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Indonesia plans listing

state commodities giant

JAKARTA: Indonesia plans to list state plantations producing an array of commodities on the London and Kuala Lumpur stock exchanges after grouping them into a giant holding firm, a senior official said on Monday.

The company, whose name has not yet been decided, could rank among the world's largest agricultural-based firms, H.S. Dillon, assistant to Agriculture Minister Syarifuddin Baharsyah, told Reuters in an interview.

He said the holding company could be established by next year at the latest, and listed the following year. He did not mention Jakarta as a possible listing place.

Dillon said Indonesia wanted to attract the "big players who are familiar with agri-business" by listing the holding company in London and Kuala Lumpur.

"We are aiming to enhance the efficiency and productivity of our state plantations and we believe listing them would be one way of stimulating both," Dillon said.

He said the nine plantations to come under the holding company produced crude palm oil, rubber, cocoa, coffee, tea, sugar cane, tobacco and cotton.

The plantations, stretching from Aceh province in northern Sumatra to densely-populated Java Island and Irian Jaya province in eastern Indonesia, have around 288,000 employees.

They had a combined area of just over 1.1 million hectares (2.7 million acres) in 1993, while their assets were estimated by the World Bank at 6.2 trillion rupiah (US$2.75 billion) at the end of last year.

The Bank said in its 1995 report on Indonesia that the state plantations' financial performance were inferior to that of private estates and that declining commodity prices in the 1980s partly explained their worsening financial performance.

"The average PTP (state plantation) debt-total assets ratio masks dangerously high debt levels in tree crop PTPs. Debt management is a serious financial problem for some PTPs," the bank said in the report.

"The operational performance of PTPs also lags that of the private sector. For example, the costs of oil palm development in PTPs are from one-quarter to one-third higher than those of private estates and the cost of a PTP crude palm oil mill is 40 percent higher than a private mill," the bank said.

Dillon said the government undertook a restructuring exercise of the state plantations in 1994 to improve their efficiency and "shake them out of complacency".

"We have also directed them to diversify and venture into downstream activities so that they would not be so susceptible to fluctuations in commodities' prices," he said.

One example, he said, was for tea plantations, which have been suffering from poor prices, to venture into horticulture.

Dillon, the architect of the restructuring exercise which saw 26 plantations being merged into nine entities, said the plantations' were "not doing very well" financially "because their fortunes were too closely linked to (commodity) prices".

He said that there was a possibility that the government would employ managers from the private sector to run the plantations in a bid to boost their efficiency and output.

"Some of the present management have been resisting change, so there might be a need for managers from outside," he added.

Dillon said there was a need for the state plantations to be more competitive, especially in light of the ASEAN Free Trade Area, that will be created by the Association of Southeast Nations (ASEAN) by 2003. ASEAN groups Indonesia, Brunei, the Philippines, Malaysia, Singapore, Thailand and Vietnam.-Reuter