American consumer goods giant Procter & Gamble Company (P&G) is exploring opportunities to invest in Indonesia’s downstream palm oil industry to ensure a sustainable supply for its fatty alcohol needs.
Industry Minister MS Hidayat said in Jakarta on Monday that the investment in the oleochemical industry would be needed to support the firm’s target to secure supply of 200,000 tons of fatty alcohol per year for its production over the next 10 years.
The planned oleochemical plant would also enable the company to establish a more competitive supply chain to face the growing competition in the world’s consumer goods market, he said.
“P&G has set aside US$100 million for the planned investment. It can be higher,” he told reporters after meeting the company’s senior executives at his office. A P&G spokesman, however, said that the company had not decided on the amount of funds for the investment. “But it won’t be part of the $100 million allocated for the construction of new factories,” Bambang Sumaryanto.
P&G said last week it would invest $100 million in Indonesia over three years to support the company’s market expansion in the country.
Hidayat said that the government expected the corporation would cooperate with interests in state-owned plantation companies through approaches such as establishment of joint ventures in realizing investment plans.
“I’ve asked the company to establish a joint venture with local companies in its investment,” he said, adding that the investment would be in line with the government’s efforts to develop the country’s downstream palm oil industry.
The minister said that besides its plan to enter the oleochemical industry, P&G also pledged to buy more palm oil-based products from Indonesia.
Indonesia is currently the world’s largest palm oil producer with output reaching 20.3 million tons last year. However, 60 percent of the output was exported in the form of crude palm oil.
According to Hidayat, Indonesia produces 320,000 tons of fatty alcohol annually through three companies — PT Oleogreen Oleochemicals, PT Musim Mas and PT Bakrie Sumatra Plantations.
Additional output of 144,000 tons is expected from Wilmar International Ltd., the world’s largest palm oil trader, which is setting up its fatty alcohol plant in Gresik, East Java, to be completed at the end of this year.
Hidayat said that the planned investment would also promote the development of the recently launched economic corridors.
Under a new economic master plan, earlier this year the government appointed six economic corridors, which covered Sumatra, Java, Kalimantan, Bali and Nusa Tenggara, Sulawesi and Papua and Maluku. Sumatra is designed to be home for industrial clusters of, among others, downstream palm oil industries.
Hidayat said that the government offered P&G the opportunity to invest in the Sei Mangke integrated palm oil cluster in North Sumatra, or in the Dumai Industrial Park in Riau, adding that it might offer fiscal incentives to support the investment.
Under government regulation No. 62/2008, the government offers a 30 percent reduction of income tax for five years for new investments in, among others, the downstream palm oil industry.
“Investments in the oleochemicals industry are included in the category of investments that receive incentives,” Hidayat said, adding that the government had also imposed a progressive export duty on palm oil to guarantee sufficient supply for domestic downstream industries.
Earlier this year, P&G revealed its planned investment of $100 million over three years to build its first factory in Indonesia and strengthen