SEO Version
Dear Shareholders,
Over the past decade or so, Indonesia has experienced the lowest
volatility in economic growth compared to any advanced nations
in the Organisation for Economic Cooperation and Development
(OECD). As we put this annual report together, the domestic
economy of Indonesia, Southeast Asia’s largest, posted a 2012
GDP growth of 6.2%.
The GDP in 2012 fell short of the state’s 6.5% growth target.
Nonetheless, it is a refection of how Indonesia’s wealth of natural
resources and substantial population bolsters its resilience as one
of the fastest growing economies in the world.
Interestingly, McKinsey predicted Indonesia’s economic growth is
largely driven by domestic consumption, thanks to rapid urbanisation
and rising per capita incomes. By 2030, when 90 million people
are added to its consuming class, Indonesia is set to become
the world’s seventh-largest economy, supported by a doubling of
its current 55 million skilled workers and accelerated workforce
productivity. McKinsey estimated that the market for consumer
services, agriculture and fsheries, resources, and education sectors
to be valued at US$1.8 trillion.
As a large-scale Indonesian agribusiness with activities spanning
from upstream production to downstream distribution, we are
fortunate and extremely well positioned to leverage on our stake in
the nation’s inherent growth potential.
Driving Continued Expansion
Complementing the Group’s expansion strategy in Indonesia, we
took a decision on acquiring a 50% equity interest in Companhia
Mineira de Açúcar e Álcool Participações (CMAA), a sugar and
ethanol producer in Brazil. This acquisition is targeted to complete
in the second quarter of 2013.
Brazil’s position as the world’s largest sugar producer and exporter
and its competitiveness as the world’s lowest cost sugar producer
has much to do with modern agronomic practices. Government
mandates on the mechanisation of sugar cane harvesting continue
to drive Brazil’s 25% share of the global production, while its export
share is around 40% to 50%. It would be diffcult anywhere else in
the world to sustainably increase sugar production to meet the 2%
annual growth in global sugar consumption.
Access to best sugar cane cultivation practices, coupled with
knowledge and technology transfers, makes CMAA a compelling
investment choice for IndoAgri. As we venture outside Indonesia,
this will provide a strong basis for enhanced cost-competitiveness
across the Group.
Increasing Sustainable Production
and Growth
While a robust expansion strategy is integral to growth, Indonesian
agribusinesses are constantly scrutinized for the effects of increasing
their planted acreage on the environment. And despite the effciencies
of our vertically integrated operations for low-cost production, we
are not shielded from commodity price fuctuations.
Hence, our strategies for sustainable growth and cost competitiveness
are diligently accompanied by improved productivity, stronger
agronomy practices, and better yields per hectare.
To achieve these objectives responsibly, our palm oil estates undergo
rigorous audits as part of a Group commitment to sustainable farming
and production. In 2012, we achieved RSPO certifcation for two
estates and one palm oil mill in Riau. The endorsement adds 53,000
tonnes to IndoAgri’s sustainable CPO production, bringing our total
certifed CPO output to 248,000 tonnes.
We see these efforts, together with our numerous community
development initiatives, as ways of demonstrating corporate social
responsibility while establishing sustainable win-win partnerships
with our communities at large.
Chairman’s
Statement
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