Please enter something
Case Study
Case Study

Case Study

Available Only on StudyHippo
  • Pages: 5 (2384 words)
  • Published: October 14, 2018
  • Type: Case Study
Text preview

Agriculture is one of the most vital economic activities in most of the Asian countries. However, it is important to note that the general productivity levels have continued to decrease, mostly because of drastic climatic changes that have affected some countries like Indonesia among others. Despite the many challenges, this sector continues to fund most of the activities in these countries, hence, the need to ensure its sustainability. Asia Agri, specializing in production of palm oil, is one of the firms operating in Indonesia, which has significantly contributed to the improvement of lives of many Indonesians. The history of Asian Agri Group can be traced back to the 1960s, when Sukanto Tanoto, an Indonesia born and of a Chinese descent, set the firm after being offered a soft loan by the Indonesia in collaboration with the World Bank.

In 1989, the Asian Agri had almost 30,000 hectares of plantations, small refinery and a mill aimed at processing CPO to a specialized type of oils. By 2000, the Asian Agri had expanded the areas where it was growing the palm oil and invested heavily in the notable areas, such as milling among others. There are several achievements, which have been made by Asia Agri, especially in enhancing sustainable development of palm oil in Indonesia. According to Sukanto Tanoto, the palm oil industry has a bright future, due to the increased demand for low fatty oil, biodiesel fuels, and enhanced investment in research and development. Generally, the firm alongside other affiliated companies should enhance sustainability of the business by protecting the environment, educating the locals as well as increasing its participation in social r

...

esponsibilities. This way, the firms will maintain a well-managed growth, hence significantly conserving the available natural resources. In my personal opinion, the Asia Agri should continuously invest in research and development, hence, raising the productivity levels.

For a long time, Asian countries have highly depended on agriculture for sustainable development of their respective economies. Kindred & Bell (2010, p. 2) argue that agriculture contributes over 56% of the annual Gross Domestic product of countries, such as Indonesia, Malaysia among others. Based on this fact, it has become extremely vital to protect and guard this coveted sector, through taking some proactive measures most of which are geared towards environmental conservation. In the last decade, the agricultural sector in this region has experienced numerous challenges that have erroneously reduced agricultural productivity, thus, reduced G.D.P in most of the economies.

For instance, due to the global economical crises that have faced most of the major economies like the European Union, United States among other notable global markets, the buying powers of customers have drastically decreased, thus, resulting to reduce demand for agricultural products from the Asian continent. The situation is further worsened by the changing weather patterns, such as frequent flooding, drought, and windy situations, all of which give rise to the reduced productivity. However, one of the agricultural products, whose productivity has continued to surge, despite all these difficult situations is palm oil. Drimmer (2007, p. 8) indicates that palm, coconut and palm kernel oil are edible oils from plants, al

View entire sample
Join StudyHippo to see entire essay
View entire sample
Join StudyHippo to see entire essay

derived from fruit of the palm oil. This paper will critically evaluate the role played by the Asia Agri in palm oil production in Indonesia.

The history of Asian Agri Group can be traced back to the 1960s, when Sukanto Tanoto, an Indonesia born and of a Chinese descent, became one of the richest man in Indonesia, despite being forced to drop out of school as a teenager. In most of the ways, Tanoto’s success paralleled that of the palm oil industry in Indonesia. During this time, the government of Indonesia collaborated with the World Bank, in order to develop rural regions in Indonesia. This was carried out by giving low-priced land for cultivation of palm oil to the private investors in these regions. As a result of this, Sukanto, who was inexperienced though highly visionary, took advantage of the opportunity, offered and founded the first Asian Agri plantations. The piece of land, which was located in Sumatra, was estimated to measure 10,000 hectares and Tanoto clearly remembers the land as “the wild, wild east”. Later, Tanoto acquired numerous small plantations, where he built mills for extracting CPO (Crude Palm Oil) as well as the palm kernels. In 1986, the Asian Agri started to participate in the programs organized by the government. These programs were aimed at integrating the smallholder farmers, holders of a maximum of two hectares of land, into the area of commercial agriculture.

The main agenda of this program was to empower the rural Sumatra, through offering the much-needed financial support to the deprived residents of Java, which is the most populous island in Indonesia. The participants form Java obtained soft loans from the government to enable them to acquire two hectares of land, along the perimeters of the commercial agricultural “nucleus”. It is crucial to note that the cell-like configuration of these programs earned the whole project under the title “plasma”. Kindred & Bell (2010, p. 2) indicate that by 1989, the Asian Agri had approximately 30,000 hectares of plantations, small refinery and a mill aimed at processing CPO to a specialized type of oils. By 2000, the Asian Agri had expanded the areas where it was growing the palm oil and invested heavily in research and development.

The initiative for R&D focused on the notable aspects, such as fetilizer inputs for the various types of soils, husbandry practices, disease and pest controls among others. The firm also upgraded its refining capacities as well as constructed a plant for producing shortening and margarine. As a result of the booming demand for the palm oil in the international markets, its price surged from $ 60 to $130 per metric tonne below Soy (Drimmer 2007, p. 22). Exhibits 1& 2 indicate the production of palm oil in metric tonnes in Indonesian, Malaysian and the other part of the world between the years 1970-2009.

From the above background on the Asia Agri as well as the general information on palm oil, it is quite clear that the views held by Tanoto regarding the bright future of palm oil cannot be over emphasized. Despite the hard economical times in most

View entire sample
Join StudyHippo to see entire essay