Back to Basics i

By : rudi_pandjaitan | on 2:46 PM July 03, 2017
Category : Cover Story

Aryo Djojohadikusumo has a front row seat not only in the nation’s political arena but is also the driving force behind his family’s business expansion. He comes from distinguished lineage and looks set to continue his family’s legacy of serving the nation. He shared his visions for the family enterprise and the nation with GlobeAsia in an exclusive interview. By Shoeb Kagda

Over the past decade, Indonesia has done well in exploiting its natural resources. It is no secret that the country is rich in minerals and is among the top producers of palm oil, rubber, cocoa and many other agricultural products.

But as the drum beat for renewable energy grows ever louder across the globe, Indonesia cannot afford to continue business as usual. It cannot continue to rely on fossil fuels to meet its ever-growing energy needs given the impact on climate change. It must start investing in renewable energy and new technology not only because it makes good business sense but also because it will help to close the income inequality gap.

This is why Arsari Enviro Industri (AEI), a subsidiary of the Arsari Group, is betting big on renewable energy. The company, founded in 2016, has invested $100 million in a palm sugar project as the first phase of a multi-billion dollar program to enter the renewable energy space.

“We are investing in the future,” noted Aryo Djojohadikusumo, a member of Commission VII at the House of Representatives and the son of Arsari Group founder Hashim Djojohadikusumo. He is the nephew of Probowo Subianto, founder of the Greater Indonesia Movement (Gerindra), which he represents in the House.

“We are entering the renewable energy sector in many forms but our biggest business is a bio-ethanol project involving palm sugar,” added the businessman and politician. AEI’s Rebuild program is based on the concept of poly-culture mixed agro-forestry that helps restore degraded land in tropical countries while being profitable in renewable energy and agriculture products.

It is projected to provide large-scale employment, up to 55,000 jobs, while protecting the environment and promoting wildlife conservation.

One hectare of palm sugar in a multi-species environment can produce 88 barrels of oil equivalent per year. AEI operates a pilot project in East Kalimantan comprising over 173,000 hectares of which 70% is degraded forest. The total concession includes 50,000 hectares of protected primary forests and 20% of the remaining 120,000 hectares is composed of biodiversity corridors.

“The net present value of our palm sugar project is $800 million and we have two to three other sites that have the same scale so our business has potential worth of over $4 billion,” said Aryo.

Besides bio-ethanol, AEI is also investing in solar energy, bio-coal and clean water. It has tied up with a number of foreign investors to develop solar energy across the country and recently won concessions to produce 90 MW of power which will be supplied to state utility PLN.

To produce bio-coal, biomass from degraded forests is used as feedstock. According to the company, bio-coal is comparable to fossil coal but is a sustainable source of cleaner energy.

“Solar energy is the future,” noted Aryo. “Energy comes from the sun and the earth’s core so solar panels are basically replacing leaves which capture energy from the sun. We are replicating what has been happening for millions of years.”

Producing and distributing clean water is another business opportunity where AEI sees great potential. “Cheap clean water will create new jobs, reduce the price of food and improve living conditions. That is why we are planning to enter the utilities sector in smaller cities which are dying for clean water,” he added. “If you have the funds to finance such projects, the cash flow is unbelievable.”

 

‘In 2012, Prabowo outlined four main challenges facing Indonesia – imbalance in the economy, depleting energy resources, inefficient government and an exploding population.’

 

 

It’s the economy

While the Arsari Group is one of Indonesia’s largest business groups, the Djojohadikusumo family is also part of the country’s political fabric. The family has done well in business and now seeks to influence the nation’s political and economic future.

Gerindra is seen as a major political player and its victory in the Jakarta governor elections may be a harbinger of the future of the party.

The party’s founder Probowo Subianto, a former general, lost narrowly to Joko Widodo in the last presidential elections but is widely expected to make another run for the presidency in 2019.

At 34, Aryo is one of the younger members of parliament but already he is acutely aware of the growing income inequality gap in Indonesia. The recent Jakarta governor elections, he argues, were not about religion but about the widening gap between the haves and have-nots in the city.

It was mainly economic issues that propelled Anies Baswedan and Sandiaga Uno, supported by Gerindra and the Prosperous Justice Party (PKS), to the office of governor and vice governor earlier this year. As the representative at the House for West Jakarta, Aryo represents 455,000 voters, some 40% of Jakarta’s population.

“I have been part of this party (Gerindra) since it was founded and we have a very good idea of the main challenges facing this country,” noted Aryo. “In 2012, Prabowo outlined four main challenges facing Indonesia – imbalance in the economy, depleting energy resources, inefficient government and an exploding population. Those challenges are very real today.”

Many observers pointed to religion as a major factor in the race and there are growing fears of fundamentalism and religious extremism taking over the country. Aryo argues that this perception is unfair after just one election.

“I can explain why Ahok (former governor Basuki Tjahaja Purnama) lost so badly,” he said. “There is a huge gap between the upper middle class and the working poor. It’s not just about incomes but also the narrative.”

 

 

The sense of injustice and the growing income gap are being used by extremist groups and agents of fundamentalism to sow hatred.

 

The urban poor have a totally different narrative about how Jakarta is being developed. In the North Jakarta district of Kalijodo, for example, the demolition of the red-light district by troops and bulldozers was seen as a huge success by the upper middle class. “But the people who were displaced were ripe for manipulation especially since other areas which were illegally constructed and occupied by the rich have not been destroyed,” he noted.

Such double standards, whether real or not, have created a sense of injustice amongst the city’s urban poor. Furthermore, there is a lack of communication between the two communities.

This sense of injustice and the growing income gap are being used by extremist groups and agents of fundamentalism to sow hatred, said Aryo. “This is why we need to sort out inequality as soon as possible not just in Jakarta but across the country.”

Moving forward

Given the many challenges facing the country, Gerindra’s strategy to lift economic growth is to boost the agricultural sector and promote industries that support agriculture. Aryo is appreciative of the current government’s focus on upgrading the country’s infrastructure backbone but questions projects such as the Jakarta-Bandung high-speed train, which in his opinion adds little economic value.

“The toll road expansion program is great and this government has already exceeded what was achieved in the 10 years under SBY (former President Susilo Bambang Yudhoyono),” he noted. “But I do not agree with other policies, especially the budget for agriculture which is only 2% although 40% of the population are farmers.”

“If Gerindra were in power, we would build more feed-mills for chickens so we can control the cost of animal feed and produce more protein for our people,” he said. “Once we can control the price of food, all mothers will sleep easier.”

Indonesia’s economic policy priorities should focus on the fundamentals such as keeping the cost of food low, providing jobs and improving the level of education. “Let’s go back to basics. This may sound populist but if that means looking after our less fortunate brothers and sisters, then it is ok with me.”

In Gerindra’s economic model, the private sector has a big role to play, not just in traditional sectors but in providing public amenities such as clean water and energy. Aryo also noted that for the country to progress, tax collection must be increased.

“I am a conservative and eventually we may move to small government but I am a socialist when it comes to governing. Our Constitution is socialist in that the state has a responsibility to ensure social justice.”

Business and politics are often two sides of the same coin. In the case of the Arsari Group, business and politics not only mix, but are intricately linked.

 
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