With a huge fertile productive land area and the easy availability of cheap labor, Indonesia has historically been an agriculture-centric country. At the same time, land prices in other countries in the region - such as Malaysia, Thailand and Vietnam - are getting more expensive, meaning that the utilization of land in those countries for plantations is often no longer viable.

Indonesia is well placed to capitalize on the recent boom in soft commodities. The biggest export commodity for Indonesia is CPO. Indeed, Indonesia is now the largest producer of CPO in the world. Indonesia took over the number one position from Malaysia in 2006 and is set to achieve new heights in production - especially with demand growing in countries such as China and India for the commodity in the food processing industry. At the same time, the international enthusiasm for biofuels is increasing as the prices of non-renewable sources of energy like crude oil rise inexorably higher.

Recently, the strong returns from CPO have led to a flood of investment, with new commitments virtually every week. Among the latest are plans by Malaysia’s TDM Bhd to spend $34.6 million on a joint venture to develop palm plantations, while another Malaysian firm, Multi Vest Resources Bhd plans to issue asset secured notes with a face value of up to Rp350 billion to fund land clearing. Domestic investment is also rising with existing players adding to their plantations and new companies entering the sector. To finance the investments companies have turned to banks, which lent significantly to companies in the plantations sector, and also to the capital markets with IPOs coming soon.

In the rubber sector, Indonesia has long been a leading producer of rubber and is expected to soon overtake Malaysia as the world’s largest producer. However, in the past few years, rubber plantations have lost their attractiveness and much of the land has been converted into CPO plantations. Yet with the recent commodity boom, rubber plantations are again in the spotlight.

Indonesia is the world’s third largest producer of cocoa and we have seen some major commitments to create added value in this industry, where an Indonesian firm backed by European interests is planning to spend as much as $600 million on a processing venture.

Other major investments have been detected in the sugar industry with a number of investors in both the state-owned and private sector emerging with plans for new refineries to boost efficiency in the industry. In the most recent development in the sugar industry, Singapore’s Olam International purchased PT Dharmapala Usaha Sukses for $12.6 million and committed itself to investing a further $12 million to upgrade refinery capacity. Horticulture is also attracting attention, with an unnamed Dutch multinational seeking to invest in the seedling industry for vegetable and fruit crops, according to Agriculture Department officials.

Finally, with the advent of the new global enthusiasm for biofuels, in which investments of some $5 billion are planned, many areas of the country are considered prospective for plantation crops, providing opportunities in many areas of Indonesia. Other than CPO, the jetropha plant, for instance, an important feedstock for biofuels, is ideally suited for cultivation in the drier areas of the country such as West and East Nusa Tenggara, which up to now have lagged behind other areas of Indonesia in terms of development.