ASEAN Business and Investment Summit 2016

AEC Symposium 2016 – AEC Sustainable

Economic Development

Agus Purnomo, Managing Director

Sustainability and Strategic Stakeholder Engagement

Vientiane, 6 September 2016

Private Sector Involvement in the AEC

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Voluntary standards

• Roundtable for Sustainable Palm Oil

• International Standards for Carbon Certification

• High Carbon Stock Approach

• Sustainable Palm Oil Manifesto

• Palm Oil Innovation Group

Government standards

• Indonesian Sustainable Palm Oil

• Council of Palm Oil Producing Countries

• PROPER

GAR Social and Environmental Policy

• Environmental management

• Social and community engagement

• Work environment and industrial relations

• Marketplace and supply chain

OVERVIEW OF THE PALM OIL INDUSTRY

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• Golden Agri-Resources Ltd (GAR) is the second largest palm oil plantation company in the

world.

• Listed on the Singapore Exchange since 1999, market capitalisation of

US$4.5 billion as at 31 Dec 2014.

• Parent company of PT SMART Tbk which is listed on the Indonesia Stock Exchange since

1992.

• Total planted area of 472,837 ha.

• Employs 183,000 people.

• Integrated operations in China.

• Focused on sustainable palm oil production through multi-stakeholder collaboration.

ABOUT GAR

HOW WE OPERATE

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GAR SUSTAINABILITY EFFORT - INNOVATIVE

FINANCING FOR SMALLHOLDERS

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CPO Price

Replanting

2 Million Ha

1 Million Independent Farmers

Yield Increase

(x 2 Mil Ha)

5-6 Mio Ton CPO/Year

Income Increase

Save New Land opening and avoid forest encroachment of

1 Million Ha forest

up to 2-3 Ton CPO

5-6 Mio Ton CPO x USD 700 = USD 3.5-4.2 Bill/Yr

NOT IMPLEMENTING GOOD AGRICULTURE PRACTICE

LOW: 2-3 ton CPO/ha/year

NOT CERTIFIED

COMMERCIAL INTEREST RATE LOAN

NON CERTIFIED and LOW QUALITY

• CERTIFIED BY GOVERNMENT BPN)

• Fund Provided

SUBSIDISED INTEREST RATE LOAN

CERTIFIED and HIGH QUALITY

HIGH: 5-6 Ton CPO/ha/Year

IMPLEMENTING GOOD AGRICULTURE PRACTICE (GAP)

NONE 4 Years during Construction Compensation = Living Cost

SEED

YIELD

PRACTICE

FUND

COMPENSATION

LAND

Before Program After Program

Reduce emissions level through:

Improve yield Improve land use to reduce

deforestation Sustainable farming practices

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NOT CERTIFIED CERTIFIED BY ISPO (Indonesia Sustainable Palm Oil)

SUSTAINABILITY

GAR SUSTAINABILITY EFFORT - INNOVATIVE FINANCING FOR SMALLHOLDERS

GAR’S SUSTAINABILITY EFFORT –

PARTICIPATORY CONSERVATION PLANNING

GARs process for public consultation, village by village, to identify areas for conservation and development formalized with a village regulation

Draft land use map in and around PT PGM

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GAR’S SUSTAINABILITY EFFORT – SUPPLY

CHAIN TRANSFORMATION

The Aggregate Refinery Transformation plan guides GAR in ensuring that its 440 independent mills comply with the GAR Social and Environmental Policy.

Supply Chain Mapping/

Traceability

Mill Prioritization

Process (MPP)

Field Visit

(Mill and its Supply Base)

Develop and Implement Assistance Programs

(Broad and Deep

Engagement)

Monitoring and

Evaluation

Progress - Done

Progress – On Going

Progress - Next

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GAR’S SUSTAINABILITY EFFORT – SUPPLIER

ENGAGEMENT

Suppliers are key in the journey to transform the Indonesian palm oil industry - GAR recently held the first workshop for about 80 suppliers in Medan.

GAR’S SUSTAINABILITY EFFORT – JOINT

PROJECTS WITH CUSTOMERS

GAR welcomes customers to collaborate on sustainability implementation projects related to peat land conservation, fire prevention, smallholder productivity and sustainability

GLOBAL VALUE CHAINS– TAKLING THE

CHALLENGES FOR AEC BLUEPRINT 2025

In shaping economic growth, the AEC member countries must define principles and criteria for sustainable growth and determine a balance between environmental conservation and development across commodities and their supply chains in the ASEAN region. The AEC objective of sustainable economic growth should not only focus on environmental conservation but also pursue rural and inclusive development. In palm oil, independent smallholders represent a great opportunity to increase production without the need for more forest clearance. Within the AEC not just Malaysia and Indonesia grow Palm Oil. The industry is expanding into Thailand and the Philippines as well. At some point, these countries need to come together to guide companies on standards towards sustainable palm oil production and to negotiate as a bloc with off-taker markets in Europe and USA.

ROLE OF THE AEC

Thank you