Tag: Indonesia

  • Indonesia Companies Rush to List Before Upcoming Election Year

    Indonesia Companies Rush to List Before Upcoming Election Year

     

    Companies are rushing to go public this year in search of fresh funds despite volatility in the market and investors likely to maintain a tight grip on the purse strings ahead of Indonesia’s 2019 general election.

    Thirty companies have listed on the Indonesia Stock Exchange (IDX) between Jan. 1 and July 12, raising a total Rp 11.5 trillion ($790 million). In contrast, 20 companies undertook initial public offerings in the same period last year, raising about Rp 3.8 trillion in fresh capital.

    The bourse expects 16 more companies to list during the rest of this year, among them Garuda Food, MD Pictures, Arkadia Digital and Media Net Visi Media, better known as Net TV. That would bring the total for the year to a record 46.

    Kiswoyo Adi Joe, an analyst at Narada Kapital Indonesia, said prospective companies are hurrying for early listings on the IDX this year rather than wait for next year because of the uncertainty associated with an election year.

    “They seem to worry about the upcoming election year, which would be more difficult and uncertain. While the JCI [Jakarta Composite Index] is flashing green, these companies will rush to list on the IDX,” Kiswoyo said.

    Most of the public listings so far this year were by small and medium firms, such as digital exchange platform NFC Indonesia, palm oil producer Mahkota Group and property firm Sinergi Megah Internusa.

    Among them were subsidiaries of state-owned companies, such as insurance firm Asuransi Tugu Pratama Indonesia, shariah-compliant lender BRI Syariah and logistic firm Indonesia Kendaraan Terminal, which raised more than Rp 1 trillion.

    These companies prefer to seek funding through IPOs because it is cheaper than borrowing from banks or issuing bonds and medium-term notes, said I Gede Nyoman Yetna Setia, newly appointed company valuation director at the IDX.

    “Banks require guarantees and companies usually only qualify for loans of up to 30 percent of their guarantee value. At a certain point, when they need loans for big expansions, they do not have any guarantees left,” Nyoman said.

    However, companies seeking to raise capital will find themselves in a volatile market.

    The benchmark JCI has slipped more than 7 percent since the beginning of the year, with foreign investors dumping Rp 51 trillion in shares. The rupiah has meanwhile lost 6.9 percent of its value since the beginning of the year and currently trades at 14,487 against the US dollar.

    “Whenever the US Federal Reserve raises interest rates, it affects our stock market and bonds. There are also other factors, including the current geopolitical situation, especially the heated trade war between the United States and China,” said Ari Pitojo, chief investment officer at asset management firm Eastspring Investments.

    While the uncertainty will force some investors to adopt a wait-and-see approach, others will perceive the valuations of these companies as low and scoop up their stocks at bargain prices. This will shore up demand for the IPOs this year.

    “Market volatility has little effect on any particular IPO because it is mostly about a company’s fundamentals,” said Nafan Aji, an analyst at Binaartha Sekuritas.

    “But this year, the stock market is perceived as relatively cheap, so many want to hold IPOs.”

  • Malaysia Airlines to capture 50% moslem market share in Malaysia, Indonesia

    Malaysia Airlines to capture 50% moslem market share in Malaysia, Indonesia

    Malaysia Airlines Bhd (MAB) aims to tap into 50% of the umrah pilgrimage market in Malaysia and Indonesia with 270,000-290,000 umrah pilgrims projected to make their pilgrimage to the holy land in the upcoming pilgrimage season.

    The national carrier entered into a charter service deal with a coalition of four umrah tour operators comprising KRS Travel Sdn Bhd, ATS Global Travel & Charter, Ecoriths Leisure Travel &Tour and Rayhar Travels Sdn Bhd to provide air charter services during the umrah season beginning October 2018 until June 2019.

    MAB group CEO Captain Izham Ismail said all the 149 flights will be operated via its Airbus A380-800 aircraft. The agreement will see the carrier transporting 70,000 pilgrims from Malaysia and neighbouring countries such as Indonesia.

    The direct flight are from Kuala Lumpur to Jeddah and Madinah in Saudi Arabia.

  • Toyota Eyes 53 New Export Destinations for Indonesia-Made SUV

    Toyota Eyes 53 New Export Destinations for Indonesia-Made SUV

    Toyota Motor Manufacturing Indonesia, the local unit of the Japanese automotive giant, aims to expand its export market by shipping its all-new Rush sport utility vehicle to 53 countries in Asia and Africa this year.

    Toyota currently only exports vehicles to the Philippines, but it believes the model, updated early this year, would appeal to a broader market.

    “The Toyota Rush is indeed one product aimed at export. Where previously we only exported it to one other country, this new model will be delivered to 53 countries,” Henry Tanoto, deputy director of Toyota Astra Motor, a joint venture between Toyota Motor Manufacturing Indonesia and the country’s largest car distributor, Astra International, said on Tuesday (24/07).

    The Toyota Rush still leads in Indonesia’s so-called low SUV market segment, with data compiled by the Association of Indonesian Automobile Industries (Gaikindo) showing that 19,508 units were sold in the first semester of 2018, up 69 percent from the same period a year ago.

    Japanese manufacturers have long sought to establish Indonesia as an export hub in the Asia-Pacific region.

    Toyota has pledged $1.9 billion to expand its manufacturing capacity in Indonesia between 2015 and 2019.

    Exports of Indonesian-made completely built-up cars has risen more than 14 percent over the past three years to 231,000 last year. The country exported 110,135 completely built-up cars between January and June, according to Gaikindo data.

  • New Biodiesel Recipe Can Cut Indonesia’s Fuel Imports

    New Biodiesel Recipe Can Cut Indonesia’s Fuel Imports

    Indonesia, the world’s biggest palm oil producer, is offering incentives to developers of a new 100 percent palm oil-based “green diesel,” which the net oil importer hopes can replace costly fuel imports within three years, Industry Minister Airlangga Hartarto said.

    Biodiesel for land transportation in Indonesia currently consists of a 20 percent bio component that is mixed with petroleum diesel. That component is expected to be raised to 30 percent in 2020.

    In Indonesia, the bio portion of biodiesel is made with fatty acid methyl esters (FAME) from palm oil, but efforts to increase FAME concentrations in biodiesel have faced resistance from regulators as well as the automotive and oil industries.

    While biodiesel can cut fuel costs and reduce emissions, higher blends of FAME require special handling and equipment as the fuel has a solvent effect that can corrode engine seals and gasket materials, and it can solidify at cold temperatures.

    But according to Airlangga, Indonesia has found a new way to produce biodiesel that is not based on FAME that can avoid these problems.

    “We already have a prototype and in three years we will be ready to produce it,” he said last week.

    “Green diesel” made completely from palm oil has “the same specifications as petrol” and is compliant with the Euro IV emissions standard, said Airlangga, who chairs Indonesia’s second-biggest political party, Golkar.

    A biorefinery owned by Elevance Renewable Sciences and Wilmar International is currently producing “green diesel” in a pilot project, and has been given a corporate tax discount to develop full-scale output, Airlangga said.

    Modifications to engines and machinery “wouldn’t be needed because its specifications are the same as [B20] biodiesel,” he added. “It’s actually better than conventional fuel.”

    According to Lila Harsyah Bakhtiar, an official at the Industry Ministry, green diesel is made using hydrotreated vegetable oil, a technology that is expensive to develop but which could avoid disruptions to automakers who were “angry” over repeated changes to the FAME-based biodiesel mix.

    Elevance and Wilmar did not reply to requests for comments.

    According to its website, Elevance uses a patented process at its refinery in Gresik, East Java, to produce 180,000 metric tons of modified triglyceride, unsaturated methyl esters and olefins per year.

    Indonesia’s biodiesel program was already reducing Indonesia’s fuel import demand by $21 million per day, Airlangga said, adding that green diesel can “help [improve] our trade balance, and strengthen the rupiah while creating jobs.”

    Southeast Asia’s largest economy is among the region’s most vulnerable to external factors due to its sizeable current account deficit and its large fuel imports.

    Because of that, the rupiah has been among the hardest hit this year as investors have sold emerging market assets.

    Indonesia has been pushing increases in domestic palm oil consumption to cushion a possible slowdown in export demand. The European Union last month agreed to phase out the use of palm oil in transport fuels from 2030 because of deforestation concerns.

    The Indonesian Automotive Industry Association (Gaikindo) has previously said increasing biodiesel blends can increase fuel consumption and may lead to engines overheating.

    The minister asserted that green diesel generated 90 percent fewer emissions than conventional fossil fuels.

    However, a 2015 study funded by the European Commission found that among vegetable oils, palm and soybean oils generated the highest indirect greenhouse gas emissions because of deforestation and the drainage of peatlands associated with their cultivation.

    Indonesia is expected to consume between 3.2 million and 3.3 million kiloliters of FAME this year, below an earlier target of 3.5 million kiloliters, according to the Indonesia Estate Crop Fund.

    The Indonesia Biofuel Producers Association (Aprobi) expects unblended biodiesel exports to reach 800,000 kiloliters this year.

  • Goldman Loses Indonesia Court Appeal in Hanson Share Ownership Dispute

    Goldman Loses Indonesia Court Appeal in Hanson Share Ownership Dispute

    Goldman Sachs has lost a court appeal in Indonesia over whether it should return shares in property developer Hanson International to tycoon Benny Tjokrosaputro in a legal tussle over ownership.

    Benny, president director of Hanson International, sued the US bank for Rp 15 trillion ($1.1 billion), accusing it of making “unlawful” trades in the shares and claiming ownership of 425 million shares.

    Goldman said Goldman Sachs International had bought the Hanson shares from New York hedge fund Platinum Partners in a series of “valid” transactions on the Indonesia Stock Exchange (IDX) between February 2015 and December 2015.

    The South Jakarta District Court ruled in favor of Benny in November last year, ordering the US firm to return shares and pay Rp 321 billion in compensation.

    The Jakarta High Court upheld this verdict on Thursday (19/07). The ruling, published on its website, said Goldman’s transactions had been done without Hanson’s knowledge and were against Indonesian law.

    Hanson shares last traded at Rp 127 apiece, valuing a parcel of 425 million shares at about $3.7 million.

    The bank planned to appeal the decision, Goldman Sachs spokesman Edward Naylor said.

    A lawyer for Benny, Oscar Sagita, declined to comment as he had not yet reviewed the judgment.

    The lawsuit has been seen by some legal experts as a litmus test for Southeast Asia’s largest economy, which has launched its biggest drive for foreign investment in a decade.

    At stake in the Goldman case is the protection of the rights of foreigners, amid a general lack of transparency in Indonesian court proceedings, they say.

    Benny had pledged Hanson shares to Platinum in return for funding on the basis he could get the shares back upon repayment, according to court documents.

    Such a repurchase agreement, or a repo, effectively acts as a loan but the deal involves temporarily transferring legal ownership of the shares.

    Goldman Sachs International bought the Hanson shares from Platinum as a hedge for the derivatives it had entered into with the fund, a bank spokesman has said.

    In late 2014, New York-based Platinum fell into financial difficulties and had trouble paying back a large number of investors, according to US authorities.

    Goldman started selling the Hanson shares in 2015, but was forced to stop after Benny filed a police complaint, which he followed up with the lawsuit.

    Goldman says in its court filings that it “understands” Platinum originally acquired the Hanson shares from an entity named Newrick Holdings, rather than from Benny.

    According to the “Panama Papers” online database as of 2015, which compiled millions of leaked documents from law firm Mossack Fonseca, Newrick is a company registered in the British Virgin Islands in which Benny was a shareholder.

  • SE Asia Stocks: Indonesia, Vietnam rise; others subdued

    SE Asia Stocks: Indonesia, Vietnam rise; others subdued

    Investors’ risk appetite soured on fears of more trade protectionist measures from the United States as U.S. President Donald Trump said on Friday he was ready to impose tariffs on all $500 billion of imported goods from China, threatening to escalate a clash over trade policy that has unnerved financial markets.

    The dollar declined against major currencies after Trump criticised the Federal Reserve’s monetary tightening policy.

    “Market players will likely closely monitor China’s policy reaction, especially on the RMB front in the interim. Asian markets are likely to also trade with a cautious tone today,” OCBC said in a note.

    Singapore shares were down after four straight sessions of gains ahead of June inflation data.

    The annual headline inflation rate is expected to have risen in June from the previous month, according to a Reuters poll.

    Financials were among the biggest drag with index heavyweights DBS Group Holdings, Oversea-Chinese Banking Corp and United Overseas Bank shedding between 0.9 percent and 1 percent.

    Indonesian shares rose 0.9 percent with all sectors but materials in positive territory.

    Financials led the charge, with Bank Central Asia Tbk PT rising 1.7 percent to its highest in more than three months, while Bank Mandiri (Persero) Tbk PT gained nearly 2 percent.

    The impact of U.S.-China trade tensions on Indonesia is “not a lot” as exports to these countries are not the biggest parts of Indonesia’s economy, said Nomura Indonesia analyst Elvira Tjandrawinata.

    “Indonesia is instead affected through the impact global events have on the local currency, which pours into general sentiment in the economy,” she said.

    Last week, the central bank kept its benchmark interest rate unchanged as expected, taking a pause in its monetary tightening cycle.

    Vietnam shares jumped 1.4 percent, driven by gains in real estate and financial stocks. Vingroup JSC and Petrovietnam Gas Joint Stock Corp were the top gainers.

  • Indonesia Apartment Sales Slump in H1 2018, No Sign of Recovery

    Indonesia Apartment Sales Slump in H1 2018, No Sign of Recovery

    Apartment sales in Jakarta slumped in the first half of this year, due to a lack of confidence among top-tier buyers to commit to big-ticket purchases amid economic and political uncertainty, property consultancy Jones Lang LaSalle said on Wednesday (18/07).

    However, the silver lining is that demand for lower- and middle-class apartments has kept growing, although it was barely enough to curb a further sales decline in the rest of the year.

    Developers sold 2,100 units in the country’s largest property market between January and June, which is 6.2 percent less than in the corresponding period last year, Jones Lang LaSalle said in the report.

    The slump was mainly cause by a decline in sales of the most expensive units, the consultancy said. The government imposed a 20 percent luxury tax on sales of apartments worth Rp 10 billion ($694,000) or more in March last year, further curbing top-tier buyers’ appetite for new apartments.

    “For most people, the condominium is the part of an investment,” Vivin Harsanto, head of advisory at Jones Lang LaSalle, said on Tuesday.

    “In the first half of this year, they were still not confident enough because of volatility of the rupiah, and they also held off purchases of investment products due to the fasting month and the Idul Fitri celebration,” she said.

    Vivin said there is always a slowdown in apartment sales during Ramadan as consumers are usually more focused on other needs, such as going on holiday and the Idul Fitri celebration.

    Still, demand for lower-cost apartments – priced between Rp 300 million and Rp 500 million – remains robust and growing. Cleon Park, a middle-class apartment project in East Jakarta by listed property developer Modernland Realty, was sold out when it launched in May, according to Luke Rowe, head of residential project marketing at Jones Lang LaSalle.

    The consultancy said in the report that there might be an improvement in property demand as some large, reputable developers offer units close to public transportation, such as the mass rapid transit and light rail transit systems, currently under development in Jakarta, while smaller developers are offering more affordable units.

    Bank Indonesia has dropped its requirement for mortgage down payments in April this year. It formed part of the central bank’s effort to ensure domestic economic growth after it had to increase its benchmark interest rate by 100 basis points in the preceding three months to maintain economic stability amid global capital outflows.

    Still, Vivin said she does not expect the central bank policy to significantly impact current sales trends, which have been on a decline since 2014.

    “[Apartment buyers] want to see a stable rupiah and a steady political situation as we enter an election year in 2019,” she said.

    According to research by Jones Lang LaSalle, apartment prices in the greater Jakarta area are expected to remain flat amid weak demand for the remainder of the year.

    Developers only built 1,292 units between January and June this year, bringing the number of total unsold units to 144,000. In the same period last year, developers built 4,843 units, resulting in total stock of 134,536 units.

  • Carrefour to open 300 mini stores in Indonesia

    Carrefour to open 300 mini stores in Indonesia

    Carrefour Indonesia has sealed a deal with the nation’s Mosque Council (Dewan Masjid Indonesia, DMI) to open up to 300 mini supermarkets.

    The stores will be built in mosque districts by Carrefour’s local entity Trans Retail Indonesia and range in size between 10sqm and 250sqm.

    According to Salaam Gateway, the company is working with the national mosque body to select districts for stores in cities including Jakarta, Sukabumi, Bandung, Bekasi, and Depok, as well as in provincial centres such as Riau, Padang, Lombok, and Makassar.

    VP for corporate communications with Trans Retail, Satria Hamid, says a memorandum of understanding has been signed with DMI “and we agreed on three points: boost human capital skills in retail management, grow the number of entrepreneurs from mosque districts, and increase the purchasing power of this captive market.”

    Profits will be shared equally.

    The retail infrastructure and store operations will be overseen by DMI and Trans Retail will supply products as well as providing technical assistance, training, and support on merchandising, safety, hygiene and other operational factors.

    The new Carrefour Indonesia stores will compete with Alfamart convenience stores.

    Trans Retail operates 112 Carrefour hypermarkets and supermarkets across Indonesia under the umbrella of four brands: Carrefour, Transmart Carrefour, Transmart, and Groserindo Carrefour.

    Trans Retail’s parent CT Corp acquired 100 per cent of Carrefour Indonesia from Carrefour France in late 2012.

  • Indonesia Scrambles to Mitigate Trade War With US

    Indonesia Scrambles to Mitigate Trade War With US

    While bracing for the fallout from a trade war between China and the United States, Indonesia is doing its best to avoid sparking a trade war of its own with the world’s largest economy.

    Indonesia found itself on the wrong end of a trade imbalance with the United States, amid President Donald Trump’s apparent dislike of trade deficits.

    Now the United States is planning to a revoke duty-free incentive for Indonesian goods under the Generalized System of Preferences (GSP), imposed in 1976 to increase poor and developing countries’ competitiveness in global trade. This could affect some $2 billion in Indonesian exports to the United States.

    If the plan passes, it could have serious repercussions for Indonesia’s manufacturing and agricultural sectors – key industries that provide most of the jobs in the archipelago.

    “I think the problem is the United States’ attitude towards trade and specifically towards surpluses and deficits. It’s a fundamental misunderstanding of the way trade works… It’s unfortunate that Indonesia has been singled out, simply for having a trade surplus,” Chris Clague, managing editor of the Economist Intelligence Unit’s thought leadership division in Asia said.

    Indonesia ranked in 16th place among countries with trade surpluses with the United States at $9.7 billion last year – nearly three times higher than in 2013.

    The United States has been demanding greater access for its goods, services and investments in Indonesia, in addition to several other issues, such as stronger intellectual property rights protection. But Indonesia does not have a comprehensive bilateral free-trade agreement with the United States and efforts to bring the countries in under multilateral deals such as the Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP) also fell through, leaving limited avenues for the United States to get what it wants.

    “[The GSP] is a unilateral agreement, so if [the United States] wants to evaluate it, we have no right to protest. We can only serve what they want,” Coordinating Economic Affairs Minister Darmin Nasution told reporters last week.

    “Because the government has an interest in maintaining the facility… we will do everything we can to keep it,” he said.

    Trade Minister Enggartiasto Lukita will lead a team to the United States on July 21-28 to try and persuade that country to keep its special tariff treatment for some Indonesian products, the ministry said in a statement.

    This will be the first official meeting between the Ministry of Trade and its US counterpart under Trump’s presidency.

    “Indonesia is ready to partner with the United States and address the issue of a trade deficit because the two countries have products and services that are not competing but complementary,” Enggartiasto said in the statement.

    While the United States is also evaluating special tariffs for India and Kazakhstan, Indonesia is the only country that has been given a chance to discuss the matter with the United States.

    “We can lobby the United States because we have a big market, an investment destination, a strategic region and good economic potential in the region. So our bargaining position is very strong to negotiate with the United States,” Indonesian Textile Association (API) chairman Ade Sudrajat said on Tuesday.

    He said Indonesia should establish a free-trade arrangement with the United States to ensure that country cannot withdraw its trade facilities as it wishes. That way, Indonesian exports can also easily enter the United States and be more competitive as it will not be subject to tariffs, he said.

    According to the Trade Ministry, there are plans to finalize six free-trade agreements or comprehensive economic partnership agreements this year. They include the RCEP, Indonesia-Australia Comprehensive Economic Partnership Agreement, Indonesia-European Free-Trade Association, Indonesia-EU Comprehensive Economic Partnership Agreement, Indonesia-Iran Preferential Trade Agreement and Indonesia-Malaysia Border-Trade Agreement.

    Steel Spillover

    The world’s two largest economies kicked off a trade war two weeks ago with the United States imposing punitive tariffs of 25 percent on $34 billion worth of Chinese imports, which prompted the latter to immediately retaliate. The United States wants to reduce its trade deficit with China after it hit a record high of $275.81 billion in 2017.

    The United States imposed import tariffs on several Chinese products, including steel and aluminum, which could spill over to other countries, such as Indonesia. The archipelago forms part of a free-trade arrangement between the Association of Southeast Asian Nations (Asean) and China, which commenced in 2010.

    Indonesian steel imports rose 33 percent to $4.7 billion in the first half of this year, compared with the same period a year ago.

    But Hidayat Triseputro, executive director of the Indonesian Iron and Steel Industry Association (IISIA), said between 25 percent and 30 percent of the steel imports are the result of dumping, making it very difficult for local producers to compete.

    Indonesia produced 4.8 million metric tons of the alloy last year, according to World Steel Association data. This is a tiny amount compared with the 831.7 million tons by China, the world’s largest steel producer.

    Still, domestic production should be enough to cover 90 percent of Indonesian steel demand.

    “Imports dominate up to 40 percent of our market… That’s why we want to tighten imports; there must be detailed data to screen them,” Hidayat said.

    However, what happens with the steel industry could soon befall other industries. The International Monetary Fund has warned that a trade war between the United States and other countries could cost the global economy $430 billion and risk lowering global growth by 0.5 percent by 2020.

    “This is potentially very, very bad, if not bordering on something catastrophic. The world economy has finally recovered from the impact of the 2008-09 global financial crisis … and now we’re running into a situation that could have a potentially devastating and deadening effect on global trade,” said Clague of the Economist Intelligence Unit.

  • Palm Oil From Indonesia’s Shrinking Forests Taints Global Brands

    Palm Oil From Indonesia’s Shrinking Forests Taints Global Brands

    Palm oil sourced from illegally cleared rainforest areas in Indonesia has flowed through traders to major consumer goods brands despite widespread commitments to cease purchases of non-sustainable oil, a new report says.

    Palm oil companies Royal Golden Eagle (RGE), Wilmar, Musim Mas Group and Golden Agri Resources sold oil from 21 “tainted” mills to more than a dozen global brands including Nestlé and Unilever, according to the report by Eyes on the Forest (EoF), a coalition of environmental nongovernmental organizations, including WWF Indonesia.

    In spot checks since 2011, EoF used GPS tracking to follow trucks carrying palm oil fruit, known as fresh fruit bunches, to mills from plantations within Tesso Nilo National Park and the Bukit Tigapuluh protected forest areas in central Sumatra.

    “All companies bought directly or indirectly from at least some of the 21 implicated mills,” according to the report, which calls for traceability on palm oil to be improved and to be extended to plantations that supply mills.

    Forest cover on Sumatra Island, home to endangered tigers, orangutans and elephants, had declined by more than half to 11 million hectares in 2016 from the 25 million hectares it had in 1985, as palm oil and other plantations have expanded and encroached on protected areas.

    Nestlé said in an emailed response it was “committed to tackling” deforestation. A company spokeswoman said the firm was working with partners to transform the palm oil industry “further down the supply chain.”

    Unilever said by email it publicly disclosed suppliers and mill details and was committed to increasing traceability in the palm oil supply chain “and to working with our suppliers and partners to resolve issues.”

    Unilever also said it was examining “details behind the investigation to determine the right approach and next steps.”

    Environment Ministry spokesman Djati Witjaksono Hadi said smallholders, “not companies,” owned plantations in national parks.

    Hadi referred further questions on the mills to the ministries of agriculture and industry, which did not immediately respond to requests for comment.

    Similar issues were highlighted in earlier EoF reports including in 2016, but a lack of strict supervision by traders has led to more forest clearing and illegally grown palm oil entering global supply chains despite their commitments to improve traceability and stop deforestation, the report said.

    Traceability

    “We acknowledge that it’s really challenging to get traceability beyond the mill and going right down to the plantation source,” Elizabeth Clarke, WWF global palm oil lead said. “But it’s absolutely paramount that they do this.”

    Among those mentioned in the report, Wilmar International was accused of buying palm oil from Citra Riau Sarana (CRS) whose three mills were found to have bought fresh fruit bunches from Tesso Nilo in 2011, 2012, 2015 and 2017, even though Wilmar sold its 95 percent stake in CRS in 2014.

    “Whatever action they’ve been taking, it hasn’t fixed that particular mill, and this is what we’re asking these particular individuals to do,” the WWF’s Clarke said.

    Responding to the report, Wilmar said it had “continued to engage with CRS and to monitor their traceability system” from 2014. “While there was progress made on traceability, we have stopped purchasing from them since June 2018 for other reasons,” Wilmar said in an emailed statement.

    But Wilmar said it had not received “a clear confirmation from the authorities which companies are illegal in the landscape” despite making a request to the Environment Ministry.

    CRS could not immediately be reached by phone for comment.

    Sime Darby Plantation, also named in the report, said it had 94 percent visibility of its supply chain “which provides key customers access to traceability information that can help them make informed choices about the palm oil products that they purchase.”

    It also said it was working with nongovernmental organizations to eradicate deforestation for the remaining 6 percent.

    Daniel A. Prakarsa, head of downstream sustainability at Sinar Mas Agribusiness and Food, a subsidiary of Golden Agri, said the company considered 39 percent of its output to be fully traceable, and was targeting full traceability from the 427 mills of its suppliers by 2020.

    “Our policy is to help suppliers to comply. Not just [saying] ‘this is our standard, you must comply, otherwise we stop [buying],’” he said.

    Musim Mas Group did not immediately respond to a written request for comment. On its website, the group says it is working with smallholders and other stakeholders along the supply chain to achieve sustainable palm oil production.

    Clarke from the WWF said trading firms “need to make it very clear to the mills that they won’t buy from them until they can provide assurance that it is 100 percent legal.”

  • Gov’t Eyes $200m in Additional Revenue Next Year From Excise on Vaping Liquid

    Gov’t Eyes $200m in Additional Revenue Next Year From Excise on Vaping Liquid

    The Ministry of Finance estimates that the government may collect up to Rp 3 trillion ($207 million) in additional revenue next year from a new excise on tobacco extract, or vaping liquid, commonly used in electronic cigarettes.

    While Indonesians have been puffing on e-cigarettes since 2013, the government only imposed an excise on vaping liquid on July 1. Under a new regulation, the liquid is subject to a 57 percent excise tax, more than four times the maximum excise on regular cigarettes.

    The government requires up to 200 domestic producers to start attaching excise ribbons to the product containers and pay excise on it by Oct. 31. Only vaping liquids containing tobacco extract or nicotine are subject to the excise.

    “If there are any businesses not using the ribbon after the transition deadline, we will seize it,” said Heru Pambudi, director general of customs and excise at the Ministry of Finance.

    According to Noegroho Wahyu, acting director of excise, only three producers are currently registered but the government expects the remaining producers to do so before the deadline.

    The government will likely only collect between Rp 50 billion and Rp 70 billion in additional revenue from the new excise this year, but it eyes potential revenue of around Rp 3 trillion per year once all manufacturers are registered, Noegroho said.

    Vaping liquid is the latest commodity to attract excise as part of government efforts to curb people’s consumption of harmful substances. Indonesia is also considering to tax on plastic bags and soft drinks, but the government has yet to make a decision on the matter.

    Indonesia collected Rp 151 trillion in excise – mainly from cigarettes – last year, accounting for 9.1 percent of total state revenue.

    The government considers several aspects, including public health, impact on the industry and tobacco and clove farmers, in determining excise tariffs on tobacco products, Noegroho said.

    With vaping liquid subject to the maximum rate for tobacco-related products, there may not be any further increases in the future.

    Aryo Andrianto, chairman of the Indonesian Personal Vaporizer Association (APVI), said the excise rule means the government has officially acknowledged and provided the industry with legal certainty.

    Vaping liquid producers meanwhile plan to only increase their prices by a maximum of 20 percent to soften the blow on consumers, Aryo said.

    “They don’t mind [the increase],” he said.

    APVI members also hope the government may be more willing to support the industry’s export efforts.

    Deni Syarifa, chairman of the E-Liquid Micro-Entrepreneurs Association (APeM), estimates that manufacturers can export up to 2 million bottles of vaping liquid per month.

    “There is currently demand for around 5,000 to 10,000 bottles per month from just one country,” Deni said, adding that producers plan to ship the liquid to countries in Asia, Central America and Europe.

  • What’s Asia’s fastest growing budget hotel chain?

    What’s Asia’s fastest growing budget hotel chain?

     

    Bangkok-based budget hotel chain Red Planet has been rapidly expanding in Asia, responding to the growing number of new travelers in the region.

    Established in 2010, Red Planet has become one of Asia’s fastest growing budget hotel chain.

    It operates 30 hotels with more than 4,700 rooms in four countries — the Philippines, Japan, Thailand and Indonesia — which includes one hotel in Tokyo not under the Red Planet brand.

    To speed up the company’s development, it is now seeking to enter into a franchise contract and creating joint ventures with real estate funds. The company has plans to double its pan-Asia hotels to 60 by 2023.

    The market for budget hotels is rapidly growing in Asia-Pacific, the region which has long seen the polarization of luxury Western hotel chains and inexpensive but substandard chains operated by local companies.

    OYO Rooms in India has expanded the concept of organized, cost-effective and higher-quality hotel chains by creating a network of partner hotels since 2013. Other Asia-based startup budget hotel chains, including ZEN Rooms and RedDoorz, both of which are based in Singapore, have copied that model.

    “Cleaning or English support are the services required at any level of hotels,” said Tomohiko Sawayanagi, international director of Jones Lang LaSalle Hotels & Hospitality Group. “Newly emerging budget hotels meet these demands, used for both business and leisure opportunities throughout the region.” According to Euromonitor International, the market size grew to $27.7 billion in 2017, up 47% from 2012. It is forecast to increase to $32 billion in 2022.

    Red Planet has been expanding its business in this competitive market, by making use of technology. This could be especially appealing to young customers, as well as to the global hotel industry whose corporate management tends to adopt an analogue-based structure, rather than automated.

    Guests can have text conversations with the hotel’s front desk on a chat service on Red Planet’s booking app. From the moment customers reserve a room until they check out, guests simply send text messages and responses are usually immediate. The app also helps in finding local tourist spots or nearby restaurants, and offers discounts.

    The company is planning to launch a new computer reservations system by the end of this year, which compiles customers’ data across its network. For instance, if guests ask for an extra pillow in an app chat while staying at a hotel in Tokyo, they will automatically receive an extra pillow the next time they travel to one of the chain’s other hotels across Asia.

    It also plans to launch an automated check-in process by the end of this year, providing machines to complete the process without the need for staff, although some staff will still be present for face-to-face customer support.

    Red Planet already applies artificial intelligence for a system that calculates room prices every 15 minutes based on the predicted occupancy. More than 120 daily reports offer the actual and expected future performance of each hotel, enabling managers to make decisions in advance to maintain high occupancy levels.

    “Our technology is developed in-house with six members of the group, unlike other hotel chains which use a third-party company,” said Simon Gerovich, chairman and co-founder. “It is easy to adjust and scale our business speedily.”

    These various uses of technology allow Red Planet to reduce its labor costs — it hires 10 to 12 employees for 160 rooms, Gerovich said, while five-star hotels usually have 2.5 to three employees a room — and to maintain an occupancy rate of 85% or higher.

    The company also keeps a steady focus on comfort and convenience — with an eye on making guests repeat customers.

    The hotel’s compact rooms are roughly 15 sq. meters, but space is maximized. The beds, custom-made in Thailand, allow space for suitcases to be stored underneath. A youth-oriented tourist-friendly atmosphere is created along the hotels’ hallways, with photos of local areas covering the walls.

    Hotel lobbies have a bank of Apple computers for free guest use. Room prices, which can change frequently based on demand, are usually between $45 to $90 in Japan and even lower in other countries.

    “We are mainly targeting young millennials of 25 to 35 years old, tech-focused, who spend little time in their room but prefer experiencing in their trip,” Gerovich said. The one-stop services on the company’s app provide complete research and reservation procedures for guests for their trip.

    Gerovich describes the brand as a “copy and paste business model.” The company concentrates on building a systematic operation procedure so that “we can grow much more rapidly with potential partners with uniform guidelines in a future,” he said, “just like McDonald’s provides handbooks to franchisees on how to build a kitchen and make a hamburger.”

    This strategy has seen success. Its Philippine hotels had an average occupancy rate of 85% to 90% in April, while Red Planet Tokyo Asakusa was 97.5%. “Our business model works well in a crowded, congested city where we can reinforce the accessibility for business and leisure with good location,” Gerovich said.

    Gerovich’s background sheds light on his company’s nonconformist business model.

    “I’m grateful to the 2008 global financial crisis for correcting our plan,” Gerovich said, recalling an encounter with Timothy Hansing, CEO and co-founder of Red Planet. Gerovich, who worked in Tokyo as an equity derivatives trader at Goldman Sachs for six years, resigned and moved to Bangkok in 2005.

    He started his hotel career as an entrepreneur in real estate, focusing on the development of high-end hotels. He met Hansing, who had years of experience in the hotel industry, and together they worked on a new project on the popular Thai resort island of Phuket.

    But global events intervened. Gerovich said the project looked to falter amid the financial crisis and when political turmoil in Thailand led to a downturn in the country’s tourism and luxury businesses. “I understood the market-dependent risks of the five-star hotel industry, but at the same time I took note of the increase in the world’s connectivity with the development of low cost regional airlines,” he recalled.

    There were already very inexpensive hotel chains but Gerovich was convinced that “it would be nice for tech-focused young adults to stay at clean, affordable hotels.”

    Gerovich’s background in finance and Hansing’s expertise in hotel operations led to the idea of Red Planet. Gerovich said Hansing’s “unique ideas” included the use of technology that could help hotel managers from becoming submerged in a paper reporting system and the difficult task of forecasting occupancy rates.

    Red Planet grew quickly by utilizing the celebrity of an existing chain hotel brand. In 2012, Red Planet bought a 16% stake in Malaysia-based Tune Hotels, the budget hotel chain led by AirAsia founder Tony Fernandes. Red Planet became its major franchisee, building and operating hotels in cities served by low cost carriers in the Philippines, Thailand, Indonesia and Japan. When the company ended its partnership with Tune Hotels in 2015, it rebranded 24 of those properties as Red Planet.

    In contrast with other hotel chains, whose facilities are often built and leased by landowners or developers, Red Planet has been developing its hotels on its own, purchasing the land to build new hotels or refurbish existing buildings. That allows the company to choose locations without depending on landowners and to easily standardize the rooms’ format.

    “Red Planet can develop its hotels even at locations where developers or fund managers may hesitate, which is one of the biggest strengths of the company,” said Sawayanagi at JLL.

    Gerovich also made use of his strong connections to Goldman Sachs for Red Planet’s fundraising.

    In March, the hotel chain said it concluded an 11.77 billion yen ($111 million) sale-and-leaseback deal with Goldman Sachs, by selling ownership rights to four of its Red Planet branded hotels in Japan and simultaneously entering into a lease-and-operate agreement for 20 years.

    Red Planet can then use the funds to pay back its development costs to banks, build another hotel and sell again, and reduce its property taxes. In September 2016, the company announced a separate $70 million investment from Goldman Sachs.

    Though Red Planet is privately owned, including with stakes held by Goldman Sachs and other parties, the company has listed subsidiaries in Japan and Indonesia. In 2012, Red Planet took a stake in a financially troubled music recording company that was listed on Japan’s stock exchange. Seeking the music company’s restructuring was much easier than establishing a subsidiary in Japan and applying for an initial public offering. Red Planet Japan is about to see increases both in sales and profit this year, after selling other nonrelated businesses and focusing only on hotel operations.

    Red Planet expects revenue to reach $46 million this year, nearly 10 times what it had in 2012. The company is “seeking to establish the most scalable business,” Gerovich said. Its EBITDA margin, the operating profitability of its total revenue, has been as high as 50%, while the typical five-star hotel is 20% to 25%.

    The recent travel trend in Asia favors the company’s expansion plans. Red Planet focuses primarily on Japan and the Philippines, two countries that have seen a sharp rise in tourism.

    According to the Japan Tourism Agency, the number of international visitors to the country swelled to 28.7 million in 2017, more than three times the figure in 2012. Of those visitors, 61.4% had visited Japan previously. While the government estimates that Japan will have 40 million foreign tourists annually by 2020, Mizuho Research Institute said in a report last year that the country will be lacking as many as 4,000 rooms at that time to accommodate those visitors.

    The effect of a new law on home-sharing in Japan, or minpaku, should benefit the budget hotel business. Since the new regulation came into effect in mid-June, Airbnb and other home-sharing services are facing a massive drop in hosts in Japan, as the company pulled roughly 80%, or 50,000, of its listings in Japan that did not meet the requirements.

    “Budget hotels should have a potential in expanding their business among this area by providing an affordable price range,” said Tatsunori Kuniyoshi, research associate at Euromonitor International.

    “Japan is our smallest market but our second-largest revenue contributor,” Gerovich noted.

    The Philippines, where the company has its largest presence with 13 hotels, has seen a development in tourism in recent years. Tourist arrivals reached 6.6 million in 2017, up 11% from the previous year, and increasing at an annual pace of roughly 10% since 2010. The country saw a sharp increase in visitors from China in 2017 amid Philippine President Rodrigo Duterte’s friendly relationship with Chinese President Xi Jinping, marking 43% growth since Duterte took office in mid-2016.

    Red Planet announced in early June the establishment of a new subsidiary in the Philippines and the acquisition of two new properties, with plans to open hotels in 2019 and 2020.

    “This is an important year for us, because the size of our business is becoming substantial,” said Gerovich. “We are currently moving to the next phase, starting to focus on potential partnership and franchising.”

  • Bid to Revive Property Market Highlights Bank of Indonesia’s Policy Dilemma

    Bid to Revive Property Market Highlights Bank of Indonesia’s Policy Dilemma

    As Indonesia’s central bank drives up interest rates to defend a fragile currency, governor Perry Warjiyo is banking on a revival of the sluggish property sector to help maintain growth momentum in Southeast Asia’s biggest economy.

    Five years ago, luxury Indonesian apartment prices skyrocketed amid a commodities boom that saw some wealthy buyers pay cash upfront. The boom’s end, slower economic growth and rules to curb property speculation slammed on the brakes.

    Now, authorities want to encourage buying. From August, the central bank is scrapping its 15 percent minimum mortgage down payment for first-time home buyers and relaxing rules on loan disbursements, in a bid to support listless credit expansion.

    “We need to support our economic growth,” Perry said in a recent interview, asserting that property can have a multiplier effect on other sectors.

    This comes as Indonesia is caught in the cross hairs of an emerging market sell-off that caused the central bank to raise interest rates by 100 basis points in six weeks, to defend the rupiah.

    Filianingsih Hendarta, a senior Bank Indonesia (BI) official, estimates the eased mortgage rules will add 0.04 percentage points to economic growth this year. That sounds small, but Indonesia’s higher interest rates will reduce its growth pace, making a net gain from the rule changes welcome.

    BI’s growth forecast is 5.1-5.2 percent, compared with 2017’s 5.07 percent.

    But given the absence of a hot commodity market and the rising interest rates, seeking to make property an economic pillar might highlight authorities’ lack of credible policy options in the current environment.

    A Pedestrian Pace 

    Standard & Poor’s expects property sales to be flat this year despite BI’s new measures.

    “We don’t think there will be a major recovery, everything will probably move at pedestrian pace until the second half of 2019, after elections at best,” analyst Kah Ling Chan said, referring to parliamentary and presidential polls next April.

    In recent years, Indonesia’s biggest online housing broker Rumah123.com, part of Australia’s REA Group, has recorded sluggish sales.

    “The number of buyers seems to be stagnant now,” country manager Ignatius Untung of Rumah123.com said.

    Bankers have said they will not completely remove downpayments and instead will adjust the interest rates on home loans based on a customer’s risk profile.

    Roosniati Salihin, deputy president director of Bank Panin , said tepid demand is a major problem for property. “The market needs to be reinvigorated. The banking sector is only waiting for customers to walk in,” she said.

    Soelaeman Soemawinata, chairman of the Real Estate Association of Indonesia, said its “most optimistic scenario” is for the number of units sold to increase by 10 percent in the next year.

    “But the property industry is hard to predict,” he said. “People’s psychology affects this.”

    Preference for Renting

    The younger generation prefer to rent than purchase a home, said Handayani, consumer banking director of Bank Rakyat Indonesia.

    “Kids nowadays prefer to rent and to travel whenever they have spare money,” she said.

    Even if banks start requiring no downpayment at all, that would mean higher installments for customers, which won’t sit well given higher interest rates, said Aldi Garibaldi, senior associate director of Colliers International Indonesia, a property services firm. He said he does not think BI’s measures will be enough to spur demand.

    While BI’s easing is welcome, the central bank should take it up a notch by scrapping rules on the maximum number of credit facilities per person and allow banks to dispense more cash upon signing loan documents, said Adrianto Adhi, president director of developer Summarecon Agung.

    BI’s announcement on mortgages has spurred some young Indonesians to consider home-ownership.

    Newly married Khaerul Estian, a 28-year-old who works in a bank, has started looking. He hopes not to have to make any down payment, given small savings. But Estian intends to buy, even if higher interest rates raise the ultimate cost.

    “It’s a risk, but the most important thing is to own a house,” he said.

  • Texas Chicken to open 80 more stores in Indonesia

    Texas Chicken to open 80 more stores in Indonesia

    Quick Service Restaurant (QSR) has signed an 80-restaurant deal with US fast-food chain Texas Chicken.

    QSR is the third Texas Chicken Indonesia master franchisee to enter the market, following Quick Serve Indonesia which signed a development agreement earlier this year and Cipta Selera Murni, which has been there since 1985 and now has 59 restaurants.

    The companies said in a statement that QSR will open and operate locations “primarily in Indonesia” which it says is one of the fastest growing markets for the company. But it did not elaborate on where other stores may be located.

    QSR expects to open its first three restaurants by the end of this year. “The Asia Pacific market has been a sweet spot for Texas Chicken. We’ve experienced incredible growth in this part of the globe,” said Tony Moralejo, executive VP of international business for Texas Chicken. “The public and franchisee response to our presence in Indonesia, and the surrounding Asian markets, has been encouraging and we are excited to watch the developments that will occur in the coming years.

    “To continue the momentum of this expansion, we are actively pursuing more franchisees, who believe in the brand and its growth potential.”

    The newest Texas Chicken Indonesia operator plans stores in the DKI Jakarta, South Sumatra, Bengkulu, Banten, West Java and Lampung Provinces over the next 10 years.

    QSR is a subsidiary of Singapore-listed Envictus International Holdings, a well-established F&B operator with several businesses in its portfolio, including bread maker Hearty Bake, San Francisco Coffee and Delicious restaurants in Malaysia and foodservice supplier Pok Brothers.

  • The Long Road to Reviving Indonesia’s Cacao Industry

    The Long Road to Reviving Indonesia’s Cacao Industry

    Indonesia had to import about 200,000 metric tons of cacao beans last year, but it was not supposed to happen.

    The tropical archipelago used to be a beacon of cacao bean production, with a record 850,000 tons of raw beans in 2009, or about six times more than two decades earlier, according to Central Statistics Agency (BPS) data.

    Until then, Indonesia was the third-largest cacao bean exporter in the world behind the Ivory Coast and Ghana. However, seeing that much more value could be added by processing beans domestically, the government slapped a tax on raw bean exports in 2010 and told global manufacturers to build cocoa processing plants in Indonesia.

    Switzerland-based cocoa and chocolate maker Barry Callebaut expanded its Indonesia operation by establishing a plant in Makassar, South Sulawesi, in 2013 and another in Gresik, Central Java, in 2016. United States-based agricultural giant Cargill also established a processing facility in Gresik in 2014.

    But then a deadly disease decimated many cacao trees, forcing farmers, most of them only using simple farming techniques, to switch to planting corn, coconut or oil palm. Indonesia had about 1.3 million hectares of cacao plantations in 2012, which have continued to decline to an estimated 1.1 million hectares last year. Yields also fell to around 660 kilograms per hectare last year from 1.1 tons just five years earlier.

    The Indonesia Cocoa Industry Association (AIKI) estimates that the country produced around 260,000 tons of beans last year, down 31 percent from a year earlier.

    Soetanto Abdoellah, chairman of the Indonesian Cocoa Board, said the country now has to import beans from Ghana, the Ivory Coast and Cameroon to meet local demand.

    The Fall

    According to Rudyanto Hady, sourcing sustainability manager at Barry Callebaut, the production decline can also be ascribed to farmers’ limited skills and a lack of funds to develop new plantations.

    “Most cocoa farmers in Indonesia are smallholders, which make up more than 95 percent of the total cocoa plantation area, with the remaining areas held by private firms and state-owned companies,” Rudyanto said.

    Farmers are meanwhile also struggling with aging cocoa trees, most of which were planted between the 1990s and 2000s, in addition to diseases that afflict trees.

    All these factors have created a negative perception of cocoa as a commodity among farmers, who deem it an unprofitable crop that cannot improve their livelihoods.

    Misnoto, a 49-year-old farmer from Lampung, said black pod disease infected half a hectare of his cocoa trees.

    Another farmer, Sutaji, said farmers in the province, including himself, are struggling to improve yields.

    “We are now still learning how to improve yields from our cocoa plantations,” said Sutaji, who has a 3-hectare cocoa plantation.

    Temptation of Palm Oil

    AIKI chairman Piter Jasman said farmers often lack technical assistance, which affects local cocoa production and makes other cash crops, such as oil palm, to be considered as more lucrative alternatives.

    “If the government does not push the national production then production from cocoa plantations will continue to decline and eventually subside over the next few years, like in Malaysia,” Piter said.

    The neighboring country produced around 247,000 tons of cocoa beans in 1990, which dropped to a mere 3,000 tons by 2014 as farmers switched crops amid a palm oil boom.

    Lampung farmer Sutaji noted that oil palm could be an attractive option for farmers like him, who can produce around 700 kilograms of cacao per year, earning him Rp 17.5 million ($1,220). On the other hand, the same area under oil palms can earn him up to Rp 31.5 million per year.

    Demand

    Still, both local and foreign chocolate companies are heavily invested in Indonesia’s downstream cocoa industry, with most having established processing facilities in the country.

    Indonesia’s average cocoa bean production capacity rose to 800,000 tons a year from 350,000 tons since the government started to impose an export duty on the commodity, said Piter of AIKI.

    The total export value of processed cacao – including cocoa cake, cocoa butter, cocoa powder and chocolate liquor – amounted to nearly $1 billion in 2016, close to 2010’s peak of $1.1 billion.

    Chocolate confectionery is an expanding business in Indonesia, projected to grow 42 percent to Rp 19.5 trillion by 2019, data from a research firm Mintel shows.

    While Singapore and Malaysia each currently consumes about 1 kilogram of chocolate per capita per year, it is only 600 grams for Indonesia, indicating more room for growth.

    Closing the Gap

    Mahendra Siregar, who was a deputy trade minister and instrumental in Indonesia’s tax policy on cacao bean exports in 2010, said the current government seems to have abandoned the initial plan to boost the country’s cocoa processing industry.

    “We want the cocoa processing industry to accelerate, just like palm oil. We want the raw material to be processed in the country,” Mahendra said.

    “We encouraged local investors and even invited foreign investors to develop their upstream businesses here. But now, with the declining cocoa production … it’s like we already invited them here, they already established here, but now we only have a small cocoa supply [for processing],” he said.

    Mahendra said the processing industry still has a future, but it depends on consistent government policy.

    The National Cocoa Movement (Gernas Kakao) was set up in 2009 to plant new cacao trees and intensify production in existing plantations. It distributed subsidized cocoa seeds and fertilizers to farmers and provided them with technical assistance.

    But the program was terminated in 2013 after efforts to expand the main cocoa producing areas from Lampung and Sulawesi to other provinces spread the government’s pool of instructors too thin.

    “We need to hurry to implement and revive Gernas Kakao, otherwise the processing industry business will soon melt away,” Mahendra said.

    Private-Sector Assistance

    Cocoa farmers in Lampung are also trying to boost bean quality and yields with assistance from Barry Callebaut, the world’s largest producer of chocolate and cocoa products. The company is helping them improve their farming techniques to boost the quality of the fruit.

    It works with thousands of smallholders in Lampung and Sulawesi to implement cocoa sustainability programs, allowing farmers to produce high-quality beans that can be sold under a sustainability scheme. The beans can also be certified as premium quality, which either improves farmers’ incomes or earn them incentives from the company, Rudyanto said.

    Cocoa can also be cultivated along with other trees and plants, such as coconuts and cloves, giving farmers additional income from the same land.

    Muksininin, a 33-year-old farmer from Bumi Mulyo village in Lampung, said he still prefers to grow cocoa because the trees do not need constant attention.

    “Cocoa trees are easier to manage compared with oil palms, rubber trees, or even vegetables,” Muksininin said.