Businessman Hashim Djojohadikusumo is diversifying his business and setting up new ventures in mining and renewable energy. In a rare interview, Hashim said he is moving into rubber plantations, tin mining, developing renewable energy derived from aren (arenga pinnata) trees and developing technology to tap the power of water.
Hashim Djojohadikusomo is no stranger to the ups and downs of business. Before the 1998 financial crisis, he was regarded as fast rising entrepreneur with close ties to the country’s political elite.
His business holdings included stakes in banks, agribusiness and energy. His brother Prabowo Subianto was Lieutenant General and a son in law of former president Suharto. Life was sweet then.
The crisis, however, upended his plans and he was forced to handover many of his assets to the Indonesian Bank Restructuring Agency (IBRA). With the Indonesian economy facing a long bleak winter, Hashim decided to look elsewhere to rebuild his business.
He established himself in London and scoured the globe for new investment opportunities. He struck oil in Kazakhstan and that proved to be his road back to success and to Indonesia.
Today his business empire hasd an estimated turnover of $1.2 billion. He is also an emerging player in the country’s agriculture industry with plans to own large estates across the country.
"We have been in commodities for a long time, palm oil and maize. Now rubber. We are already in the rubber business in West Java and are looking to expand to Kalimantan and Aceh,” he told GlobeAsia.
And, he adds, “My newest venture is in tin mining on Bangka island, where we are already making an acquisition.”
The plantation business will still be viable for the next 10 to 20 years, Hashim believes, and he is expanding his land bank in West Sumatra, South Sumatra and West Kalimantan.
We have been a player in maize for a long time, together with its end products like food and animal feed and now we are looking into developing maize in Sumba in eastern Indonesia and Kalimantan as well,” he adds.
He faces major competition, however, as commodities are also being hotly pursued by some of the country’s largest conglomerates such as Astra International, Sinar Mas and the Salim Group.
The businessman, who made a huge fortune from the sale of his Central Asian oil stake in 2006, is now spending time developing renewable energy by planting aren trees on his estates in various provinces, aiming to produce bio-ethanol.
The aren tree, with deep roots extending some six to seven meters into the sub-soil, is an effective means of preserving the ecology, helping to conserve water. It is easily grown in lowlands as well as on mountain slopes up to 1,400 meters above sea level.
The tree grows easily as a secondary species under forest cover, and in North Sulawesi, where Hashim’s aren concession is located, wild boar and deer have returned as the habitat improves and as new springs of water appear.
Unlike cassava, aren grows all year long. Each tree can produce 20 liters of nira extract of which 10% can be processed into ethanol while the remainder can be sold as palm sugar. A hectare of aren trees can produce 100 liters of ethanol a day.
We are planting the aren trees in East Kalimantan, replanting denuded forests in a biodiverse way using the aren trees and their variants. The end product is ethanol. Sizewise, it requires $30 million for initial investment and we are talking here about 400,000 hectares or a long-term investment of $350 million. Some European investor groups are interested,” Hashim states.
The program has created considerable interest in the region. Local media in East Kalimantan reported on Hashim’s visit to the area, noting that he was accompanied by potential investors from Abu Dhabi, France and the Netherlands. The reports added that the businessman would also build an ethanol plant.
Suwadji, a member of the Kutai Kartanegara regional assembly (DPRD) and a prominent community figure, welcomed the move. “This is the solution should we experience an energy crisis. Hashim has the support of the local legislative assembly and the local people,” he declared.
If he can realize his plans it will mark the awakening of the regency in providing for the welfare of the people,” said Suwadji, who also owns 35 hectares of land in the area, where he has successfully planted teak trees.
Hashim says that the intial planting will cover 5,000 hectares and if successful, the area targeted will be raised to 700,000 hectares. “Many multinational companies have committed to buy the ethanol,” he adds.
Hashim owns a modest 400 hectares of rubber plantation in West Java but is now planning some more extensive rubber estates in East Kalimantan, where he owns 21,000 hectares of land that was initially intended for oil palm plantation.
Agribusiness holding company Comexindo sees rubber as a better prospect than palm oil because of the tough competition in the oil palm and CPO business. Comexindo has put aside Rp1 trillion to open up the East Kalimantan land right through to full production.
An initial 1,200 hectares will be planted under a people’s ‘nucleus’ scheme. Later development will include a further 15,258 hectares that will be managed by smallholders in a partnership program with the company.
Production is expected to start in 2014 or 2015 with an estimated capacity of 500 tons a day, with 80% of the rubber exported.
Hashim, who also owns the PT Kertas Nusantara pulp and paper company together with brother Prabowo, said he expects to be a significant player in the rubber business.
Mining and investments
Hashim, known as one of the country’s most ‘discreet’ business operators, does admit that he recently entered the tin business with the acquisition of a tin mining company in Bangka Island, where he is looking at the prospect for its tin being used in the electronic industries.
It’s not about tin cans but as raw material used in cell phones, laptops, TV screens and other electronic components,” he stated. And, he adds, “We are also looking to invest in gold mining in Indonesia and abroad. Also coal, but we have not made any investments yet.”
When Hashim sold his Nations Energy to China’s Citic Corp. in 2006, pocketing Rp17.2 trillion, he did not leave the oil and gas business entirely. In 2008, he established Nations Petroleum, operator of the Rombengan field in Papua, the South Madura Block and the Brunei Block L field. He sold those assets to Australia’s AED Oil and then, in 2010, divested his remaining stake in his oil fields in the United States, leaving him with significant cash resources.
Hashim, who ranks 23rd on the 2011 GlobeAsia rich list with a net worth of $910 million, is blunt about his approach to business. “Basically we are opportunists. We set up new ventures as well as equity investment. If a company needs capital infusion, management, we have done that, as in Canada and in the US where we became controlling shareholders. But we would rather not make passive investments in non-public companies.”
Energy from water is another new direction for the businessman. He is developing low-cost water-power systems suitable for developing countries, including Indonesia.
It’s an invention by an Indonesian engineer, Ismun Uti Asdan, which has been patented. It’s power-generating equipment he calls Kincir Ismun or the Ismun Waterwheel, which works in perennial rivers. You don’t need rushing water or dams and it works in lowland rivers. We are developing the prototype for commercial purposes,” Hashim said,
The waterwheel can adapt to the rise and fall of the river by being mounted on a pontoon. It can be combined with wind power. Compared to a solar power plant, the Kincir Ismun power plant is cheaper and easier to handle and far easier to repair.
Many local governments from Papua and Kalimantan have already used the waterwheel and Hashim has tested it in his own plantations. Ismun is now working to meet the demand for different capacities to meet a variety of local conditions.
With Hashim interested in supporting development of the waterwheels, Ismun is working to develop several models with capacity of 2,500 watts, 3,000 kilowatts, 30,000 kilowatts and 50,000 kilowatts.
Hashim’s group of companies, the Arsari Group, named after his children Aryo, Sarah (Rahayu Saraswati) and Indra Djojohadikusumo, has completed a major consolidation.
Heir apparent Aryo Djojohadikusumo, 29, who completed his studies at London University, was the force behind the consolidation process and helps his father at the helm of the group.
Aryo is now commissioner of Arsari Group and holds a strategic position in controlling the group’s subsidiaries. He is president director of PT Arsari Putra Indonesia and PT Karunia Tidar Abadi.
Arsari Group’s core businesses are in agribusiness, mining and minerals, logistics and energy. The group also runs mushroom and pearl culture businesses exporting to the US, Europe, Japan and the Middle East.
The group is also expanding in large-scale ranching in Sumatra while PT Cito Sarana Jasa Pratama is in logistics and courier services and operates warehouses.
Nor has Hashim neglected his old businesses in favor of his new projects. His oil palm plantation in West Sumatra won an award for preserving the environment by leaving some 3,000 hectares in its natural state as a tiger sanctuary.
This was his second animal conservation endeavor, after Mangkajang, Kalimantan, where he manages a 1,260-hectare green belt for native flora and fauna. This, says Hashim, provides natural habitat for 450 orangutan, 12 Sumatran elephants and 30 honey bears.
It’s about cultural heritage, which we have to preserve. Preserving our cultural heritage, not just our physical cultural heritage but also landscape, forest, wildlife, nature, environment, the reefs, the waters. Culinary traditions, food, wayang and so forth.
There is relevance between business and culture. Business should support culture and culture civilizes business. Hopefully businessmen who are influenced by culture become more civilized. I believe it: Culture civilizes businessmen,” states Hashim, a well-known art collector and who runs a number of philanthropic organizations.
These organizations aim to preserve Javanese cultural heritage in the widest sense and provide education for the needy. The Arsari Djojohadikusumo Foundation and Wadah Titian Harapan Foundation concentrate on early childhood education, providing assistance in the form of hardware and software in information technology, books, libraries and buildings. The Arjasari Library in Bandung is a learning center for teachers, students and farmers.
More than 1,200 children have enjoyed grants while scholarships are provided for post-graduate programs in collaboration with Gajah Mada University (UGM) in Yogyakarta, with an emphasis on museum curator skills, anthropology, archeology and the Javanese cultural heritage.
Hashim’s foundations also work to preserve historic buildings, the renovation of the tombs of the Javanese kings and the digitalizing of ancient texts.
Hashim has a vision to preserve cultural heritage, the tangible and the intangible. He just doesn’t want his work to be talked about,” says Professor Frank Tugwell of Pomona College in the United States, which awarded Hashim its prestigious Blaisdell Distinguished Alumni Award.
For my part, I wish there were many more businessmen who were willing to preserve our cultural heritage as part of their corporate social responsibility,” notes Hashim. “I am not the only one. Arifin Panigoro also sponsors and is active in the preservation of cultural heritage, including wildlife preservation.”
Hashim, who is also the chairman of the Indonesian Chess Association, continues to maintain business interests abroad and is currently eyeing opportunities in India and Mongolia.
Kincir Ismun, the modern waterwheel
It all started during a rainy session when little Ismun Uti Adan asked his mother if he could have one of her yarn spindles for a toy. He used the spindles to make a waterwheel and played in the water rushing along the drains around his house.
That small boy never thought that one day he would invent a smart but simple technology for a micro-hydro power plant.
In the eyes of Prof. Dr. Ir Indarto, dean of Gadjah Mada University (UGM), Ismun is a very tenacious person who won’t give up until his goal is acheved.
“Ismun and I have been very good friends since our student days at UGM. So I know him well. He is very active and creative,” Indarto told GlobeAsia’s Ardhian Novianto.
Ismun’s journey through life was much like that of other people in the interior of West Kalimantan in the 1950s, living in harmony with nature. His describes his life as just like the flowing rivers of Kalimantan. When he was accepted as student in mechanical engineering in one of the best universities in the country, he saw this as part of the natural flow of his destiny.
When Ismun graduated from high school in 1963, UGM had just opened a new department of mechanical engineering. It offered an opportunity for every high school graduate with the highest grades in each province to enter the department without a test. Ismun was one of the fortunate few.
Ismun’s idea to use the river to generate electricity was inspired by the fact that his hometown is located on the river but most people there lived without electricity.
He knew that the common technology for electricity generation is to have a conventional hydro-electric power plant, expensive to build and which damages the riverine ecosystem. Damming the river would also inevitably affect the lives of people who use the river as their traditional means of transportation.
“To build such hydro-electric plants and to build an integrated electricity network is not possible due to the economic scale. So I invented the first waterwheel applicable for small rivers with slow water flow in 1984. A waterwheel with a diameter of one meter and submerged parts succeeded in turning a car alternator to generate electricity,” he recalls.
In 1996, Ismun built a bigger waterwheel, with a diameter of five meters, with two-meter blades submerged in water. He tried the device at his home town in Kalimantan, but it did not work.
The cause of the faulure was the characteristic of water as an incompressible fluid. When the blades churned the water, the surface of the water maintained pressure on the blade and the waterwheel stopped turning.
“I felt bad, I cried. I moped for several days, frustrated. Since then, I have been thinking about how to solve the problem. One day, I looked out the window and the louvred glass window insired me. If I applied the louver window principle, it might work,” Ismun thought.
Two years later, Ismun created a waterwheel with moving blades using the louver principle. He succeded in making a 3,000-watt power generator that worked well.
At first he called his invention “moving blades waterwheel” but many micro-hydro researchers asked him just to use his own name for the invention. So the waterwheel came to be called Kincir Ismun or the Ismun waterwheel. He obtained his patent cerificate in 2002.
Many local governments in Papua and Kalimantan have already ordered the Kincir Ismun. Realizing that he needed capital to mass-produce the waterwheel, he met with businessman Hashim Djojohadikusumo last year. That was how the venture started, offering a new means of bringing power to small and isolated communities.