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Management Appraisal of Oil Palms Nucleus Estate Smallholders-Transmigration Scheme in Jambi, Sumatra, Indonesia: The Case of PT. Durna Kencana
Field Study Abstract:
This study evaluated the operation and management of PT. Durna Kencana as adaptor and implementor of the NES-Trans scheme in Jambi Province, Indonesia covering the period 1997-2000. It also determined and analyzed the problems and constraints of the firm as bases in formulating policies toward improving the economic performance of the firm.
Oil palm plantation operated and managed by PT. Durna Kencana totaled 31,247 hectares, of which 12,014 hectares or 38.45 percent was operated by nucleus and 19,233 hectares or 61.55 percent was operated by plasma (composed of 8,658 plasmabeneficiaries).
The overall production operation of PT. Durna Kencana was divided into three major interdependent and interrelated facets, namely: nursery farm, plantation, and processing plant. Apparently, it was observed that the company was not efficient in managing its FFB production. In 1997-2000, the actual production of FFB was lower than the target. Through the years, the processing plants have been underutilized due to inadequate supply of raw materials (FFB), operating at only 55.87 percent of its rated capacity during the past years.
PT. Durna Kencana was marketing-efficient for it has a sure market. The company was able to totally sell its products to its institutional buyers, who are sister companies of the firm. While the provincial market share of the company apparently showed decrease through the years due to the proliferation of oil palm plantations in Jambi province, its share to national supply had increased through the years.
From the financial performance assessment, PT. Durna Kencana was found to be inefficient in terms of managing its financial resources. Findings revealed that the company had become insolvent and debt-ridden as reflected by its current ration and debt-to-asset ratio during the past years. Profitability wise, the return on investment (ROI) of the company remained below the standard earning rate during the same period under review.
Evidently, the financial sustainability of PT. Durna Kencana was believed to be at stake. Aside from inefficient financial and production performance, the increasing social pressure from the local communities had also been affecting the operational sustainability of the project.
However, on a positive light, the socioeconomic impact of the project to the community exhibited manifestation of creation of job opportunity, improvement of quality of life of plasma beneficiaries, revenue/tax generation by the government, existence of other business, and provision of social services and economic infrastructure and facilities.
Since the NES-Trans scheme as adopted by PT. Durna Kencana was found to be contributory to the national economic goals and objectives of Indonesia, this program should therefore be sustained and supported by the government. Collaboration between the company and the government should be further strengthened to sustain the NES-Trans program and to improve the oil palm industry of the country in general.