(Article for the Jakarta Globe – issue date 3 December 2012)
MONEY WISEMONEY REALLY DOES GROW ON TREES
Figuratively speaking that is! As investors struggle with the vagaries of thefinancial markets and the falling value of paper money many are turning to ‘real
assets’ as a means of preserving their wealth. Real estate is an example but when
you need cash in a hurry you cannot sell a bathroom. Other real assets include
gold, other commodities, collectibles such as works of art and agriculturalproducts. Let’s just consider what investment opportunities we can actually findgrowing on trees, or in the case of Agarwood within the tree itself.
But first we should consider the environment
There is much debate on the negative impact of irresponsible agriculturaldevelopments. Every day an area of rainforest the size of New York City
disappears. Throughout South East Asia we are seeing pristine forests that stoodfor millions of years being replaced by vast palm oil plantations. Many countries
are getting concerned about the damage being done to the planet. France has
just announced plans to impose a penal tax on the import of palm oil. Othercountries could move the same way. But there are plenty of other products thatare available to investors who want to keep the planet green.
Bamboo – the wonder plant
In pre-historic times bamboo would grow to heights of over 85 meters. It is still
the fastest growing plant on the planet. In recent years the harvesting of
hardwood has become more and more a challenge as forests become depleted
and environmental concerns grow. Fortunately bamboo offers a viable
alternative.
Every part of the bamboo plant has a value. Trunks are used for flooring,
construction and furniture, midsections can be woven into mats and food can beproduced from the shoots. The sawdust created during milling can be used tomake high grade paper.

As for the contribution of bamboo to the environment, it reduces erosion as its
roots and falling leaves absorb 90 percent of rainwater compared to between 35
to 40 percent by other trees. Bamboo forests provide habitat for wildlife. They
also function as the lungs of the earth as they absorb far more carbon dioxide
than other trees covering a similar area.
A single clump of bamboo can produce 15 kilometres of marketable wood. Theworld market for bamboo is currently valued at $10 billion. This is expected toreach $20 billion by 2015.
Agarwood – a resin worth more than its weight in gold
In the forests of South East Asia, including Indonesia, an evergreen known as theAquilaria tree grows. Roughly 1% will become infected by a fungus which spreads
from deep in the heart of the wood. As a result of natural resistance to thefungus, a thick dark brown resinous core is formed. The resin is known as
Agarwood which for centuries has been one of the most prized and valued
aromatic resins in the world. The resin is used for medicinal purposes, as anadditive in up-market brands of cosmetics, in aromatherapy and in religious
ceremonies.
It is so valuable that farmers would cut down 100 trees to find the one containing
the prized resin. Fortunately this destruction is no longer necessary as the trees
can now be scientifically injected so that every one produces high quality
Agarwood. This solution is a win for nature, a win for man and a win for investors.
Jatropha – the biodiesel ‘Miracle’ tree
There is considerable pressure in the world to rely less on fossil fuels for ourenergy needs. There are some very clean alternatives such as geothermal, windturbines and solar energy. The capital investment required however is still high interms of the immediate returns. Nuclear energy is also considered a ‘clean’alternative but the recent disaster in Japan has shown the devastating effects of a
nuclear accident.

Fortunately there is an option that can help to meet energy needs without
destroying forests and depriving people of food. The option is Jatropha, aninedible plant that can grow in the most miserable of soils and in any warm
climate, whether tropical or arid. It can survive on as little as 200mm of rain peryear. Its seeds contain up to 40% oil which can easily be processed into high grade
diesel fuel. The quality has already been demonstrated in trials by several airlines,
including Air New Zealand.
What are the investment returns and risks?
For those who can accept the risks of ‘outside the box’ investments returns canbe expected in the range of 10% to 15% per annum. But investment opportunities
are generally unregulated and subject to unknown risks so would not beappropriate for the small investor who should stick with more conventional assets
such as cash, stocks, bonds and property. But for the adventurous and wellheeled investor a little planting of ‘money seeds’ can lead to a useful financial‘harvest’ and can also contribute to a greener world.
Colin Bloodworth, director of PPI Indonesia, has spent over 20 years inIndonesia. If you have any questions on this or a related subject you can contact
the writer at indonesia@ppi-advisory.com