Personal Finance - Money Really Does Grow On Trees

Figuratively speaking that is! As small investors struggle with the vagaries of the financial markets and the falling value of paper money many are turning to 'real assets' as a means of preserving their wealth. Property is one real and desirable asset of course but owning too much real estate carries risks, in particular liquidity. When you need cash in a hurry you cannot sell a bathroom. More liquid real assets are gold, oil and other natural resources including products from agricultural land and forests for which there is an endless and growing demand.


There is much debate on the negative impact of irresponsible agricultural developments. Every day an area of rainforest the size of New York City disappears, Indonesia being responsible for much of this. Throughout South East Asia we are seeing pristine forests that stood for millions of years being replaced by vast palm oil plantations. We hear of elephants and tigers in Sumatra rampaging as their habitat disappears. There is certainly big money involved but I don't think the average investor wishes to be part of the destruction, especially if products that can feed people are being converted to other uses such as fuel. It doesn't have to be this way as there are investment opportunities that can produce high returns and at the same time help to create a greener planet.


In pre-historic times bamboo would grow to heights of over 85 meters. It is still the fastest growing plant on the planet. A single clump can produce up to 15 kilometres of marketable product. It also has a tensile strength capacity stronger than most steel. 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 be produced from the shoots. Even the sawdust created during milling can be used to make 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.

It is now possible to invest in bamboo via a managed forestry fund. Typically you would purchase a minimum of 50 clumps. The purchase price would include the forestry management charge and you could expect a rising income every year from the fourth year up to the fifteenth year from the regular harvesting of the wood. Returns are projected to exceed 20% per annum, although as with all investments projections should not be automatically assumed.

The world market for bamboo is currently valued at $10 billion. This is expected to reach $20 billion by 2015.


In the forests of South East Asia, including Indonesia, an evergreen known as the Aquilaria 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 the fungus, 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 an additive 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 Agarwood. Fortunately this destruction is no longer necessary as the trees can now be scientifically injected so that every one produces high quality Agarwood. The technique has been patented so that it is used only by qualified and selected forest management companies. This solution is a win for nature, a win for man and a win for investors.

Planting to harvesting is a seven year process so it has to be seen as a medium to long term investment. The rewards can be significant however as returns can exceed 20% per annum. It is possible to buy semi-mature trees and there is also a mutual fund option with a lock-in period.

Anyone purchasing trees is entitled to visit the plantation by arrangement with the management company. So you are free to go and talk to your trees if the mood takes you.


We are all feeling the effects (or at least we would be if petrol was not still heavily subsidized in Indonesia!) of the rapid depletion of oil against a backdrop of exploding demand. Political unrest in the Middle East adds further urgency to the need to find alternative energy sources.

There are some very clean alternatives such as geothermal, wind turbines and solar energy. The capital investment required however is still very high in terms of the immediate returns. Nuclear energy is also considered a 'clean' alternative but the recent disaster in Japan has shown the fragility of our defenses against nature and how devastating can be the effects of a nuclear accident.

Which leaves us with biofuels, the conversion of plants or their derivatives to a usable fuel. The problem here is that large tracts of land are required to produce the volumes of fuel that are needed. Worse, most of the plants that can be converted are also plants that feed populations, such as corn and soy.

Fortunately there is an option that can help to meet energy needs without destroying forests and depriving people of food. The option is Jatropha, a 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 per year. The fruit of the plant is poisonous, so can never be used as food. 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.

Another benefit is that the processing requires a large labour force which is good news for developing countries. One of the most favoured locations is Kenya which has the ideal climate and a ready workforce. Yet another plus factor is that greenhouse gas emissions are reduced since the fuel burns much more cleanly than conventional fossil fuels.

Jatropha is not limited to the production of fuel. Other by-products include high quality paper, soap, cosmetics, cough medicine and fertilizer. Returns from an investment can begin after as little as two years.


As US President Obama said: "The next generation will not be held hostage to energy sources from the last century." But it doesn't mean we have to be poorer as a result. There are clearly opportunities for those who are prepared to step outside the box of conventional asset classes. It should not be seen as a substitute for basic financial instruments including traditional pension and savings plans, but for those who already have these in place there are potentially high returns and the knowledge that their investments will contribute to a greener planet.

Colin Bloodworth has worked as a financial consultant in Indonesia since 1992. He is Director of PPI Indonesia and can be contacted at or +62 21 3004 8024