Two companies from Malaysia are on the lookout for investors to set up a big agarwood tree plantation in Laos to produce Oud oil and other agarwood products for markets in Asia, the Middle East and Europe.
Agricultural contractor Aseagate on January 6 signed an agreement valued 200mn with forestry management and agriculture technology firm Richwood Capital both companies are based in Kuala Lumpur to operate and run a 2,000-hectare agarwood tree plantation in the central Lao province of Bolikhamsai, one of the largest plantations projects in the landlocked Southeast Asian country so far.
According to Richwood Capital’s CEO Kendrick Ho Qing Tyat, the project will be implemented in four phases. The initial investment in the first phase is about 18mn for the planting of 200,000 agarwood trees aged between 18 and 22 years at costs of 90 per tree, which should yield a return of 200mn in three years based on calculations that one liter of high-quality agarwood oil fetches at least 14,000 on the wholesale market.Over four phases in the coming six to eight years, with the planting of new trees and new investors on board, the venture’s business plan is to reach a total return of no less than 7.2bn, Tyat said at a press conference in Kuala Lumpur last week. The venture plans to set up its own production plant in Laos or to collaborate with a Lao partner. To produce the resin from which the Oud essence can be distilled, a special technique developed by a Singapore laboratory using a unique and effective enzyme will be deployed to multiply the resin output per tree.
Main export markets will be the Middle East and China, and also Southeast Asia to tap the big potential that opened up with the recent launch of the ASEAN Economic Community. Top European perfume makers are also on the potential client list. The venture will also sell agarwood leaves, which can be made into tea, and explore ways of producing wood chips from the agarwood trees as well as offer “agriland banking” to investors to tap into the growing ptential of agarwood farming.
Both companies hailed agarwood as a safe investment, as it was “more resilient to economic fluctuations as compared to stocks and bonds,” and insurance will be purchased to provide protection against possible natural calamities.
Aseagate has been awarded the sole rights to the management of the agarwood plantation, while Richwood Capital will supply and plant the trees. The plantation concession has been exclusively awarded by the Lao government to the Singapore branch of non-governmental organisation Global Outstanding Chinese 100, or GOC100, an association of international Chinese industrialists, business people and entrepreneurs, which will cooperate with the two Malaysian firms in setting up the plantation and is working out profit-sharing and other details for the collaboration with the Lao government.
GOC100 in August 2015 signed an exclusive agreement with the Lao Ministry of Agriculture and Forestry for the concession of the plantation which is located within a Lao military base and guarded by the army. Infrastructure-wise, the plantation will benefit from a new railway network linking Laos with China to be set up by 2020.
Agarwood is increasingly becoming an investment commodity due to its valuable resin of which Oud oil is being distilled. Pure Oud is highly in demand as a natural fragrance throughout East and Southeast Asia, as well as in the Middle East and by global perfume manufacturers. It is a popular fragrance for both men and women in the Arab world, while it is also used in traditional Chinese medicine, by Ayurvedic and Tibetan physicians and as meditation incense by various religious groups. In some Arab cultures, it is also used as inhaled incense as a natural remedy against insomnia.
What makes investment in an agarwood plantation particularly attractive is the fact that, due to its scarcity, the mature wood is pricier than gold with a retail price of between 5,600 and 10,000 per kilogramme, making it one of the most expensive natural raw materials in the world.