DO it right and a P12.5-million investment in agarwood production today, through the establishment of a one-hectare Aquilaria tree farm, can potentially yield as much as P500 million after 10 years, says Australian businessman Benjamin Mead, founder and CEO of Iba Botanicals Inc.
Along with his business partner, former Department of Agriculture Secretary Luis “Cito” Lorenzo Jr., Mead was first to invest in agarwood production in the Philippines.
malaccensis seedlings at a tree
Iba Botanicals, which is based in Zambales, has started selling imported agarwood seedlings. In five to six years, the company is expected to sell its own seedlings to prospective buyers.
Huge demand, big opportunity
“USING even the most conservative projection, it is an extremely profitable opportunity. What I want to do is encourage the people to plant because we want to grow the industry and we can see very strong demand for Philippine agarwood,” Mead added.
Agarwood-importing foreign markets include Middle Eastern countries, China, India and Japan. The tree by-product is also used for perfumes, and countries in Europe are expected to source their raw materials in the Philippines, given that the country’s agarwood is the most sought-after among agarwood products even in the black market.
Estimated to be worth $8 billion a year on a global scale, the birth of the agarwood industry in the Philippines essentially began only last year when the Department of Environment and Natural Resources (DENR), through the Biodiversity Management Bureau (BMB), granted the first-ever Wildlife Culture Permit to Iba Botanicals.
It has also secured the necessary import permits and went through a rigid process to secure its permit from the Bureau of Plant Industry under the Department of Agriculture.
Mead: “Using even the most conservative projection, it is an extremely profitable opportunity. What I want to do is encourage the people to plant because we want to grow the industry and we can see very strong demand for Philippine agarwood.”
The firm produces essential oils and is a pioneer in the business of producing essential oils from ylang-ylang (Cananga odorata), vetiver grass (Vetiveria zizanioides), and Elemi, which is produced from the resin of the Pili tree (Canarium luzonicum).
Also known as the “wood of the gods,” agarwood is reputedly the most expensive forest product in the world.
A kilogram of premium quality agarwood, sought for its fragrant resinous heartwood from the Aquilaria tree that naturally grows in the wild in the Philippines, can fetch up to P5 million.
Grown in plantations, each Aquilaria tree can produce from four to six kilos of agarwood that can fetch from a range of P75,000 to P100,000 per kilogram.
Native tree species
INTERVIEWED by the BusinessMirror, Lorenzo Jr., chairman of Iba Botanicals, said the company is targeting to plant within the year at least 60 hectares of Aquilaria malaccensis, a species that naturally occurs in Bangladesh, Bhutan, India, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and the Philippines.
This early, Iba Botanicals has already sold seedlings to some 1,000 buyers. Iba Botanicals sells seedlings at P1,000 each, which are about 25 centimeters to 30 centimeters tall, but the price goes down depending on the quantity being purchased.
Easily, Lorenzo and Mead said that with the incorporation of the Agarwood Association of the Philippines, the areas planted to Aquilaria malaccensis can reach 1,000 hectares in a couple of years, noting that the Philippines is known to produce premium-quality agarwood.
Because of the huge demand for agarwood, Aquilaria malaccensis is threatened with extinction due to habitat loss, and in the case of the Philippines, due to the absence of a legal source, and rampant tree poaching to harvest agarwood in the wild.
The trading of Aquilaria malaccensis is strictly regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and it requires special permits to import or export CITES-listed species.
The DENR-BMB also strictly prohibits the harvesting of the species, its seeds, or seedlings from the wild as it is already on the endangered list and will stop at nothing to apprehend those in the illegal trade of agarwood-producing trees and their most expensive products.
IBA Botanicals has been working with some of the largest buyers of essential oils and these are multibillion-dollar companies that are willing to buy huge volumes of chips and oil products that are of premium quality, says Mead.
“The way we do this is with best practice mentality and traceability, we do it the right way,” he said.
Moreover, Mead said they are currently working with the University of the Philippines-Los Baños and are set to formalize the partnership to optimize the agronomic practices and work together on the inoculation techniques so that farmers will get the most return.
There are about 12 species of agarwood or Aquilaria trees that produce agarwood. But Iba Botanicals decided to focus on the malaccensis species because it grows in Bukidnon and produces high volumes of top-quality agarwood. More important, the inoculation technique is well understood, thereby reducing the risk of failure.
In the Philippines, Iba Botanicals Inc. said the company is working to secure the right of first refusal or be the first buyer of agarwood from its partners.
“WE as a country have a lot of catching up to do when it comes to reforestation and environmental initiatives. It is not just a function of responding to climate change but rather we pretty much used a lot of our tree resources that we need to replenish,” Lorenzo said, adding that nurturing the agarwood industry in the Philippines is now one of his advocacies.
“It is also difficult to plant anything for the sake of the environment because it is not sustainable since there’s no steady stream of benefactors that could supply a permanent tree crop,” he said.
According to Lorenzo, Aquilaria malaccensis is already acclimatized to Philippine tropical conditions for hundreds of years, making it ideal species for plantation forests.
“There have been efforts before in Mindanao to bring in different trees like pine trees from New Zealand, but it was not sustainable for a host of reasons,” says Lorenzo, adding that one factor is due to the fact that the species is not endemic to the Philippines.
ACCORDING to Lorenzo, starting it right is important in doing business with agarwood production, adding that a systematic and very organized approach that adheres to the rules of engagement by those in the business every step of the way is paramount, citing the case of Iba Botanicals when it started to produce essential oils in the Philippines.
“The corresponding process…the user processor…consumers—they have studied it and they are consistent and [there is] no shortcut,” says Lorenzo, describing Iba Botanicals’ way and assurance of producing premium-quality essential oils using the best practices developed through years of research and partnership with the communities and other stakeholders.
“Now, we are encountering a new way at agriculture and forestry. This new way is looking at an endemic species. It’s been localized or native to the Philippines. It, however, is endangered so all the permits have to be followed, not harvested in the wild,” says Lorenzo.
A known technology
MEAD was previously involved in the agarwood business in Laos prior to securing the permit from the DENR-BMB for the establishment of the Aquilaria malaccensis in the Philippines. To do it right, Iba Botanicals provides training and seminars to prospective buyers twice a week and even guides potential partners in securing the necessary permits, especially the legal sourcing of agarwood-producing species for forest plantation establishments or even backyard tree farming.
“The vision is not just to plant agarwood and create a new high-value agroforestry industry but also to relieve poaching pressures in the wild,” he said.
Also, he said, this will pave the way for imparting and perfecting the best practices, consistent practices, and traceability.
“With agarwood, it can be worth so much money if it is done right,” Mead asserts.
Image credits: Iba Botanicals Inc., Cenro Masinloc