INVESTMENT OPPORTUNITY FOR FOOD AND AGRO INDUSTRY IN INDONESIA

DIRECTORATE GENERAL OF AGRICULTURE AND CHEMICAL BASED INDUSTRIES MINISTRY OF INDUSTRY Tokyo, 2 June 2009

I. INTRODUCTION 





Food and Agro Industry is an important industry because it plays role in a escalation endurance of national foodstuff, labor absorption, escalation income of village community, devisa and also in developing of economic and industry in all Indonesia area. In year 2007, Food and Agro Industry sector share 24,7% in PDB industry. Food and Agro Industry is developed through Industrial Cluster approach with priority in developing CPO industry, chocolate and cacao industry, sugar industry, sea product industry, coconut industry, fruit industry and rubber industry. So far, Development of Food and Agro Industry already show a progress, but not optimal yet. It happened because some challenges such as ; 1) dearth of basic material because it is exported as a primer form like CPO and Cacao, 2) Increasing of oil fuel price , 3) There are amount of illegal product, and 4) issue foodstuff additive.

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II. CONDITION OF FOOD AND AGRO INDUSTRY 1. GROSS DOMESTIC PRODUCTS OF SECTOR INDUSTRY IN 2008 AND GROWTH TARGET IN 2009

(Percent) SITC

INDUSTRIES SECTORS

2005

2006

2007

2009

2008 OPTIMIST

MODERATE

31

Food, Beverages and Tobacco Industries

2,8

7,2

5,1

2,3

2,0

2,93

32

Textile, Leather Products and Footwear Industries

1,3

1,2

(3.7)

(3.6)

(4.0)

(2.18)

33

Wood and Other Products Industries

(0.9)

(0.7)

(1.7)

3,5

2,50

(0.15)

34

Paper and Printing Products Industries

2,4

2,1

5,8

(1.5)

(2.0)

(2.5)

35

Fertilizers, Chemical and Rubber Products Industries

8,8

4,5

5,7

4,5

2,5

2,0

36

Cement and Non Metalic Quarr Products Industries

3,8

0,5

3,4

(1.5)

(2.3)

(2.5)

37

Iron and Steel Basic Metal Industries

(3.7)

4,7

1,7

(2.1)

(4.0)

(4.5)

38

Transport Equip., Machinery & Apparatus Industries

12,4

7,6

9,7

9,8

(1.0)

(1.5)

39

Other Manufacturing Products

2,6

3,6

(2.8)

(1.0)

1,0

(1.5)

Non Oil and Gas Manufacturing Industry

5,9

5,3

5,2

4,1

0,0

(0.5)

Sources : BPS 3

2. Contribution of Industrial Sector in GDP Non Oil and Gas Manufacturing Industry, 2008

Transport Equipment, machinery and Apparatus Industries ; 35%

Other Manufacturing Industries ; 1%

Textile, Leather Products & Footw ear Industries ; 10% Iron and Steel Basic Metal Industries ; 2%

Food, Beverage and Tobacco Industries; 27% Wood and Other Products Industries; 4%

Paper and Printing Products Industries; 5% Fertilizers, Chemical Cement and Non & Rubber Product Metalic Quarr Industries; 13% Products Industries ; 3% 4

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3. Contribution of Agriculture and Chemical Based Industries in GDP Non Oil & Gas Manufacturing Industry, 2008

Transportation Equipment, machinery and Apparatus Industries; 35%

Other Industry ; 1%

Textile, Leather Products & Footw ear Industries ; 10% Iron and Steel Basic Metal Industries ; 2%

Agro and Chemical Industry ; 52%

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III. Policy for Industrial Business Climate a. Government Regulation Number 1/2007 on Income Tax Facility for Investment in Particular Fields of Business and/or Regions Domestic corporate taxpayers of Limited liability company and cooperatives making investment in particular fields of business and regions are provided income tax facility One of the lines covered in the Government Regulation is Food Processing Industry namely Canned Fish and other aquatic biota in the following regions/provinces: Maluku, North Maluku, Papua, West Irian Jaya, North Sulawesi, South Sulawesi, Central Sulawesi, Northeast Sulawesi, West Sulawesi, Gorontalo. All Provinces/Regions are in Eastern Indonesia b. Government Regulation Number 7/2007 on 3rd Changes in Government Regulations on the number 12/2001 regarding the import and / or consignment of goods hit a tax that is exempt from the strategic value-added tax

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Policy …… continued c. Law of Republic Indonesia Number 25/2007 on Investment d. Government Regulation Number 62/2008 on Changes in Government Regulations on the number 1/2007 on income tax facilities for investment in the fields of business and / or in certain areas e. Government Regulation of RI No.24/2009 on Industrial Estate Industrial company to operate upon enactment date of this Government Regulation shall be based in Industrial Estate Industrial companies to perform expansion by additional lands in excess of the land availability for Industrial Estate shall be based in Industrial Estate. Companies based in Industrial Estate may be provided custom & excise facilities in accordance with the applicable rules and regulations on custom & excise. Tax facilities for Industrial Estate and Industrial Companies in Industrial State will be provided in accordance with the prevailing rules and regulations on custom & excise. 7 7

Policy …… continued c. Presidential Regulation Number 28/2008 on Policy for Industrial Sector – among other things : to boost the development of Fish Processing Industry; d. Regulation of Minister of Industry Number; 41/M-IND/PER/6/2008 on Rules and Procedures for Industrial Licensing, Expansion Permit and Industrial Registry Certificate; 

Guidelines for Local Government on Industrial Licensing

8 8

Policy …… continued e. Regulation of Minister of Industry Number 10/M-IND/PER/2/2006

on the Utilization of Local Engines for Exempted Goods and Material Imports for Production 

Industrial companies carrying out the development using local engines, will be given additional import exemption set forth in Article 5 Decree of Minister of Finance Number 135/KMK,05/2000.



Industrial companies referred above must have Minimum Local Content (Domestic Products Utilization) 30 %;

9 9

Policy …… continued f

. Decree of Minister of Finance Number 135/KMK.05/2000 on Facility for Import Duty on Engines, Goods and Materials, for Industrial Development of Goods/Services 

Engine imports for purpose of goods/service industry will be given import duty facilities to 5% (five percent).  Import Duty facility will be given for imports within 2 (years) as of issue date of Decree on Import Duty

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IV. INVESTMENT OPPORTUNITY 1. CPO Industry 2. Cacao and Chocolate Industry 3. Fish Industry 4. Sugar Industry 5. Rubber Industry 6. Coffee 11

1. CPO Indonesia is the largest producer of palm oil CPO-based industry has been developed to produce food as well as non-food products Estimation of CPO production of Indonesia in 2009 reach 20,9 million tons is increase 7,6 % compared 19,330 million tons in 2008. Estimation of CPO production of Indonesia in 2020 reach 40 million tons Utilization of palm oil is mostly in the form of CPO and cooking oil for domestic and export need. Further process to produce oleochemical with higher value added has not yet maximized. Land is available in Sumatera, Kalimantan, Sulawesi, Papua (± 6 million Ha) 12

1.1. Demand Estimate in 2012 Product

Global Capacity (Ton) demand (Ton)

Market share (%)

Fatty acid

6.291.343

565.300

9,87

Gliserol

1.060.387

59.040

5,9

Fatty alcohol

4.050.005

140.000

3,58

Sumber : CIC (2006)

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1.2. Closing Remarks 

Indonesian palm oil production will reach 21 million ton in 2010. That amount of production could fulfill the demand for domestic CPO-based industry.



Some oleochemical industries have been developed and show significant growth



Oleochemical industry is promising because it is favorable in terms of environmental aspect, that is, it is renewable and environment friendly (biodegradable).

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2. CACAO & CHOCOLATE 

Indonesia produce Cacao seeds is about 486.500 Ton. It placed Indonesia at the third place among world’s cacao produser after Pantai Gading/Ivory Coast (1.276.000 Ton) dan Ghana (586.000 Ton).



Indonesia cacao seeds about 365.200 ton (80%) is exported in dry seed form and 121.300 ton is used to fulfill the need of domestic cacao processing industry.



The main producer of Cacao : Sulawesi Selatan 184.000 ton (28,26%), Sulawesi Tengah 137.000 ton (21,04%), Sulawesi Tenggara 111.000 ton (17,05 %), Sumatera Utara 51.000 ton (7,85%), Kalimantan Timur 25.000 ton (3,84%), Lampung 21.000 ton (3, 23%) dan other 122.000 ton (18,74%)



Cacao’s land in Indonesia is about 992.448 Ha

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2.1. CACAO BEAN PRODUCTION NOWADAYS The World’s Cacao Bean Production Cacao Beans Production (thousand ton)

Asia’s Cacao Beans Production (thousand ton) Cocoa Production in Asia

Other ; 649; (20%) Ivory Coast; 1276; (37%)

Nigeria; 190; (6%)

T/yr Indonesia Philippines

Brazil; 171; (5%) Indonesia; 456; (14%) Ghana; 586; (18%)

456,000 6,000

Malaysia

30,000

Vietnam

400

PNG

41,000

India + SL

12,000

Total

559400

Total : 3.328 ribu ton Source: ICCO, 2005 (Diolah)

Indonesia is the third biggest cacao producer in the world.

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2.2. Indonesia’s Cacao in 2007 Description -

Cacao Butter

Cacao Pasta

Cacao Powder

2,400,000 367,000

646,500 40,388

450,500 2,691

528,500 23,742

5.13 10.94

5.16 22.7

1.36 11.78

15.65

-

Indonesia’s trend Export 2003-2007 (%) Volume Value

1.05 7.68

5.15 22.03

-39.96 -29.20

-1.15 -8.39

-

Market Share (%) NETHERLANDS FRANCE COTE D’IVOIRE GHANA NIGERIA INDONESIA MALAYSIA GERMANY USA SINGAPURA

0.9 0.2 38.9 15.4 7.2 12.6 0.2 0.5 1.1 0.07

33.7 10.2 8.5 1.2 0.8 6.2 12.1 1.6 3.6 2.5

22.2 5.8 27.5 4.5 0.2 1.8 4.4 4.5 5.2 2.7

41.1 9.7 3.9 0.1 0.02 4.5 9.5 6.2 3.5 3.8

-

UNIT VALUE INDONESIA WORLD’S FLAT

-

The World’s Volume Import (Ton) Indonesia’s Volume Ekspor (Ton)

Cacao Beans

World’s trend Import 2003-2007 (%) Volume Value

US$ 1.273 / TONS US$ 1.580 / TON

US$ 3.576 US$ 4.004

US$ 481 / TON US$ 1.187 / TON

US$ 1.148 / TON US$ 1.731/ TON

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2.3. Export of Indonesia’s Cacao Comodity

2004

2005

2006

2007

Vol (ton) Value (000.US Vol (ton) Valeu (000.US Vol (ton) Value (000.US$)

Vol (ton) Value (000.US$)

Cocoa Beans

365,649

520,672

265,838

410,278

275,484

369,863

367,425

467,827

Cocoa Liquor

5,631

9,894

1,954

5,161

863

1,803

908

1,920

Cocoa Cake

2,558

980

3,388

1,298

6,920

2,650

20,971

8,032

Cocoa Butter

38,767

120,139

43,354

161,754

43,226

155,138

40,387

159,609

Cocoa Powder

31,289

74,155

27,133

76,814

28,694

34,605

26,265

21,380

443,894

725,839

341,667

655,303

355,187

564,059

455,956

658,769

Total

Source: Pusdatin, Ministry of Industry

In 2008 Indonesia’s Cacao Beans is exported to :  Malaysia (42,27%)  Amerika (29,20%)  Singapura (8%)  Brazil (7,5%)  China (4,30%)  UE (3,00%) 18

2.4. National Cacao (2008) Description

Area (Ha)

Wide of Area

Production Utilisation (%)

Export Volume (Ton)

Export Value (Thousand USD)

992.448

Cacao Bean (Ton)

456.000

Cacao processed

121.300

39.98 %

365.200

464.900

102.620

221.659

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2.5. AREA AND PRODUCTION OF CACAO BEAN IN INDONESIA

Sumatera

Kalimantan

147.000 Ha 96.000 Ton

37.000 Ha 25.000 Ton

Sulawesi 588.000 Ha 435.000 Ton

Jawa

Indonesia 992.000 Ha 651.000 Ton

Maluku dan Papua

47.000 Ha 21.000 Ton

82.000 Ha 38.000 Ton Bali 31.000 Ha 18.000 Ton

Nusa tenggara 38.000 Ha 14.000 Ton

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2.6. SPREADING OF CACAO INDUSTRY

Sumatera Utara PT. Cocoa Ventures Indonesia Sulawesi Tenggara PT. Inti Kakao Utama

Sulawesi Selatan PT. Effem Indonesia PT. Unicom Makassar PT. Maju Bersama Kakao PT. Kopi Jaya Kakao

Banten PT. Davomas Abadi PT. Cocoa Wangi Murni PT. Bumi Tangerang PT. Budidaya Kakao Lestari PT. Cocoa Ventures Indonesia PT. Kakao Mas Gemilang PT. Mas Ganda PT. Foleco Group

Jawa Barat PT. General Food Industry PT. Inti Cocoa Abadi

Jawa Timur PT. Teja Sekawan Cocoa Industries

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2.7. CLOSING A.

Development Direction 1. Increasing : added value, investment, devisa gained, dan labor absorbent. 2. Increasing downstream industry step by step with no interference to market potency. 3. Increasing existing utilisation capacity production of Industry. 4. Increasing raw material supply and infrastructure

B. Aim 1. Increasing Fermentation Cacao Bean from 20% to 80% 2. Increasing Cacao Bean Fermentation for domestic Industries. 3. Increasing domestic capacity cacao industry from 40% to 80% 22

3. FISH 

Indonesia is one of the largest fish producers as its has relatively wide marine areas with wide marine width of approximately 5,8 million km2 comprised of island waters/archipelagic sea of 2,3 million km2, territorial waters 0,8 million km and ZEEI 2,7 km2 and coastal line of 81.000 km the longest after Canada. There are also general waters in ground areas of 0,54 million width.



However, the use of fishery resources is currently not optimized yet, either to fulfil the need of fish consumption and export demand.



Indonesian fish production is predominated by catch fishery with sustainable potentials of marine fish of about 6,40 million tons/year, meanwhile, the use of marine remains at 4,1 million tons in 2006 and culture fishery production reached about 2,6 million/year in 2006.



The contribution to the latest Gross National Product was 3,14%.



In the past few years, there has been no new investment in fish processing industry and non-optimized performance of fish processing industry.



Fish processing industry is viewed as a very potential industry in the future. In respect of the Policy for National Industry Development, the development of marine fish processing industry has been established using cluster approach in building sustainable competitiveness. 23 23



Indonesian fish consumption in 2004 was about 24 kg/capita/year and is projected to reach 30 kg/capita/year in 2009;



Fisheries play an important role in National Food Security, since Fishery products are generally consumed by all social communities;



To enhance its competitiveness, the development of industry (including marine product industry) has been implemented by the integration between the Central and Local Government, means National Policy prepared by Central Government and Local Government shall prepare their Local potency and competency, and Central Government strongly support their choice of development.



Fish processing industry is viewed as a very potential industry. In respect of the Policy for National Industry Development, the development of marine fish processing industry has been set up through cluster approach in building sustainable competitiveness.

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3.1. Production Capacity of National Fish Canning Companies PRODUCTION CAPACITY = 251.050 TON

MACKEREL = 18.350 TON OTHERS =

2.250 TON

SARDINES = 47.750 TON

TUNA = 182.700 TON

25 25

3.2. Export destination of Canned Fish in Year 2008

Canada England

Netherlands Germany Italy

Timur Tengah

USA

Japan

China

Korea Taiwan

India Malasia Singapore

Philippines

INDONESIA

South Africa Australia

Total Export of Fish US$. 2.3 billions

Canned Fish-Shrimp Exports

Volume (kg);

89.041.520

Value (US$);

361.982.564

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3.3. Development Target         

Assured availability of raw and supporting materials; Achieved diversification of marine product processing; Marine products should comply with standardization e.g. SNI, food safety, HACCP, GMP and Codex; Partnership agreement between fisherman groups and fish processing companies Development of supporting companies to ensure continuity of supporting industry for marine product processing; Improved capacity for utilizing domestic marine products; Improved Role of Higher Schools to supply potential human resources for marine product processing; Improved and strengthened research and development of marine product processing to increase quality assurance and product safety. Limitation of frozen fish to increase supply of frozen fish for domestic fish processing.

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Development Target



  



…continued

Coordinated mutual interaction of network and active role of central and local government, businesses sector, research institute and higher schools to promote fish processing industrial development. Developed industrial estate for fish processing outside Java island especially in Eastern regions of Indonesia; Development of modern fish processing technology modern to improve fish products in compliance with international standards; Development of tuna cluster, shrimps and seaweed to accelerate the growth of marine product industry in the selected production center; Assured infratructures such as containers, power energy, ground transportation; 28 28

4. Sugar  



 

Indonesia is the biggest consumption of sugar in Asia after China and India Two kinds of sugar producing in Indonesia. Those are Plantation White Sugar (PWS) with 58 sugar factories and Refined Sugar with 8 Refined Sugar Factories. Real production in 2008: PWS= 2,67 million tonnes and Refined Sugar=1,25 million tonnes. Estimated production in 2009; PWS= 2,7 million tonnes and Refined Sugar=1,52 million tonnes. National demand for direct consumption in 2008: 2,7 million tonnes and for industry 1,85 million tones. Import in 2008: Raw Sugar: 1,534 million tonnes and Refined Sugar= 0,451 million tonnes.

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4.1. National Policies of Sugar   

Self sufficient for direct consumption in 2009 National self sufficient for all sugar in 2014 Decree of Minister of Industry and Trade number 527/2004 devides sugar market into two categories. Those are PWS or Sugar based sugar cane is only for direct consumption and Refined Sugar based imported raw sugar is only for food and pharmaceutical industries. 30

4.2. Potential Development of Raw Sugar Industry A. Sugarcane Plantation. Location: - Sumatera: 19,000 Ha - Sulawesi : 29,500 Ha - Maluku : 16,000 Ha - Papua : 220,000 Ha B. Economics of scale for sugar factory at least 10,000 Tonnes Cane per Day (TCD) and should be supported at least: 15,000-20,000 Ha Sugar Cane Plantation. C. GOI invites investors to establish raw sugar industry for substituting raw sugar import which needs around 2 million tonnes/year for supplying refined sugar industries and MSG Industries.

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5. RUBBER

Work Field Nation devisa sources

IMPORTANT COMMODITY

Increase economic growth in rubber development area

RUBBER Data th 2005

W ide area  + 3,26 juta ha (no. 1 in the world) P roduction  + 2,27 juta ton (no. 2 after Thailand)

Study I RSG (2006)

Contribution  22% of total world natural rubber production (7,2 juta ton)

Production Prediction in 2020 : World natural rubber  + 11 juta ton Indonesia  + 3,54 juta ton

POTENCY TO BE MAIN PRODUCER

Superior Clon Developing new area

Rejuvenation old rubber tree 32

5.1.Production Natural Rubber in some Country (2000-2020):

riil dan prediction

(000 ton)

4.000 3.500

Thailand

3.000

Indonesia

2.500

Malaysia

2.000

India

1.500

China

1.000

Vietnam

500

Lain-2

0 2000

2005

2010

2015

2020

Tahun

(IRSG 2006) 33

5.2.COMODITY STATUS NOWADAYS Rubber Commodity Role • Give contribution for national devisa (increasing export from 1,38 millions ton in 2000 to 2,27 millions ton in 2005) • In 2005 devisa revenue from this commodity reach US$ 2,6 billions (around 4% from non oil and gas devisa revenue) • Big Rubber Company give revenue to nation through many tax and retribution. • Rubber agrobusiness industries supply workfield for 2 million labours. 34

Production/consumption (millions ton/year)

5.3. Development Prospect  16 14 12



10 8 6



4 2



0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

YEAR Consumption

Normal Production





Rubber Eco Project (REP) study: in 2035 demand natural rubber around 15 millions ton.

Affected by world economic growth and population in that area (China, India, Korsel, Brasil). Awareness to the environment is increasing. Number of polymer industry company is increasing. Estimation production growth , Indonesia 3%, Malaysia 1%, Thailand 2%. Malaysia’s production is decrease. 35

6. Coffee 

Indonesia is the 4th largest manufacturer’s of coffe in the world, after Brazil, Vietnam, and Colombia.



Coffee area in Indonesia reached 1,255 million ha with production in 2007 was 860,3 thousand tons or 10,5% of world coffee production (8305,3 thousand tons). The area is mostly (96,0%) arranged in the form of Perkebunan Rakyat (PR) and the rest (4,0%) grown in the form of large plantations.

36







Coffee plantation grown in Indonesia are mostly Robusta which has areal large 1,154 million ha (91,8%) and Arabica which has areal large 0,101 million ha (8,2%) that are widespread in almost all islands in Indonesia, starting from the island of Sumatra to reach 671, 4 thousand hectares (60,0%), Java (14,0%), South (12,0%), Nusa Tenggara (10,0%) and Kalimantan (3,0%). As a tropical country, Indonesia has the potential for the development of product processing industry with a sense of typical coffee (Kintamani Coffee, Toradja Coffee). Indonesian commodity coffee in the domestic and in the world market is bright and potential to improve market share. 37

6.1 Average of World Coffee Production (Tons / year)

Total production of coffee is : 8,3 millions tons / year

33%

36%

Brazil Vietnam Colombia Indonesia

7% 11%

13%

Lainnya

38

6.2 Average of World Coffee Production (Tons / year) Based on the type

33 %

Arabika Robusta 67%

39

Large-scale coffee plantations in Indonesia are: Lampung 2. Bengkulu 3. South Sumatera 4. West Sumatera 5. North Sumatera 6. Central Jawa 7. East Jawa 8. Bali 9. South Sulawesi 1.

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6.3 Development of Coffee Export in Indonesia 

According to Statistics Indonesia (BPS), the realization of Indonesian coffee exports during the two (2) years (2007 - 2008) as follows : > 2007 = US$. 687,50 millions > 2008 = US$. 1,08 billions

 Trend growth in export value of coffee for 2 years (2007 - 2008) average of 36,24%  During 2007 - 2008, Indonesian coffee export to 120 countries in the world with main markets are Germany, USA, Japan, Belgium, Italy, Algeria, Malaysia, UK, Australia, India, South Africa, Egypt, Georgia, the Philippines and Singapore 41

6.4 International Trade of Coffee 

Development of coffee export at the world in period 2003 - 2007 (US$.000) are listed in the data below : > 2003 = US$. 7.596.748 > 2004 = US$. 9.219.107 > 2005 = US$.12.476.856 > 2006 = US$.14.825.667 > 2007 = US$.17.797.368



Trend of 2003 – 2007 = 24,33%



The development of the average value for 5 years = 23,89% 42

6.5 Export Opportunities Of Indonesia Coffee Products 

Opportunities to export Indonesia Coffee Products in the world market are listed from the data below : Years 2003 2004 2005 2006 2007



Indonesia Export US$.259,107 US$.294,114 US$.504,407 US$.588,502 US$.636,417

World Import US$. 8,240,124 US$. 9,677,344 US$.12,993,063 US$.15,054,429 US$.17,724,680

Share 3,14 3,04 3,88 3,91 3,59

Market share of Indonesia Coffee Product in the world is very small only 3,51%. Meanwhile, the value of world coffee imports increased sharply average 21,32% each.

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Export Opportunities Of Indonesia Coffee Products (continued) 

The demand for coffee and its processed especially on the local market / domestic still high.



The demand for coffee and its processed mainly coming from nontraditional market is quite large and open wide. Market share of Indonesia Coffee Products still relatively small, while the growth of world import relatively large.



Availability of natural resources and adequate geographic location are great potential benefit for the development of agribusiness coffee.



The demand of processed coffee such as food and non food is tend to increase each year, because of the increasing prosperity of the population, practicality and technology development downstream.



The workshop equipment and machinery in the area of agriculture that is supported by an adequate labor and skilled

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