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INTERVIEW

“Indonesia has strong demand in packaged food”
Monday, 07 January, 2019, 08 : 00 AM [IST]
The Consulate General of the Republic of Indonesia, Mumbai, recently held Indonesian Food Festival,in cooperation with The Club, Mumbai, featuring the best of Indonesian cuisine. Ade Sukendar, Consul General of the Republic of Indonesia in Mumbai, on the sidelines of the festival, spoke with Ranjana Sharma about bilateral trade between Indonesia and India in the food and beverage sector and opportunities in exports going forward. Excerpts:

The bilateral trade between Indonesia and India reached US$18.13 billion in the year 2017. How much out of this comes from food and beverage sector?

India stands low with respect to processed food exports to Indonesia with total share of 1.03 per cent in 2017, which gives immense opportunity for food processing industry to explore the Indonesian market.

Mostly agriculture products are exported from India to Indonesia. Why processed foods are not exported? What can be done to change this scenario?
Indonesia’s President Joko Widodo has set a roadmap for the implementation of the industry revolution 4.0 to generate economic growth based on digital development in certain sectors. In this era, food and beverage (F&B) is one of the top five industries prioritised by the government for the implementation of industry revolution 4.0. These five industries are petrochemical, automotive, electronic, textile, and F&B. After all, industry 4.0 is highly crucial to support the F&B sector in Indonesia.

In 2017, F&B exports from Indonesia reached US$11.5 billion, growing from US$10.43 billion in 2016. The sector’s contribution to Indonesia’s GDP is 6.14 per cent, while for non-oil and gas, GDP is 34.3 per cent. The sector’s growth is also among the highest. It reached a 9.23 per cent growth, far higher than Indonesia’s GDP growth at 5.07 per cent. However, the combination of Indonesia’s more than 250 million population and its robust agriculture and fisheries sectors create an almost ideal operating environment for the F&B industry. These opportunities have not been lost on international or local companies, and the segment continues to attract some investments of any industrial segment.

What are the investments made by Indonesia in the Indian food and beverage sector? How do these investments help Indonesia? What more can be done in this regard?
India is one of the most important engines of the world’s economic growth. The “Make in India” move is considered as a breakthrough to open the country’s economy for investment. Indonesia’s strong investment commitment under the jurisdiction of our mission has resulted into recent investments by Indonesian companies such as Inbisco India, Gojek Indonesia, Garuda Foods and Garuda Indonesia Airlines setting up their base respectively in Ahmedabad, Bangalore and Mumbai cities. Until today, the biggest Indonesian investment being set up in Pune, Maharashtra, is by Japfa Comfeed and they have further expanded their presence in various states such as in West Bengal, Andhra Pradesh, Bihar and Uttar Pradesh. We also do have Enerlife in Chennai producing confectionery products. With this we hope that more and more Indonesian companies in near future will look ahead for exploring the trade and investment opportunities in India.

Similarly, any investments are done by India in the Indonesian food and beverage sector?
India’s investment in Indonesia is continuously increasing in various sectors such as textiles, metal, automotive, machinery, coal and electronics. For a full year in 2018, Industry Ministry of Indonesia has set approximately US$3.9 billion investment goal for the national food sector and approximately US$735 million investment for the beverage industry. Therefore, total direct investment in the food and beverage industry in Indonesia has a very positive outlook at US$4.6 billion.

What are your future investment plans for India?
India as a country is an important engine of the world’s economic growth. The Make in India move is considered as a breakthrough to open the country’s economy for investment. We hope that Indonesian companies will invest in India to strengthen ties between both countries. The business partnership in sectors such as financing, automotive, food and textile must be increased and strengthened as both countries have such huge markets in those sectors.

Give us the export and import figures of food and beverage from India to Indonesia in the coming year. Where will they reach by 2020?
As per APEDA (Agricultural and Processed Foods Products Export Development Authority) – the apex body for the promotion of exports of agri-products in India – Indonesia is one of the top import destinations for the Indian F&B products.

The Ministry of Commerce and Industry under Government of India aims to penetrate deeper into the Indonesian market. Indonesia has emerged as one of the fastest-growing food and drinks market in Southeast Asia. This growth is attributed to various factors such as economic growth and increasing urbanisation. Thus, realising the immense growth potential, several domestic and international players have established their facilities to penetrate this flourishing market.

Considering the growth potential, numerous domestic and international players have set up their facilities in a move to penetrate the flourishing market. Major investments have been made in the processed food sector, such as canned goods, snack foods and ready meals. Currently, India’s food exports to Indonesia are dominated by ground nuts, cereals, jaggery, confectionery, fresh onions, guar gum, poultry products, non-basmati rice, processed fruit and vegetables, dried and preserved vegetables, fresh fruit and vegetables, fruit and vegetable seeds, mango pulp, fresh grapes, natural honey, floriculture, milled products, pulses and alcoholic beverages. The country with maximum number of Muslims in the world definitely shows ample scope for Halal foods.

Currently, Indonesia requires a wide array of raw materials for its food processing industry. Thus, this demand is opening up significant opportunities for ingredient suppliers from all over the world, especially neighbouring countries. The food processing industry continues to grow and will continue to grip the great potential for foreign investors. For a full year in 2018, Industry Ministry of Indonesia set IDR 53.18 trillion (approximately US$3.9 billion) investment goal for the national food sector and IDR 10.07 trillion (approximately US$735 million) investment for the beverage industry. Therefore, total direct investment in the food and beverage industry in Indonesia has a very positive outlook at IDR 63.25 trillion (US$4.6 billion).
  • In 2018, revenue in food and beverages markets amounts to IDR 3.6 trillion (US$253 million).
  • The Industry Ministry of Indonesia predicted that, in 2018, the food and beverage sector would grow by 6.7% — a total of IDR 63.25 trillion (US$4.6 billion).
  • In 2018, Indonesia has 265 million consumers and the value of the food and beverage processing industry is estimated at IDR 1,238 trillion (US$92.3 billion), with raw materials contributing for IDR 791.8 trillion (US$59 billion).
  • Revenue is expected to show an annual growth rate (CAGR 2018-2022) of 13.8%, resulting in a market volume of IDR 5.95 trillion (US$423 million) in 2022.
  • Global food and beverage export in Indonesia has exceeded (IDR 112.4 trillion) US$8 billion.
  • Products in Indonesia that are in strong demand are packaged food, fruits, vegetables, seafood, health food, cooking oil, gourmet food, tea, and coffee.
  • As of 2017, with more people preferring the convenience packaged foods, the sales’ growth rose 9.4%.
  • Halal food is of significant importance, and Halal regulation is becoming more concrete, as 90% of the Indonesian population is Muslim.
India has been attempting to make inroads into new export markets for grapes which includes Indonesia. However, it is known that you have decided to come up with norms for Indian grapes. Do you think this will hamper the trade?
Over the last few years, Indian grapes have managed to make their presence felt in various overseas markets. Countries in the European Union, the Middle-East as well as USA, Canada, among others, are major export destinations of Indian table grapes. It is estimated that 10 per cent of the grapes grown in the country head for overseas markets. Japan, Indonesia, Vietnam, China are potential markets for Indian grapes, but lack of bilateral ties with the government has stalled exploration of the markets. Bilateral treaties are necessary at the government level to ensure that the markets are open to us.

What do you think about the regulatory, duty and other key factors that need to be improved for better trade ties between the two countries?
Opportunities
  • The relationship between the two countries has been excellent. India and Indonesia with their cultural similarity are very closer than any other country in the world.
  • Indonesia is one of India’s major partners in regional and international fora (IORA, ASEAN, GNB, PBB, G-20).
  • Two countries being giant markets in today’s global economy.
  • Regular Bilateral Forum between Indonesia -India: Annual Summit, Joint Commission Meeting, Biennial Defence Minister Dialogue, Biennial Trade Minister’s Forum, Foreign Office Consultation (tingkat Direktur/Joint Secretary), and various sectoral Joint Working Group
  • In 2010, ASEAN India Free Trade Agreement (AIFTA) is implemented, which cut import duties on products such as seafood, chemicals and apparel.
  • Free tourism visa will increase Indian arrivals in Indonesia, and will develop P to P contact as well.
Challenges
  • There has been general ignorance among the Indian people about Indonesia and vice versa. Both the countries have yet to see the urgency of intensifying cooperation particularly in the economic, scientific and technological, and social and cultural.
  • Direct trade between the two countries would automatically result in a win-win situation.
  • Both countries should work together to bridge the knowledge gap about investing in each other’s countries by facilitating more frequent exchange of delegations.
  • Both the countries have yet to see the urgency of intensifying cooperation particularly in the economic, scientific and technological, and social and cultural.
 
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