Agribusiness to Indonesia

(Last updated: 18 Jul 2007)

Trends and opportunities

The market

Indonesia's demand for agricultural commodities is expected to remain strong, as the processing of agricultural commodities continues to expand.

Meat and livestock

Meat consumption in Indonesia is currently around 4.3 kilograms per capita per annum, with poultry the largest proportion of meat being consumed. Indonesia is Australia’s largest market for live cattle exports.

Australia is the pre-eminent supplier of frozen and chilled meat, live animals (including bovine and horses) and offal into the Indonesian market. There is demand for imported lamb, mainly catering to the high-end food services sector. However, the majority of Indonesians still prefer the taste of Indonesian goat meat, and the country is currently self sufficient in goat meat.

Indonesia remains Australia’s biggest live cattle market. The Directorate General of Husbandry Production is intensifying its efforts to increase livestock production by encouraging the breeding of slaughter and dairy cattle designed essentially for small-hold farmers.

The main centres for dairy cattle production are East, Central and West Java. The Indonesian Dairy Cooperative Union (GKSI) is closely associated with the dairy development program. Currently, however, and partly due to the crisis, there are still serious quality deficiencies in both breeding and dairy stock.

To meet Indonesia’s rising demand for beef, the government has encouraged the development of a domestic feedlot industry. Cattle (mainly Brahman-cross) are supplied almost exclusively from Australia.

A very small niche market exists for the import of game meats (eg. kangaroo, crocodile, emu, etc) catering mainly to the food services sector for special food promotion.

Sugar

Indonesia has 71 sugar factories, of which 63 are still operating and 59 are located in Java. Indonesia is able to produce various types of sugar milling equipment. However, for larger capacity mills, (for tandem production) or for advanced technology (continuous centrifugals, laser screens, etc), Indonesia still imports equipment. Indonesia's annual sugar production is only 1.5 million tonnes, and the import level is estimated at around 1.5 million tonnes to cover the national demand of three million tonnes.

Other

Australia is a dominant supplier of horticultural products such as citrus fruits, and also exports apples, pears, grapes, potatoes and onions. Niche opportunities exist for the supply of fresh vegetables to the Indonesian hotel and restaurant sector.

With the continued development of agricultural cultivation, Indonesia's demand for seedlings for horticulture, plantation and industrial forest crops continues to grow. For example, Indonesia's rice yield is only 4.5 tonnes per hectare compared to Australia's 14.5 tonnes per hectare. As a result, for further development to take place, the Indonesian Government has removed many of the duties and import barriers associated with the seedling industry.

Cotton is an area of complementarity in trade and Indonesia's imports represent absorption of between 650,000-800,000 bales of Australian cotton each year (approximately a quarter of the entire Australian crop). The Indonesian industry adds a multiplier of eight times or more to the value of the raw commodity. Thus, Australian cotton is a key element in the multi-billion dollar export success story of the Indonesian garment and manufacturing industry.

Opportunities

Areas of opportunities in the Indonesian agribusiness industry include:

• New lines of processed meat products catering to the developing retail industry (supermarkets/hypermarkets) such as small goods
• Supply of products and services specific to the food services sector (ingredients)
• Technology transfers (eg. packaging and establishment of processing plants)
• Consultancy services for the development of the horticulture industry

Meat and livestock

• Breeder stock, feeder and slaughter cattle
• Feedlot management and technology transfer for breeding programs
• Abattoir, meat handling and butchering equipment
• Education and training programs
• Breeding, dairy, feeder and slaughter cattle
• Beef and poultry
• Game meat (eg. kangaroo, crocodile and emu)
• Other meat (eg. offal, mutton, goat and lamb)

Sugar

• Production technology

Tariffs, regulations and customs

Import duties for meat products are now set at five per cent. All agricultural products including live cattle and meat are subject to a 10 per cent Value Added Tax (VAT). There is no import quota for live cattle; however, their import is only permitted from countries that are free from foot-and-mouth disease.

The Indonesian Government has exempted feeder cattle from import duties. An import recommendation letter from the Directorate General of Husbandry Production is required. Upon arrival, all livestock are examined and are required to undergo a minimum 10-day quarantine period.

Industry standards

Exporters should be aware of halal requirements for frozen or chilled cut meat (beef) and also quarantine requirements for both cut meat and cattle. All meat products (except pork) exported to Indonesia and intended for human consumption must have halal certificates.

Halal certificates must come from halal slaughter establishments registered with the Indonesian Department of Agriculture and the Australian Quarantine Service (AQIS). These Islamic councils are:

• The Islamic Coordinating Council of Victoria Inc (ICCV)
• The Australian Federation of Islamic Council Inc (AFIC)
• Supreme Islamic Council of Halal Meat in Australia Inc (SICHMA)

A special license from the Directorate General of Husbandry Production is required for all chilled and frozen pork products.

The main prerequisite for importing fresh produce into Indonesia is the procurement of a phytosanitary certificate issued by the appropriate authority such as the Department of Primary Industries in the country of origin. The consignments are subject to plant quarantine inspection upon arrival in Indonesia.

For those wishing to operate in the Indonesian market the problem of under-invoicing is an issue that must be addressed. Under-invoicing is done frequently at the request of the local importer in their attempt to reduce tax payments. This practice is based on negotiation and discretion between the two parties involved. The practice is illegal as it avoids Indonesian import duty payable on the full or real value of the products.

This practice is common and Australian exporters have reported loss of orders for non-compliance. Australian companies should be wary of this and exercise due diligence and seek further advice before agreeing to any practices which may hinder their activities in the market.

More information

Directorate General of Husbandry Production
Gedung C, Lt VI
Jl. AUP No3, Pasar Minggu
Jakarta Selatan
Tel: +62 21 781 5580
Fax: +62 21 781 5581

Marketing your products and services

Market entry

To take advantage of the opportunities that the Indonesian agricultural industry offers, it is imperative that companies have active marketing strategies such as:

• Appointing the right business partner (after due diligence work has been undertaken)
• Visiting the market regularly as face-to-face business is important
• Preparing comprehensive information packs, profiling your company, product specifications, pricing and terms
• Participating in major trade exhibitions such as Food, Hotel & Tourism Indonesia exhibition (for meat products and processed food products)
• Promoting the Australian image of clean and green agricultural products with highest quality and international standards

Consistent quality, timely delivery and competitive pricing are essential if Australian suppliers are to ensure an increased market penetration and popularity of Australian meat in the Indonesian market.

Marketing and promotional activities in Indonesia vary dramatically. Some options include direct marketing (mail-out and/or fax-out), product/company launches that are usually held at key venues (eg. five-star hotels), and advertising with the local media (TV, radio, newspapers). Television advertising is very expensive so most companies prefer to conduct newspaper advertising.

Distribution channels

The major importers have their own distribution networks and cold storage facilities. For areas outside Jakarta, importers often have their own branch offices or appoint local distributors. Most of the business is done through the Jakarta office, with the branches usually located in major cities such as Medan, Surabaya and Denpasar (Bali).

General mark-up for imported products is 10 per cent from the importer to the distributor. Price mark-up beyond the distributor varies, depending on the market situation, such as the availability.

Transport

Agribusiness products can enter Indonesia via air or sea depending on the commodities, quantity and urgency. The shipment can take between five to eight days for shipping and same day for air transport. Australian exporters should contact shipping companies such as P&O Nedlloyd for further information on shipping rates and requirements from Australia to major ports around Indonesia.

Live cattle exporters need to form a direct relationship with feedlot companies or slaughtered cattle importers. Main destinations in Indonesia for livestock are Jakarta, Lampung, Cilacap and Surabaya.

Links and industry contacts

Agribusiness–related resources

AgroIndonesia.com - www.agroindonesia.com 
Infarmation - www.infarmation.com.au
Japfa Comfeed - www.japfacomfeed.co.id

Indonesian Department of Agriculture - www.deptan.go.id
Jl Harsono RM No 3, Ragunan
Jakarta Selatan
Tel: +62 21 780 4176

Indonesian Meat Importers Association (ASPIDI)
Wisma Rajawali, 15^th Floor
Jl. Jend. Sudirman No 34
Jakarta
Tel: +62 21 573 3160
Fax: +62 21 570 3135

Indonesian Retail Merchants Association (APRINDO)
Gedung E Trade Lt. Dasar
Jl.KH.Wahid Hasyim No.55
Jakarta Pusat Indonesia
Tel: +62 21 315 4241 or 392 8545
Fax: +62 21 319 23267
Email: pr@aprindo.org

The Islamic Coordinating Council of Victoria Inc. (ICCV)
155 Lygon Street
East Brunswick VIC 3057
Tel: +61 3 9380 5467
Fax: +61 3 9380 6143

The Australian Federation of Islamic Councils Inc. (AFIC)
932 Bourke Street
Zetland NSW 2017
Tel: +61 2 9319 6733
Fax: +61 2 9319 0159
Email: admin@afic.com.au

Supreme Islamic Council of Halal Meat in Australia (SICHMA)
Unit 1, 35-37 Harrow Road
Auburn NSW 2144
Tel: +61 2 9643 7775
Fax:  +61 2 9643 7776
Email: ssichma@bigpond.net.au

Government, business and trade resources for Indonesia

Kadin Indonesia - www.kadinnet.com/e_index.asp 
IndoExchange - www.IndoExchange.com
TradeIndonesia.com - www.tradeindonesia.com

Logistics

P&O Nedlloyd - www.ponl.com 

Media

Rural Press Group Farming Online - www.rpl.com.au/farming

Australian resources

Australian Exporters Livestock Council (Livecorp) - www.livecorp.com.au
Horticulture Australia - www.horticulture.com.au
Meat and Livestock Australia - www.mla.com.au