Indonesia has the fastest growing economy in the G20, and the food and beverage sector, along with agriculture, play a big part in the success. In 2018 alone the revenue from this sector reached IDR 3.6 trillion (US $ 253 million) and revenue was expected to show an annual growth rate of a huge 13.6%. In July this year (2019), the Indonesian Ministry of Industry predicted a growth of at least 9% this year (2019) in the food and beverage sector thanks to the heavy shift in investment in the last four years. Targets have risen since 2015.
Where is the highest demand?
Products in great demand in Indonesia are packaged food, fruit, vegetables, seafood, health food, cooking oil, gourmet food, tea and coffee. As 90% of the Indonesian population is Muslim, halal food is an important commodity. In order to keep to stringent internal regulations and standards, processes for making halal foods are clearly marked on packaging. Consumers are now educated to be aware of what they should be looking for to validate their purchases. All products traded, distributed and imported into Indonesia must be certified halal.
Buying styles have changed
Due to the rising population, and (just like other South-Asian countries) the higher living standards for the middle classes, there has been an increased investment in the food and beverage sector internally and abroad. Food has become a primary spending area now there is more diversity on offer, basics are available and there are higher standards and regulations around quality.
Ready to eat meals and canned meals (as opposed to fresh food as ingredients for home cooking) are becoming more popular as consumers can afford convenience foods and treat themselves to a meal out now and again.
The benefits of industry 4.0 in Indonesia
The Indonesian Minister of Industry, Airlangga Hartanto highlights the success of Industry 4.0 (changes incurred as the manufacturing industries take on digital technologies and monitor through a central analysis) as another reason why the country’s trade is booming. He stated, “The benefits of Industry 4.0 include added efficiency and productivity of up to 40%” Not only is the national economy helped but individual companies taking part in Industry 4.0 are witnessing huge profits too. In this way the public and the private sector are interdependent and both gaining.
The sector has seen consistent growth since 2010 which experts believe is primarily due to foreign as well as national investment. In 2018, the government alone spent IDR 30.1 trillion on the development of the sector. The development included focussing on structural gaps in an attempt to meet local food demand and to enhance the export trade.
The primary food products in Indonesia are palm oil, rubber, cocoa, coffee, tea, cassava, rice and tropical spices but for the purpose of self-sufficiency, the government has focussed its development on fundamental products (and smaller producers) such as rice, soybeans, corn, fruit and vegetables.
A focus on rice
Indonesia is the third largest producer of rice in the world. It is understandable that the government wish to keep the production of this supplement effective in order to balance the economy. It is also true that rice production tends to be produced by the poorer members of the Indonesian society. It is the smallholder farmers rather than big enterprise that accounts for 90% of the country’s rice production.
Indonesia still struggles to reach total self-sufficiency in rice production which naturally leads to a large proportion of rice being imported. In an attempt to enhance self-sufficiency, the government (1) encourages the use of modern technologies in the supply chain; (2) provides subsidized fertiliser and (3) uses campaigns such as “one day without rice” to curb rice use.
The food, beverage and agriculture sectors in Indonesia are all thriving. Local farmers and enterprise have opportunities for taking on new technologies which have become common in the West. There is attention to sustainability and to self-sufficiency with some products. As the supply chain offers greater profits and the economy grows, more investment is attracted from abroad which in turn leads to further expansion. All of this is bolstered, it would seem, by a government which is aware of the benefits of these sectors and continues to offer policies which strengthen their infrastructure for the future.
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