Owing to its location in fish-rich waters and a long fishing tradition, Indonesia is one of the biggest seafood producers in the world. The archipelago also ranks among the most productive countries in aquaculture, and as wild stocks in the earth’s seas are dwindling, Indonesia’s importance in global markets is set to increase further. The world’s fourth most-populous country is also a major seafood consumer. The combination of domestic demand and export potential points to business opportunities for fish, shellfish and seaweed producers operating out of Indonesia, as well as for processing companies and suppliers of equipment and logistics.
Indonesia's fishery production totalled 15.26 million tonnes in 2012, with wild capture accounting for 5.81 million tonnes and aquaculture for 9.45 million tonnes, according to the Ministry of Marine Affairs and Fisheries. The UN’s Food and Agriculture Organization (FAO) in 2011 ranked Indonesia third in the world in terms of inland and marine catch as well as fourth in aquaculture output. Fishery exports increased strongly in recent years and reached $3.9 billion USD in 2012, with most shipments going to the US and Japan, followed by the EU. East Java as the country’s foremost production area accounts for roughly a third of shipments. Shrimp dominates the country’s exports, followed by frozen fish and fresh fish.
The government is looking to the seafood sector to bolster national food security and ensure sufficient protein intake by increasing fish in Indonesians’ diet. Annual per-capita consumption of fishery produce amounted to 33.8 kg in 2012 after rising rapidly over the preceding decade. Jakarta has proclaimed a “Blue Revolution”, an initiative launched in 2010 with the aim of boosting sales to global markets. Meanwhile, major exporting countries like Norway and Canada are striving to increase sales to Indonesia, though at a total of $412 million in 2012, Indonesian imports are only a fraction of its exports.
A number of factors suggest that Indonesia is far from realizing its full potential in fishery production, especially with regards to exports. The vast majority (95% in 2011) of the country’s seafood comes from artisanal fishermen using traditional means. Up-scaling production, adapting sophisticated methods and modernising vessels and equipment could vastly improve margins in the industry.
The potential for efficiency gains is particularly stark in aquaculture. FOA figures from 2010 show that fish farmers in Norway had an average annual production of 187 tonnes per person, in Chile the corresponding figure was 35 tonnes, and in Indonesia this was approximately one tonne. Investors can bring capital and knowhow to bear to increase harvests and ensure greater stability in both quantity and quality, which is vital to enhancing exportability. Joint ventures and cooperation with local fish farmers and cooperatives are convenient entry points.
While foreign companies have rather limited options to engage in capture fishing due to foreign investment restrictions (See Understanding the Negative Investment List), aquaculture is open to global players in partnerships with local entities. Aquaculture also arguably holds greater potential than capture fishing. Following double-digit growth for a number of years running, national aquaculture output has superseded wild catch. This is also due to over-exploitation of some marine resources particularly in western Indonesia. As sustainability is becoming the order of the day and global importers require stringent environmental and health certification, demand for properly farmed seafood is set to grow further yet.
Indonesia’s immense coastline territory provides ideal conditions for fish farming in brackish waters, while lakes and ponds provide an abundant resource for freshwater cultivation. Saltwater fish farming in offshore floating cages is an area that warrants closer attention. The government has allocated budget funds to support small-scale fish farmers and has enlisted the help of foreign companies and organizations to modernize the sector. Indonesia’s aquaculture commodities include various types of fish, shrimp and seaweed.
Indonesia is a leading tuna producer, but the sustainable production of this saltwater fish in an aquaculture setting poses serious challenges. Marine aquaculture (mariculture) in Indonesia is predominantly used for seaweed production, while offshore fish cultivation remains relatively undeveloped. Research continues on alternative species, but so far grouper remains Indonesia’s principal mariculture fish and its cultivation appears to be the most promising business. As for freshwater aquaculture, Indonesia has become the world’s largest supplier of tilapia and made headlines in 2012 when its tilapia became the first farmed fish to receive certification from the Aquaculture Stewardship Council (ASC).
Shrimp is Indonesia’s main fishery export commodity, and it is well suited to cultivated production. The Global Aquaculture Alliance, a certification NGO, in 2013 projected average annual growth rate of 10.7% in Indonesia’s shrimp cultivation from 2012 to 2015. The Indonesian government has issued even more optimistic targets. The country reportedly has 1.2 million hectares of potential areas for shrimp breeding, giving it the potential to become the world’s largest shrimp exporter. As with other seafood goods, the shrimp industry harbours potential for productivity gains through the employment of modern knowhow and technology.
Long consumed in Asia, seaweed is only beginning to catch on as an ingredient in Western cuisine, mainly through its inclusion in sushi. The algae plant is known for certain health benefits, and an increasing internationalization of food the world over is likely to see the emergence of new markets for edible seaweed. As a leading seaweed producer, Indonesia is well placed to take advantage of growing demand. The country can also build on ample experience in seaweed cultivation, but it lacks the capacity to process all of its seaweed. Much of it is exported abroad in raw form and often re-imported for domestic consumption, which signifies downstream business prospects.
To improve the quantity and quality of its exports and to remain competitive in regional trade, Indonesia’s fisheries sector is under high pressure to modernize equipment and adapt production techniques. This includes the rearing and harvesting of fish and other seafood as well as various forms of processing, and it makes the sale of equipment one of the most obvious business opportunities for foreign companies. Undoubtedly aware of the need for modernization in the industry, the government should prove generous on applying legal facilities to reduce or waive duties and/or taxes on imported capital goods.
Fast distribution is crucial with regards to fresh seafood, which is in particularly high demand in urban centres, where most of Indonesia’s prosperous middle class consumers live. Getting it there on time is a logistical challenge in a country that remains behind the curve in infrastructure development. This is a business opportunity for firms providing live shipment or temperature-controlled transportation of fresh and frozen goods. Given that seafood export volumes from Indonesia have significant growth potential, so do specialized shipping services to bring Indonesian produce to overseas markets.
Global Business Guide Indonesia - 2014
Contribution to GDP: 13.88% (Q3 2015 including Fisheries & Livestock)
Number Employed in the Sector: 40.12 million (February 2015)
Main Products: Palm Oil, Palm Kernel, Rubber, Cocoa, Coffee, Tea, Tobacco, Rice, Sugarcane, Maize, Cassava, Tropical Fruits, Spices, Poultry, Fisheries.
Main Export Markets: China, USA, Japan, India, Singapore, Malaysia, Pakistan, South Korea, Italy, Netherlands, Bangladesh, Egypt.
Relevant Law: Presidential Regulation No. 39 of 2014 on the Negative Investment List imposes varying degrees of foreign ownership limitations in plantations depending on the crop type, and Government Regulation No. 98 of 2013 limits private plantations to 100,000 hectares.