Indonesia's cocoa industry suffers from the lack of supply amid increasing demand from the downstream sector as the country's cocoa production which once topped global production, is now declining as its cocoa plants age. Despite various constraints, the industry is still attractive in terms of investment.
Responding to Indonesians' growing taste for chocolate, global companies have invested heavily in cocoa grinding facilities and downstream businesses in recent years. Farmers, however, are struggling to increase cocoa bean output and have become the weak link in Indonesia's cocoa industry.
Shockwaves were sent through Indonesia’s investment community in August as news broke on a new draft bill to limit maximum foreign ownership of plantations to 30%. Though this strict cap was later removed, the plantation bill raises real concerns about its immediate impact on key industries driving economic growth.
Indonesia is the world’s third-largest coffee producer and exporter, after Brazil and Vietnam. With per-capita coffee consumption on the rise both in Indonesia and the wider region, there is obvious room for further growth, but there is also an obvious need for investment.
After being neglected for so long despite its strategic position as a key driver of the economy, the Indonesian government under President Joko Widodo has begun to pay more attention to the local palm oil industry through a number of business-friendly regulations.
Crude Palm Oil is one of Indonesia’s most strategically important sectors, being the leading CPO exporter worldwide. The following analysis of recent industry trends and regulations highlights the opportunities and challenges for investors in Indonesia’s palm oil sector.
With the implementation of government initiatives to achieve food security and promote downstream agribusiness opportunities having placed a renewed onus on the increased production of key commodities; Indonesia’s fertiliser manufacturing industry has experienced steady growth
To encourage the development of higher value added activity in the country’s agriculture sector, Indonesia beginning in 2010 initiated several policies limiting the export of unprocessed commodities.
Recent volatility has once again placed a focus on the sustainability of Indonesia’s rubber industry and the pressing need to make the sector more competitive as well as to develop value added industries that benefit the local market as well as provide goods to the global export market.
Although it has existed since the Dutch colonial period, the fate of the Indonesian sugar industry is not as sweet as its product. Many issues continue to plague the national sugar industry, ranging from aging factories to a flood of cheap imported sugar due to poor market regulation.
Indonesia’s tea industry faces a number of obstacles from aging plants to climate change that have led to lower productivity and poor profitability which has prompted many smallholders to switch to other commodities. That being said, there has been increased demand for tea in recent years.
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.