by Roger Pinder
Indonesia is hugely fertile and can grow almost any crop. The agricultural sector contributes more than 14% of Indonesia’s GDP and 100 million people rely on the agricultural sector for their livelihoods.
With more than 3 million new mouths to feed each year and with huge tracts of land being lost to urbanization & infrastructure every year (almost 30,000 Ha of rice in Java alone) the Government has placed much urgency on dietary diversification into other foods with a view to reducing dependency on rice by 30% per capita within five years. Even so, to feed its growing domestic population in the next 25 years Indonesia must increase rice production almost 40% and it is only through adopting new technologies in hybrid seed, crop protection and nutrition that this will be achieved.
In both the crop and livestock sectors and despite optimal climatic and soil conditions, the majority of Indonesia’s agricultural sub-sectors, like rice, continue to contract or underperform against global benchmarks and, overall, certainly fall far short of their full potential to underpin the nation’s development and the welfare of the Indonesian people.
Government regulation currently limits 60% of crop importation but 80% of local demand remains unsatisfied. Whilst this protectionism must be respected the government must spend money on educating its local farmers and give them access to new technologies in order to fill this vacuum.
The Government’s action plan is to achieve Indonesian food security by 2018 by reducing rural poverty through self-sufficiency in key commodities like rice and shallots by retaining young farmers, improving their skills whilst at the same time giving them access to collateral free micro-financing through a rural bank and improving infrastructure in irrigation, cold-storage and sealed roads and boosting farmers’ access to agricultural land ownership from an average one-third hectare to two hectares.
A measure of Indonesia’s determination to get right its focus on agriculture is the huge increase in the number of foreign direct investment projects coming to fruition in recent years.
There has been huge amounts of money, Corporate and otherwise, spent on export products such as palm oil – there now needs to be a focus to divert investment towards the small farmer growing rice, fruit & vegetable crops. One of the Government’s key implementations to realize this policy would be a bigger role for the government’s food buying agency, Bulog, to both introduce measures to curb food price rises and control the imports of a new range of commodities including corn and sugar.
Government must also improve the supporting infrastructure, including the roads linking the villages as a source of city’s raw material supply for processing it into various products. This needs to be emphasized because the logistics costs in Indonesia are still higher than the ones in neighboring countries.
Redistribution of 9 million hectares of land under a small-farmers’ land ownership scheme will effectively increase available productive land by 50% from 18 to 27 million hectares
The gap in meat consumption and production has been traditionally filled by live cattle and beef imports. This changed after the Australian government placed a one-month export ban to Indonesia in mid-2011 in response to public concerns about the treatment of cattle. In the days following the ban, the Indonesian government expressed its confidence that domestic beef prices would not be affected by changes in imports leading to the decision to cut both live cattle and beef import quotas. A few years on, beef prices continue to increase. The current price level is 69 per cent above 2012 prices and 45 per cent higher than 2013.
This beef price hike should prompt the Indonesian government to ask whether its current approach to self-sufficiency is promoting realistic food security. So far, the Indonesian government has not been able to provide all people access to affordable beef products. In a country where more than 100 million people still live on less than $2 a day, consuming beef is a luxury and it should not be.
With a coast-line of 81,000 km and ocean areas of 5.8 million square kilometers aquaculture and fisheries plays a very important role in the Indonesian economy. Indonesia is ranked third highest production of captured fisheries in the world but as the wild catch has reached maturity Indonesia now puts large emphasis on developing their aquaculture sector, the average growth of aquaculture production has been more than 30% annually in the last couple of years with close to 10 million tons harvested from aqua-farming, while wild catch was close to 6 million tons.
Indonesia has great ambitions on aqua-farming development and the Ministry of Maritime Affairs and Fisheries has is committed to almost triple the aqua-farming production from by 2018.
Indonesia aquaculture consists of several fish species and seaweed. The most promising fish species are different types of Groupers, Snapper, Barramundi and Pompano.
Many opportunities lie in the marine aquaculture sector for those involved in hatcheries, nurseries, for service providers like fish feed, vaccines etc., equipment providers and processing.
Indonesia has some of the largest forest resources in the world and has classified over 110 million hectares or around 60% of its total land area as permanent forest. Half of that is environmentally conserved and half is for continuing forestry. Forest based industries, logging, pulp and paper and wood manufacturing contribute more than 20 billion dollars to Indonesia’s GDP Much has been done and is being done in recent years to combat illegal logging but opportunity remains for new technology and expertise in tracking systems and sustainability programs and to eradicate the annual haze which has caused such issues for South East Asia due to Indonesia’s slash & burn techniques.
Despite the many constraints, in the decade ahead there is no doubt that Indonesia represents one of the most promising global opportunities for investors in the Agriculture domain. With over 250 million people, and one of the lowest consumption rates per capita in S.E. Asia, the market is set for rapid growth in scale and sophistication.
Over 1 million Indonesian people per year are entering the middle-income bracket, with similar numbers moving from rural to urban environments. These people demand the delivery of an increasing diversity of home-grown and imported fresh produce and natural resource-based products – requiring huge investments in high-yield production, packaging, storage, distribution and marketing.
The agricultural sector has challenges, for example it continues to be subject to the sudden introduction of protectionist laws but, that said, the Indonesian agricultural sector creates many opportunities for new technologies and service based companies alike and to generalize there is becoming more transparency and harmonization as we move forward.