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. In a
move to ensure that local industries do not lack for competitively priced raw
materials, the government imposed export tariffs on raw cocoa beans and crude
palm oil, and introduced an export ban on unprocessed rattan. This course of
action has by and large had the desired impact – domestic supply of these raw
materials has grown and the industries that create products derived from them
have flourished. Despite lingering questions about the long term viability of
domestic manufacturing industries reliant upon distorted input prices, there is
no doubting the present opportunity for foreign investors to engage in
downstream activity.
Cocoa
In 2010, the government implemented a progressive
tax whereby the export tariff on raw cocoa beans increases up to 15% when the
global price for the commodity exceeds $3,500 per MET as part of its strategy
to develop the cocoa processing industry. Signed into law in reaction to
skyrocketing cocoa bean prices in late 2009 that reached heights not seen in
over thirty years. Between 2011 and 2012, Indonesia increased the exports of
its processed cocoa products from 145,700 MET to 188,500 MET (BPS) despite the
fact that this period was marked with volatile global cocoa bean prices. With
the price of the commodity now rising again, reaching $2,824 per MET in
December 2013 (ICCO) and expected to rally to $3,200 per MET by the end of
2014; action taken to guarantee domestic supply for local downstream industries
is all the more important. At present, the export tariff for the beginning of
2014 has been set at 10%.
Downstream cocoa companies now benefit from an
established source of raw materials less vulnerable to impending price hikes
driven by rising demand for chocolate in Asia as well as lower global
production of cocoa beans. The grinding and fermentation industries have
experienced substantial growth - the export of processed cocoa products rose by
29.48% between 2011 and 2012 – and remain lucrative fields for foreign
investors to enter. International companies already reacted to favourable
investment conditions include Cargill Inc., which will invest $100 million to
construct a 70,000 MET processing facility in Gresik, East Java, and
Swiss-based Barry Callebaut, which plans to open a $33 million plant in
partnership with local cocoa bean trader Comextra Majora.
Furthermore, a 5% import tax on raw cocoa beans
affords Indonesian cocoa producers with an advantage in supplying raw materials
to the quickly expanding downstream industry, and foreign investors are advised
to seek out cooperation with local farmers to optimise cocoa bean production.
With a recent $350 million government initiative having failed to raise output
beyond the 456,000 tonnes produced in 2012 (ASKINDO), local cocoa producers are
seeking alternative paths to improving productivity.
Investors experienced in resolving issues brought
about by the endemic presence of cocoa pod borer moths are also encouraged to
enter the market and implement responsible, pest-mitigating harvesting and
post-harvest processes such as pod-sleeving with biodegradable plastics.
Developing research facilities to create pest resistant clones and advanced
side-grafting techniques are another area for prospective collaboration.
Rattan
In 2012, Indonesia banned the export of
unprocessed rattan in accordance with Ministry of Trade Law No. 35/2011 on the
Export of Rattan and Rattan Products. Businesses are prohibited from exporting
raw or semi-finished rattan, and must produce finished goods such as furniture,
crafts and homeware to be able to sell to markets abroad. The ban,
controversial given that local rattan farmers previously met over 80% of the
world’s raw rattan needs, put in place the framework to ensure the sustainable
utilisation of the commodity and to expedite the development of the country’s
finished rattan product industry.
Companies in this field have in the past
struggled with increasing competition for both market share and raw materials
from Chinese manufacturers who sourced the commodity from Indonesia and
subsequently pushed domestic utilisation of locally produced raw rattan down to
30% of total harvest. In the years preceding the ban, the industry suffered a
substantial drop in export market value from $300 million in 2008 to $138
million in 2010 (AMKRI) as a direct result of raw material shortages. A year
removed from the introduction of the ban, the export of rattan furniture and
handicrafts jumped by 26.9% and 213.8% to $215.7 million and $42.4 million.
As such, companies experienced in abiding by
stringent timber laws with an existing network of furniture retailers are
encouraged to seek out local partners in the rattan manufacturing industry.
Additionally, foreign investors with expertise in carrying out marketing
campaigns that appeal to international consumers should look to partner with a
local manufacturer to produce and brand rattan furniture. These goods are already
popular in markets abroad, as is demonstrated by the soon to be showcased range
of rattan products at IMM Cologne, a renowned international furnishing
exhibition. In preparation for an influx of companies in this industry, the
construction of industrial complexes for furniture manufacturers, such as the
1,000 ha furniture industry cluster in Sukabumi, West Java, is currently
underway.
CPO
To maintain a supply of palm oil needed by a
diverse range of local industries, the Indonesian government determines the
size of the export tariff on CPO based upon average prices in Kuala Lumpur,
Rotterdam and Jakarta on a monthly basis. As per Finance Ministry Decree No.67
/2010, if the price of CPO reaches between $1,200 to $1,299 per MET, the export
tariff is set at 20% and a price above this range results in the levying of the
maximum rate of 25%. With the present price hovering around $800 per MET (as of
Q1 2014), the tariff heading into 2014 is to remain unchanged from its end of
year rate of 12%. To further accelerate downstream development, the government
simultaneously slashed the export tax levied on refined palm oil products from
25% to 10%.
TUGAS ARTIKEL EKONOMI INGGRIS
Nama : Muhammad Firmansyah
Npm : 14210703
Kelas : 4EA19
