Indonesia wants more investors in cocoa processing sector

30-Jun-2011 - Last updated on 01-Jul-2011 at 11:17 GMT

The Indonesian cocoa processing sector is ripe for further investment from multinational food manufacturers, a spokesperson from the country’s investment authority said.

According to data from the Indonesia Investment Coordinating Board (BKPM), cacao plantations in the country have experienced rapid development since the early 1980s.

This has culminated in the Indonesian cacao plantation area reaching 1.5m hectares at the end of 2010.

According to Luzma Rizki Aprianti, Indonesia makes a good base for cocoa processors as the country provides both a production base and a domestic market for cocoa.

“Indonesian cocoa beans production places the third rank in the world, while with a population of 240 million people, Indonesia has a large domestic market
to offer,” she said.

According to the International Cocoa Organization, with total production of 550,000 tons in 2010, Indonesia was the world’s third largest cacao producer after Cote d’Ivoire, with 1.24m tons and Ghana, with 632,000 tons.

Aprianti added that over 50 per cent of the population lives in urban areas and has adopted a modern lifestyle.

“A growing and affluent middle class supports GDP growth with approximately 70 per cent of GDP accounting for private consumption,” she added.

Aprianti also pointed out that the Indonesian government has created a regulatory environment that supports the growth of downstream industries in the country’s cocoa market.

This includes reduced income tax in for certain investments, exemption of import duty for industrial machinery, the elimination of Value Added Tax for cocoa beans as well property tax reduction for certain regions, she said.

The entry of foreign players into the country’s processing sector has been made much easier as well, when compared to other sectors in the country. Foreign investors can enter the cacao industry through joint ventures with local players.

“The cocoa industry is 95 per cent open to foreign ownership, while the other 5 per cent is limited to local investors,” she said.

According to Aprianti, a total of 14 manufacturers realised their investment in the cocoa and chocolate industry in 2011.

“This investment could increase the capacity of cocoa and chocolate nationwide production from 531,670 tons in 2010, to 689,750 tons in 2011,” she said.

Aprianti confirmed media reports that two more investments are coming in from Malaysia and Indonesia, but declined to furnish details due to legal restrictions.

Recent media reports have said that a Malaysian and a Swiss investor would separately build two cocoa processing factories in the provinces of East Java and Sulawesi respectively for a combined investment of US$90 m.

The two factories could start operation by the end of 2012, the reports said, and would add 90,000 tons in annual processing capacity to the industry.

Currently, the Indonesian cacao processing industry is led by three major companies, PT General Food Industries, PT Bumi Tangerang Mesindotama, and PT Davomas Abadi, with an installed capacity of 70,000 tons per year, 40,000 tons per year, and 30,000 tons per year respectively.