Badan Koordinasi Penanaman Modal
Dairy Products Investment Proposition
31st August 2016
Indonesia Investment Coordinating Board
Why Canadian firms are investing in Indonesia
Indonesia’s GDP will increase by over 150% to $2.2 trillion by 2025
The food & beverage market in Indonesia will increase to $330 billion by 2020
Indonesia has the 4th
largest population in the world (261 million as of August 2016)
Indonesia is very cost effective - the average monthly wage is $161
Indonesia is one of the fastest growing economies in the world in the world (>5% p.a. 2012-16)
Access to the $2.5 trillion ASEAN market with a population of 620 million
Indonesia Investment Coordinating Board
What Canadian investors say about Indonesia
invested by Canadian firms
in Indonesia
of Canadian investors in Indonesia are
planning to re-invest in Indonesia
(WAVTEQ, June 2016 survey)
of Canadian investors in Indonesia would recommend other
Canadian companies to invest in Indonesia
(WAVTEQ, June 2016 survey)
Indonesia Investment Coordinating Board
Why invest in Indonesia’s agribusiness sector?
Growth
10%average annual growth
in food demand in Indonesia (2016-2020)
Indonesia’s competitive strengths for manufacturing investment World’s fourth largest population of 260 million The chemicals & related sector has averaged 7.61% annual growth from 2011-14 Labour costs nearly half of China and lower than India for skilled positions Better availability of scientists & engineers than China or India Effective corporate tax less than half China and India
Agricultural area
54 million ha agricultural area growing by
nearly 12% (2001-2011)
Milk consumption
64%increase in Indonesia’s per capita
milk consumption (9.77 litres in 2008 to 16 litres in 2016)
Track record
$18.7 billionAgribusiness foreign direct investment in Indonesia 2011-15
Milk production
36%increase in Indonesia’s milk
production (1.02m tons in 2008 to 1.46m tons in 2016)
Indonesia Investment Coordinating Board
Indonesia the largest market in ASEAN
Source: Based on EIU. *Total market demand for meat, dairy, fish, fruit, vegetables, sugar, animal feed, animal and vegetable oils, processed food, alcoholic beverages, soft drinks and flavourings and tobacco products in nominal US$
Food & Beverage: forecast market demand in 2020 (USD billion)*
1. Indonesia has the largest market in ASEAN, with total market demand forecast to grow from $230 billion in 2016 to $334 billion by 2020
334
143128
9881
22
0
50
100
150
200
250
300
350
400
Indonesia Thailand Philippines Malaysia Vietnam Singapore
Indonesia Investment Coordinating Board
Huge supply gaps in Indonesia
Source: Organization for Economic Co-operation and Development (OECD), Food and Agriculture Organization of the United Nations (FAO) Agricultural Outlook 1970-2025, by commodity
Total imports and exports of dairy products, Indonesia, thousand tons, 2006-2025
194205
181 181
205
228 234250
237 244255
265 273281 288 296
303311
319327
25 20
4329
20 12 11 9 10 9 9 8 8 8 7 7 7 7 7 6
0
50
100
150
200
250
300
350
Imports
Exports
Indonesia Investment Coordinating Board
Growth of dairy consumption in Indonesia
• Dairy consumption in Indonesia, as well in other ASEAN countries, continues to outpace supply, opening the market to opportunities for FDI.
• The combination of urbanization, rising incomes, and the emergence of an educated, health savvy middle-class will continue to drive growth in dairy consumption
Milk consumption, Indonesia, liters per capita (2007-2016)
Source: Economist Intelligence Unit Market Indicators and Forecasts
11.129.77
11.3112.90
13.88 14.40 14.82 15.20 15.60 16.00
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Indonesia Investment Coordinating Board
Milk production in Indonesia
• Milk production is one of the largest dairy products, and has seen strong growth.
• Between 2008 and 2016, the total growth of milk production was 43%.
• The breakdown of the market is: Powdered milk (39%); Sweetened condensed milk (35%); and Fluid UHT milk (26% of market).
Source: OECO, Food and Agriculture Organization of the United Nations (FAO) Agricultural Outlook, 2016
944 9241023
1278 1313 1379 1365 1388 1400 1442 1466
0
200
400
600
800
1000
1200
1400
1600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total milk production in Indonesia, thousand tonnes (2006-2016)
Indonesia Investment Coordinating Board
Forecast milk production in Indonesia
• Domestic milk production is dominated by smallholders who usually own no more than five cows and are members of dairy cooperatives, who collect and sell the milk to processing companies.
• These small-scale processers of milk production can often have a low degree of efficiency and product quality. Production, at around 10 litres per day, is less than half of international norms (20-25 litres per day).
• Indonesian sweetened condensed milk manufacturers rely on imported whole milk powder to supplement protein content. There are major opportunities for foreign investors to invest in Indonesia to increase the efficiency and quality of dairy production and growing market demand.
Source: OECO, Food and Agriculture Organization of the United Nations (FAO) Agricultural Outlook, 2016
Forecast milk production in Indonesia, thousand tons (2016-2025)
14661496
1526 15491579
16071637
16671698
1728
1300
1400
1500
1600
1700
1800
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Indonesia Investment Coordinating Board
Yogurt production in Indonesia
• In terms of other dairy products, yogurt was the fastest growing market at 18% growth in 2013.
• The chart below shows that yogurt production in Indonesia grew by 67% from 2004-2013.
Source: Food and Agricultural Organization of the United Nations
Total yogurt production in Indonesia, tonnes (2004-2013)
4003 39074547 4244 4565
6220 62926787 6544 6670
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Indonesia Investment Coordinating Board
Track record in attracting FDI
FDI flows into Indonesia in the agribusiness sector (2010-15), US$ million
Source: Based on BKPM data
1. Indonesia had attracted $18.7 billion of FDI in the agribusiness sector since 2011 with over $9 billion of FDI in the last 2 year.
2358
34343744
5412
3721
0
1000
2000
3000
4000
5000
6000
2011 2012 2013 2014 2015
Indonesia Investment Coordinating Board
FDI Track Record – case studies
Nestle began operations in Indonesia in 1971. Nestle Indonesia now employs more than 3,300 employees, operating four factories in Indonesia. One of them is located in East Java, which process dairy products.
The factory located in Kejayan (East Java) expanded in 2010 and became one of Nestle’s 10 largest plant in the world.
Currently, the factory located in East Java absorbs 700,000 litters daily of fresh milk from 33,000 dairy farmers in East Java
Frisian Flag Indonesia (FFI) is a manufacturer of dairy-based nutritional products for children in Indonesia under Frisian Flag brand. It’s is a subsidiary of the international Dutch group Friesland Campina, specialist of dairy products.
The company operate two state-of-the-arts production facilities in Pasar Rebo and Ciracas, both in East Jakarta, with a broad portfolio of products such as liquid milk, milk powder and sweetened condensed milk According to the annual report 2015 of Friesland Campina, Frisian Flag was in second position in the top 10 consumer brands in revenue
Indonesia Investment Coordinating Board
Competitive strengths for agribusiness – Size of market
0
500
1000
1500
2000
2500
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Indonesia
Philippines
Thailand
Malaysia
Vietnam
Singapore
Indonesia’s GDP 2025 forecast:• Increase >150% to $2.2 trillion• Larger than India’s in 2015• Nearly same size as Canada’s ($2.6 tn)• GDP/capita: $3370 (2015) to $7840
GDP 2011-2025, US$ billion (EIU forecasts)
Indonesia Investment Coordinating Board
Competitive strengths for for agribusiness– Size of population
6
31
69
92
101
255
7
36
70
103
128
308
0 50 100 150 200 250 300 350
Singapore
Malaysia
Thailand
Vietnam
Philippines
Indonesia
Population projection (mid-2030, Millions) Population (2015, Millions)
Source: fDi Benchmark (IMF and Population Reference Bureau World Population Data Sheet)
Population by country, 2015-2030
Indonesia’s population is the 4th largest in the world and will increase to over
300 million people
Indonesia Investment Coordinating Board
Competitive strengths for for agribusiness - Skilled workforce
Source: fDi Benchmark (Global Competitiveness Report, World Economic Forum, Switzerland, 2015-16 )
Availability of Scientists and Engineers – out of 7 (2015)
3.9
4.0
4.2
4.3
4.5
4.6
3.4 3.6 3.8 4 4.2 4.4 4.6
Vietnam
Philippines
India
Thailand
China
Indonesia
Indonesia Investment Coordinating Board
Competitive strengths for for agribusiness – Available workforce
Unemployment rate, 2015-2020
3.6%
6.0%
4.1%
3.2%
2.4%
2.0%
0.8%
5.9%
8.4%
6.0%
4.0%
2.9%
2.9%
1.9%
0.8%
6.3%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
India
Philippines
China
Malaysia
Vietnam
Singapore
Thailand
Indonesia
Forecast Unemployment Rate in 2020 (%) Unemployment Rate in 2015 (%)
Source: fDi Benchmark (Economist Intelligence Unit March 2016 & International Monetary Fund 2016)
Indonesia has the least tight labour market in ASEAN
Indonesia Investment Coordinating Board
Competitive strengths for for agribusiness – Low taxes
Total Tax Rate (% profit) in 2015
61%
68%
43%
40%
39%
28%
30%
0% 10% 20% 30% 40% 50% 60% 70% 80%
India
China
Philippines
Malaysia
Vietnam
Thailand
Indonesia
Source: fDi Benchmark (World Bank Doing Business 2016)
Indonesia has low effective tax rates
Indonesia Investment Coordinating Board
Competitive strengths for for agribusiness– Lowest wages in ASEAN
Average monthly wages, USD, 2011-2020
Source: EIU
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
2011 2012 2013 2014 2015 2016 2017 2018 2019
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Indonesia Investment Coordinating Board
Competitive strengths for for services – Low labour costs for engineering positions
Labour costs by country for an engineer, USD, 2015
Source: fDi Benchmark
57537
24030
15893
15840
15552
13801
12000
11029
0 10000 20000 30000 40000 50000 60000 70000
Singapore
China
India
Malaysia
Thailand
Indonesia
Philippines
Vietnam
Indonesia has highly competitive labour
costs
Indonesia Investment Coordinating Board
Competitive strengths for for services – Innovation
Total of Patent applications, non-residents (foreign investors) (2014)
3255
3960
6267
6924
9009
7321
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
Philippines
Vietnam
Malaysia
Thailand
Singapore
Indonesia
Source: fDi Benchmark (World Bank World Development Indicators)
Indonesia Investment Coordinating Board
Competitive strengths for for services – Low cost of living
Cost of Living Index, 2015*
Source: fDi Benchmark *Rating 0-10 (0=lowest cost of living; 10=highest cost of living) (2014)
5.7
3.28
2.22
2.14
1.86
1.82
1.4
1.79
0 1 2 3 4 5 6
Singapore
China
Malaysia
Thailand
Philippines
Vietnam
India
Indonesia
The Investment Coordinating Board of the Republic of Indonesia
22
Badan Koordinasi Penanaman Modal (BKPM)
Indonesia Investment Coordinating Board
Jln. Jend. Gatot Subroto No. 44Jakarta 12190 - Indonesia
t . +62 21 525 2008
f . +62 21 525 4945
Contact Centre :0807 – 100 – 2576 (BKPM)
www.bkpm.go.id
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