dairy products investment proposition€¦ · dairy products investment proposition 31st august...

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


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)


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 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


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


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


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)


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


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


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


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


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)


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


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


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


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


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


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


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)


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)


Jln. Jend. Gatot Subroto No. 44Jakarta 12190 - Indonesia

t . +62 21 525 2008

f . +62 21 525 4945

e . [email protected]

Contact Centre :0807 – 100 – 2576 (BKPM)

www.bkpm.go.id

Thank You

Terima Kasih

dairy products investment proposition€¦ · dairy products investment proposition 31st august...

Documents