Textile industry is one of the oldest and most strategic industry in Indonesia. In spite of the needs of diverse fashion which is growing continuously, the large number of Indonesia citizen population becomes several factors for the growth and development of this industry. In 2010, textile industry was capable to employ up to approximately 11% of the total industrial workforces, or 1.34 million people in 2,853 companies and contributed 8.9% of the total exports of the country.
Textile industry in Indonesia is able to develop in both upstream and downstream sector. From raw material to the finishing stage, create a highly efficient supply chain, and also capable to provide ‘one door solution’ for local and international markets. Some great local garment manufacturers even seek to raise capital to acquire assets that will help them to streamline the supply chain.
With those strengthen, Indonesia has succeeded in positioning themselves as an alternative of production market for world’s fashion brands and including become the top 10 textiles and garments exporter. Indonesian Textile Association (API) claimed that 80% of their global apparel produced in Indonesia. Textile factories which are mainly located in Bandung, Bekasi and Bogor, are being the supplier of the expensive brands such as Hugo Boss, Giorgio Armani, Guess, Marks and Spencer, Mango and many other famous brands. The export products of these factories has reached developed markets such as Japan, UK, USA, and other high-end market.
Up to 2014, the investment realization in Indonesia’s textile industry has reached IDR 9.53 trillion or increase 9.4% from the previous year. Accumulation from the period of 2009 to the third quarter of 2014 showed that the Domestic Direct Investment (DDI) increased by 33.6% or 11.8 trillion, while Foreign Direct Investment (FDI) increased by 36.4%, or IDR 23.2 trillion.
Potential Investment :
> The labor cost is low, political stability, availability of raw materials and lower price of industrial land. Compared to China, the average wage of a textile worker there has risen up to US$ 247 per month, higher than Indonesia that was US$ 140.
> Indonesia becomes the industrial base for foreign companies that specialized in manufacturing textile products such as geotextile; military uniforms, which have been exported to around 30 countries. One of those was for the army of
North Atlantic Treaty Organization (NATO); Anti-Nuclear and uniforms which have been exported to Saudi Arabia and Malaysia.
> Industry of garment and other textiles is one of the largest employer in Indonesia. In 2013, the number of workers who work in this field reached nearly 850,000 people, increase from 2009 for about 690,000 people.
* Supports industry expansion revitalization by providing financial incentives to convince the textile and garment businesses stakeholders to invest in new machinery. It also promotes technology-related cooperation between local and
foreign companies and share its knowledge.
* Bear both capital goods and material custom duty for producing carpets and/or rugs.
* Tax Allowance: a tax deduction of company taxable income as much as 30% of the investment value and given for a specific business area and/or certain areas for all the downstream textile industries. This tax reduction is given
for 6 years, which means 5% for every year.
If there is one country that offers the ideal balance between booming food and beverage (F&B) demand and an abundance of natural resources – it has to be Indonesia. With a rapidly growing and increasingly discerning middle class eager for new and innovative F&B products, Indonesia presents international investors with a vast array of opportunities across the F&B supply chain.
A growing number of world-renowned F&B industry analysts and market research firms are painting a highlypositive picture of consumption trends and future potential in Indonesia and
the broader ASEAN and Asia Pacific region:
Source: Business Monitor International, 2014
Investment Realization in Food & Beverages Industry (2010 - 2014)
Source: BKPM, 2015
Value of US$ 8,513.23 million (63.75%) on FDI and US$ 4,841.02 million (36.25%) on DDI.
Foreign capital ownership
Source: Negative investment list No. 39/2014
Crude Palm Oil, or palm oil is one of the most widely produced and consumed oil in the world. It is a competitive product and always shows price stability and it is used in a wide variety of food /cosmetic and health products, and also can be used as biofuel or biodiesel source. Most palm oil is produced in Asia, Africa and South America, where palm trees require warm temperatures, sunshine and lots of rain to maximize production.
The world’s palm oil production is dominated by Indonesia and Malaysia, where Indonesia is currently the largest producer and exporter of palm oil worldwide. Production from these two countries accounted for about 85% to 90% of the total global production of palm oil. Over the past 15 years, the palm oil industry in Indonesia has shown tremendous growth as seen from the figures of production, export and the expansion of oil palm plantations.
Driven by the increasing of global demand and a higher yield, oil palm cultivation has expanded significantly by the farmers and the Indonesian conglomerate.
Foreign Direct Investment in the Agribusiness sector (crude palm oil and palm oil for cooking) has reached US$ 675.2 million or an increase of 150.1% in 2014. Similarly, Domestic Direct Investment has reached US$ 376.9 million in 2014 or increase of 18.7%.
> The area of palm oil plantations in Indonesia has doubled over the last 15 years, to 8 million hectares today. It is estimated, that the number will rise to 13 million hectares in 2020.
> In 2020, it is estimated that palm oil production will reach 40 million tons; while world consumption per year is expected to reach 60 million tons. At this rate, Indonesia will be able to fulfill the 80% of world demand.
> Vegetable oil demand has able to reach 6 million tons annually; 2 million tons for the Indonesian market and 1.5 million tons for the Malaysian market. This means that there are 3.5 million tons of market opportunities to meet the needs of the palm oil industry
> More than 21 million of skilled labors work in plantations in Indonesia. This makes Indonesia as the country who has no match in the agricultural labor force in ASEAN regional.
* Presidential Decree Number 44 of 2016 on Investment Negative List allow foreign direct investment in plantations to reach 95%, and obligation of 20% plasma plantation, for the area that is 25 hectares or more, with or without processing unit.
* Tax incentives such as reduction of taxable income of company as much as 30% of the investment value. It is given to certain business fields and/or certain areas for all the downstream palm oil industry. Tax allowance is given for 6 years, which means 5% annually.
* Tax holiday for certain downstream palm oil industry (pioneer industry).
* Exemption Import Duty of machinery, goods and materials for the construction and industry development.
In line with its economic growth, Indonesia has become one of the investment destination for a various industries, including rubber industry. As the second largest rubber producer in the world, Indonesia is supplying a number of rubber products to the international market. The rubber industry is also significantly contribute to state revenue from non-oil and gas international trade, and plays an important role to trigger the growth of new economic centers in the rubber development region.
Approximately 70% of the world’s natural rubber is being produced in Thailand, Indonesia and Malaysia. Indonesia is the second largest world producer of rubber supplier. As many as 15% of rubber production in Indonesia is used for domestic materials industry, meanwhile the remaining 85% is exported. Nearly half of Indonesia’s rubber production is exported and sent to other Asian countries, as well as North America and Europe. The main countries of Indonesian rubber importers are United States, China, Japan, Singapore and Brazil. Meanwhile the domestic rubber consumption is contributing for the supply to Indonesia’s manufacturing industry through the automotive sector and technical rubber products.
The rubber industry in Indonesia is currently more focused on the production of semi-finished goods than to finished goods. However, for domestic consumption, the majority of Indonesia’s natural rubber is consumed by the industry which accounted for 61%, while consumption for the production of gloves, shoes and other products respectively 14%, 12% and 13%.
> International Rubber Study Group (IRSG) estimates world’s rubber consumption in 2020 will increase at an average growth rate of 6.7%.
> Since the 2000s, Indonesian rubber industry has shown a steady increase in production. Indonesia’s dry rubber production has increased by 54%.
> There are 385 companies in the downstream rubber industry which employs 107,927 people.
> Average labor cost per head in Indonesia is more efficient than the four other major ASEAN countries (Financial Times).
> Government’s commitment through infrastructure to support transport and logistic facilities. Government also provides technical assistance to investors in agriculture sector.
> Presidential Decree Number 44 Year 2016 on Investment Negative List is allowed foreign investment in plantations can reach 95% for the area that is 25 hectares or more, with or without processing unit. Investment that produce rubber such as rubber gloves and rubber boots also opened widely to investors up to 100% foreign ownership.
> Tax incentive such as tax allowance for synthetic rubber industry and tire industry.
> Tax holiday for certain downstream rubber industry (as pioneer).
> Free of import duties and import of capital goods, machinery, goods and materials for the construction and development industry.
> Free of import duties and import of capital goods for production for two years for new companies.
Marine and fishery industrial sectors have been expected as the dominant sector in Indonesia’s economic growth. Beside the tendency for innovative food needs from the middle class, Indonesia is the largest archipelago with more than 17,000 islands that also helped to boost the industry. This potential can be seen from the area of maritime Indonesia that reached 5.8 million km2, equivalent to 0.3 million km2 of water, 2.8 million km2 deep water and islands, and 2.7 million km2 Exclusive Economic Zone. Natural resources through marine also has great potential, with an annual capacity reached 6.4 million tons per year; while fish farms reached 47 million tons.
This industry great potential is the ability to expand the fish product processing and canning industries which have great potential for further development in Indonesia. This sector alone has showed great potential. Between 2008 and 2012, the national production of canned fish increased by an average of 22%. Modern processing units are generally oriented to export market, with commodities, including shrimp, tuna, skipjack tuna, fish fillet, tuna loin and tuna steak. Some of the processing operation has a strong potentials, such as: (1) freezing, cold storage and ice production; (2) the processing of value-added products, to meet the increasing market demand for fisheries products that are ready to cook, such as IQF products, shrimp, breaded fish, and fish balls.
> Indonesia is one of the largest seafood producer and one of the main exporting countries in the seafood industry world.
> Domestic market domination and the ability to expand the export market.
> Relatively new industry with its productivity remains low.
> The potential for the development of production center, including investment in canned and frozen fish industrial processing
> Domestic demand for fishery products will likely continue to increase as per capita consumption is still relatively low.
> There are only 38 fish canning plants in the country, located on Sumatra to Bali, where 20% of it is foreign direct investment.
* Fish Processing Unit (UPI) Business.
* Fermentation of fish production processing.
* Reduction/chemical processing of fisheries products processing.
* Surimi and Jelly Fish processing business.
Marine and fishery industry has experienced rapid growth over the last five years. Beside the tendency for innovative food needs from the middle class, Indonesia is the largest archipelago with more than 17,000 islands that also helped to boost the industry. The character of islands and water which is rich with marine products has become a great asset for the government to encourage fishing industry as one of the strength of the economy.
This potential can be seen from the area of maritime in Indonesia that reached 5.8 million km2, equivalent to 0.3 million km2 of water, 2.8 million km2 deep water and islands, and 2.7 million km2 Exclusive Economic Zone. One of the leading products of the sea in Indonesia is shrimp. With total production in 2013 has reached about 608 thousand tons and export value amounted to 37% of total fishery exports with a value of more than 700 million, shrimp has become the main fishery export commodity in Indonesia. The main market for shrimp export is the United States, Japan and China.
The prospect for shrimp farming is still very profitable. Like other products in fishing industry which are still largely being processed in traditionally ways, shrimp industry has great potential profit through investment and application of knowledge and modern technology, in order to optimize its process and production.
Indonesia Manganese Potential
Mineral downstream policy
Contrary to the export ban enforced by MEMR Regulation No. 7/2012, MEMR Regulation No. 1/2014 extends the deadline of export of mineral until 2017, on the condition that the exporter owns sufficient reserves for eventual smelting and has a credible plan to construct a smelter or jointly process the ores. (Source: MEMR 2014).
Manganese smelter project
Mineral Processing Industry which eligible to get Tax Allowance is also regulated under Ministry of Energy and Mineral Resource Regulation No. 16 Year 2015 (PERMEN ESDM No. 16/2015):