Opportunities abound in agribusiness sector
JAKARTA (JP): Indonesia's food and agribusiness still offers significant opportunities for both local and foreign companies, according to a study by Netherlands-based Rabobank.
The bank states in its latest study that the rapidly growing industrial and manufacturing sectors are still heavily dependent on agriculture as a source of raw materials.
Ongoing improvements in the production of agro-raw materials such as milled rice, palm-oil clove cigarettes, urea fertilizer, rubber, wood products, and pulp and paper are vital to Indonesia's manufacturing and export-oriented industry, the bank states.
"Further development of these and other related sectors form a cornerstone in the government's attempts to create a strong industry and foster self-sufficiency," it said.
According to the bank, if government policies are to succeed in this crucial area, serious investment is required from both the public and private sectors.
Government objectives, the study suggests, should include improvements in the quality of human resources, technology and science, the development of agricultural institutions, the closer integration of the sector with industrial and services sectors, and the establishment of a productive agro-industry.
According to the study, achieving these objectives will require deregulation, liberalization and the participation of foreign investors.
The need for foreign input is clear in a number of sectors, as the study shows. Indonesia's domestic market is immense, with about 200 million people. And increasing prosperity, particularly in urban areas, is generating growing demand for a diversified range of food and agricultural products.
In addition, its very physical composition -- Indonesia consists of about 13,500 islands -- means ensuring delivery of essential agro-inputs, such as high-quality seeds, fertilizers, equipment and machinery, which is crucial for the transformation of this sector.
Moreover, investment and knowledge transfers in horticulture, aquiculture and livestock are high priority and could represent interesting prospects, it reported.
While the Rabobank study is cautiously positive on Indonesia's prospects, especially in food and agricultural sectors, it also cautions that sound preparation is essential.
Indonesia is a country of major opportunity but it is still a nation in transformation. "Continued liberalization, the creation of a truly stable political system, and improvements to education and infrastructure, are all vital if this country is to fulfill its potential," the study notes.
Food and agribusiness (F&A) in Indonesia is only one of an ongoing series of in-depth food and agribusiness studies compiled and produced by the bank's F&A research department.
The study gives a positive outlook on Indonesia's overall economic performance.
With a consistent annual growth for around 7 percent per year for the last two decades, Indonesia is a prime example of a fast- developing economy, it states.
Comparative core economic and sector figures for the past 10 years provide excellent insight into how Indonesia has managed to transform itself from an oil and gas-dependent economy into a more balanced economy.
The share of the oil and gas in the country's exports declined to 24 percent in 1994 from around 70 percent in 1985. (hen)