A total of twenty Japanese companies engaged in the food and beverage industry are exploring investment opportunities in Indonesia. According to research conducted by the Japan International Cooperation Agency (JICA), the food and beverage industry of Indonesia is regarded as a lucrative investment opportunity by these companies. If realized, these foreign direct investments could be worth between USD $400 million to USD $1 billion. However, JICA’s research did not mention any names of the Japanese companies.
These twenty Japanese companies are not only interested to conduct business in Indonesia because of the country’s large population (approximately 250 million people) and rapidly expanding middle class (due to growing per capita income more money can be spent on food products) but also because the supply of raw materials for the food production process is available in Indonesia. In Japan the food industry is less lucrative (moreover the sales tax has been raised from 5 to 8 percent in the world's third-largest economy). JICA's research also indicated that the companies are focused on Indonesia’s most populous island of Java because infrastructure is most developed here (compared to other regions in Indonesia), thus resulting in relatively low logistics costs (although compared to other Asian countries these costs are still high on Java).
Indonesian Food and Beverage Industry:
in IDR trillion
¹ indicates forecast
Source: Investor Daily
The Japanese companies are mid-sized and focus on the production of seasonings & spices, beverages, bread products, and snacks. Adhi Lukman, General Chairman of the Indonesian Food and Beverage Association (Gapmmi), confirmed that there are 20 Japanese companies interested to explore business opportunities in Indonesia. On Friday 13 June 2014 one of the companies will visit Indonesia. Lukman added that the establishment of a small scale food factory in Indonesia requires about USD $10 to $20 million worth of investments.
Despite Indonesia’s higher electricity tariffs (planned for 1 July 2014), higher minimum wages, high inflation, the weakening rupiah and the current slowing economy, these companies are convinced that investing in Indonesia is lucrative, especially on the longer term.