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15 July 2020 (closed)
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The Indonesian Cocoa Association (Askindo) expects that Indonesia's cocoa exports will decline 37 percent to 25,000 tons in 2016 from an estimated 40,000 tons this year. As such, Indonesian cocoa exports are set to continue their slide. In 2014 Indonesia still exported a total of 63,334 tons of cocoa. The country's cocoa exports have been falling as the government set a tougher tax regime since mid-2014. The export tax for cocoa is 10 percent, VAT at 10 percent and the income tax is 0.5 percent. Meanwhile, low domestic cocoa production is also partly responsible for the lower export performance.
Zulhefi Sikumbang, Chairman of the Askindo, said the export tax and value-added tax on cocoa should be scrapped as it are mainly the Indonesian cocoa farmers that have to bear these additional charges. Currently the domestic cocoa price is around IDR 33,000 (approx. USD $2.4) per kilogram at the farmer-level. However, without the export tax, this price would rise to IDR 36,000 per kilogram, says Sikumbang. Moreover, Indonesia already has a downstream cocoa sector, meaning that farmers who deliver cocoa to domestic industries should not be burdened by the export tax.
According to the latest data from Askindo, Indonesia's cocoa exports stood at 33,783 tons in the January-October 2015 period.
Sikumbang added that before the implementation of the cocoa export tax there were around 60 Indonesian cocoa exporters (traders). However, after the implementation of the export tax there now remain only three industrial players that export cocoa. These exporters are not traders but simply supply cocoa to their factories located abroad.
The export tax has also caused a rise in the export of cocoa butter. In full-year 2015 Indonesia may export 110,000 tons of cocoa butter, up from the realization of 99,483 tons last year.
Indonesian Cocoa Production
Sikumbang also informed that Indonesia's cocoa production is expected to reach 320,000 tons only in 2015 - a record low output - due to El Nino-inflicted dry weather. Moreover, Indonesia has been struggling to raise cocoa productivity (currently at 400 kilogram per hectare) as trees are ageing (hence becoming more vulnerable to diseases). Meanwhile, some cocoa farmers have switched to more profitable and less labour-intensive agricultural crops such as corn, clove, rubber and palm oil.
To boost Indonesia's cocoa production to over 600,000 tons by 2015, the government launched a USD $350 million program in 2009. Furthermore, about USD $100 million was invested in early 2015 to distribute seedlings and boost the nation's cocoa productivity. However, these investments have not shown satisfying results. Sikumbang said part of the problem is that the government has not succeed in educating cocoa farmers about better farming-techniques.
Indonesia, the world's third-largest cocoa producer, now has an installed cocoa processing capacity of 606,000 tons per year. Despite being one of the leading cocoa producers, the country still imports cocoa as well (mainly from Africa and used for blending). In 2014 Indonesia imported 109,409 tons of cocoa. However, due to the tax environment, more and more cocoa output is consumed domestically. In the January-October 2015 period, Indonesia's cocoa imports stood at 48,109 tons, down significantly from last year's imports. However, next year Indonesia's cocoa imports are expected to rise to around 125,000 tons
In 2016 a new challenge will occur in Indonesia's cocoa industry as a new government regulation will come into effect (in May 2016). This new regulation will require local farmers to ferment cocoa beans to increase value before being allowed to sell their products.