Industrial growth may slow down

The combined growth of the food, beverage and tobacco industries is expected to slow next year as a result of sluggish investmentIndustrial growththis year, the industry ministry said.

In a report presented to the House of Representatives Commission VI overseeing trade and investment on Wednesday, the ministry said the combined sales of the food, beverage and tobacco industries grew by 13.3 percent year-on-year in the third quarter on the back of strong domestic consumption.

Growth is expected to decelerate, however, to 6.6 percent next year due to lower level of investment
this year.

The Indonesian Food and Beverage Association (Gappmi) confirmed the ministry’s estimates of limited investment this year.

“Nestle and Garudafood realized their investment, but that was only for expansion (and was not much),” head of regulation division Franky Sibarani said on two of Indonesia’s biggest food and beverage firms.

The Investment Coordinating Board said the food industry alone saw Rp 8.2 trillion (US$870 million) of realized investment last year and Rp 4.85 trillion in the first nine months of 2009.

Franky said industry growth would also be affected by the increased number of electricity blackouts, which further underlined Indonesia’s infrastructure problems.

“Moreover, supply of natural gas [to fuel industry] will likely decline next year. This can be a discouraging factor,” he said, highlighting another bottleneck to business expansion.

Problems hampering industrial growth are being highlighted just when the food and beverage industry is supposed to benefit from the emergence of new positive market trends.

Gappmi chairman Thomas Dharmawan argued that the global economic downturn had forced Indonesian consumers to divert their spending on electronic goods and automotive expenditure, both grossly affected by currency fluctuations, into food and beverage products.

“Consumption of cell phones and motorcycles was high in 2007. But since the crisis [hit the country late last year], food and beverage consumption has rebounded again,” said Thomas.

Consumption also benefits from the new regulation issued by the trade ministry to protect the domestic market from smuggled goods. The regulation stipulates that imports of food and beverages, garments, footwear, children’s toys and electronics can only enter the country after a pre-shipment inspection to be verified via five designated seaports and all international airports.

Gappmi estimates that the food and beverage industry will likely see a 7.95 percent growth rate by the end of the year with total sales of Rp 420 trillion. In terms of exports, the industry is expected to see a 5 percent contraction from $2.7 billion booked last year.

The food and beverage industry contributed about 7.2 percent of the GDP last year, and the tobacco industry about 1.8 percent.

Mustaqim Adamrah, Jakarta Post, November 26, 2009

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