Indonesia's food, beverage industry indifferent to AEC

Indonesia's food, beverage industry indifferent to AEC

While New Year's Eve fireworks across Southeast Asia marked the birth of the ASEAN Economic Community (AEC), part of the ASEAN Community, Indonesia's food and beverage associations foresee no significant change in the business landscape unless standards and regulations are harmonized.

Indonesian Food and Beverage Association (Gapmmi) chairman Adhi S. Lukman said over the weekend that the AEC would bring about no major changes for the industry, as most ASEAN members had already progressed with tariff barrier reductions over the last five years.

"We won't see anything new with the birth of the AEC, as most ASEAN countries reduced over 90 per cent of tariffs [on goods] to zero per cent during the period of 2010 to 2015," he said.

However, he added that the government should begin to regard Southeast Asia as a greater Indonesia and employ an ASEAN-centred mindset when formulating policies in the future.

"The harmonization is indeed not an easy process, as each ASEAN member tends to cleave to its own interests. This is something that needs to be resolved," he said.

One of the ongoing discussions among ASEAN member countries regards the definition of ASEAN products, with some defining them as goods traded and/or produced within the region and some others defining them solely as goods produced there.

The assistant to the coordinating economic minister for trade and industry, Edy Putra Irawady, said last week that the government was preparing to boost the local industry's competitiveness by slashing red tape.

"We're now working on incentives for special economic zones, bounded logistics centres, an inland free-trade agreement [FTA] and a government regulation on industrial zones," Edy said.

He added that all the policies were expected to help Indonesia and Indonesian products compete with other AEC members.

The AEC, one of the three pillars of the newly born ASEAN Community, will deepen integration among the 10 ASEAN member countries by providing freer movement of goods, people and services.

Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand were set to implement full integration by the end of 2015, while Cambodia, Laos, Myanmar and Vietnam are expected to fully join by 2018.

The community will form a single market and production base of some 620 million people with combined gross domestic product (GDP) of US$2.7 trillion (S$3.8 trillion).

Gapmmi's Adhi said that while local food and beverage business players were unexcited by the official launch of the AEC, they were confident about their business prospects, though still cautious about the possible tougher competition.

The fact that ASEAN countries had been reducing trade barriers long before the launch of the AEC had opened possibilities for Indonesia's retailers to expand their businesses, he said.

Local minimarket chain Alfamart, Adhi said, was in the process of building 100 outlets in the Philippines, while rival chain Indomaret was mulling a similar move.

"What we need to look at is improving our human resources for marketing. Traditionally, people sell products overseas by literally exporting the products [without marketing them]," he said.

Many business groups have voiced concerns that Indonesia will serve solely as a market within the AEC, and not as a production base. This view was shared by a consumer, Dipta Dadia, a 29-year-old private-sector employee, who said he had noticed more imported processed food and beverages at the supermarkets he frequented.

"However, their prices are still higher than local products and their taste sometimes doesn't suit my palate," he said in Central Jakarta, adding that he sometimes bought imported instant noodles and chocolate, among other products.

Wider access to imported products in the wake of the implementation of the AEC did not significantly affect his consumption behaviour, he said, as such products were not staple foods and not consumed on a daily basis.

The concern was also shared by Association of Indonesian Soft Drink Producers (Asrim) chairman Triyono Prijosoesilo, who said local regulation constraints could mean Indonesia became merely a market for other ASEAN nations.

"We want to see Indonesia as a production base, but if there are too many cost components, investors may opt for neighbouring countries as a production base," he said, adding that Asrim had voiced concern over the government's plan to impose excise on carbonated and sweetened drinks.

The plan was recently discussed by the government and the House of Representatives as a way to help boost the government's excise revenue.

But doing so would be a hindrance for the beverage industry amid growing foreign investment in the beverage industry, Triyono said.

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