OPPORTUNITY ON POULTRY MARKET IN INDONESIA

The poultry industry in Indonesia is playing an important role in the nations’ economic development in respect of employment creation and opportunity, generating and developing especially rural economic income growth and in earning foreign exchange. Poultry products are also a source of protein and affordable to the majority of the population. An estimated number of 500.000 households are involved in the traditional poultry farming of indigenous fowls, nationwide. The economic and financial crisis of 1997 has hit the poultry industry badly due to drastic decrease of the purchasing power of the people causing a drastic downfall of the demand for poultry products in the domestic market and the devaluation of the local currency. Many poultry farms were forced to close the operation due to the fall of the local currency against the US Dollar and as a matter of fact, the required components in the farming industry, from animal feed to antibiotics and vitamins are still heavily importing dependent. The Directorate General of Livestock Production of the Ministry of Agriculture registered only 22 parent stock breeding farms remained in 1998 out of 101 in total, whereby the survivors were only operating at a capacity level of around 30%, as a negative impact of the economic crisis.

The poultry industry, however, recovered earlier than expected as the foreign exchange situation was relatively stable after the year 1999. In the year 2000 the total poultry meat production was registered at more than 817.000 tons, an increase of 24% from the previous year of 1999 of 620.000 tons. Assuming a relatively stable economic and political climate, the poultry meat production is estimated to reach a figure in excess of 855.000 tons for the current year 2001, an average annual increase of 4.7%. The consumption of poultry meat during the crisis period was merely 450.000 tons and estimated to increase to a level of some 600.000 tons in the year 2000. The fact that Indonesians tend to consume more poultry meat as a substitute for beef and that the demand for poultry products is characterized as income elastic, leads to a higher consumption figure in the near future.

Currently, per capita consumption of poultry meat in Indonesia is 3.8 kg and with expected improvement in the living standard and better purchasing power of the people, the consumption should easily reach a figure of between 740.000 to 750.000 tons annually. This condition indicates that the production output has not yet been fully utilized domestically, the supply side with regard to production capacity has not reached the so-called levelling-off position; the up-stream industry still has over capacity. This means in turn, that more than sufficient room for development and expansion is available for the future.


TRADE POLICY

Indonesia imposes a 5% import duty on all poultry products as listed in the import classification (HS-code system), although there is a WTO bound rate of 40%. All poultry meat products to be imported must be attached with a “halal” label and certified by the Indonesian Islamic Council (MUI). The label is issued by a number of U.S. Islamic centres, which in turn are approved by the Indonesian MUI.

Since the end of 1999 general importers are allowed to import poultry products; they however have to inform the Directorate General of Livestock Production detailed information on the type of product imported, volume, code number of the slaughtering house, port and market destination. In view of the growing import trend of such products recently, the government attempts to control the internal distribution of imported poultry products away from traditional markets in order to protect the domestic poultry producers. Imported poultry products indeed are channelled to market outlets requiring high quality products such as specialized super markets, hotels and restaurants businesses. In the same period of time the government has also removed poultry farming business from the so-called Negative Investment List, a former regulation restricting or prohibiting foreign companies to invest in certain business sectors. Foreign companies are now allowed to establish breeding farms or animal feed mills. A regulation was also revoked in mid 2000, where foreign poultry farms no longer have the obligation to export at least 65% of its production.