Weak Infrastructure Blocks Investment in Indonesia's Cold Storage Industry
The cold storage industry of Indonesia needs IDR 12 trillion (approx. USD $902 million) of additional investment in order to raise installed capacity to a sufficient level. Currently, Indonesia still has to cope with a deficit in terms of the availability of cold storage facilities. This causes a problem for the preserving as well as the transportation of (processed) seafood, chicken meat, fruits and vegetables. At the start of 2016 the Indonesian government announced it would open the cold storage industry to foreign investment for the full 100 percent. However, investment realization has been limited.
Hasanuddin Yasni, General Chairman of the Indonesian Cold Storage Association (ARPI), said on Wednesday (18/05) that the lack of cold storage facilities across Indonesia is a problem for various industries. For example, Indonesia's seafood industry requires some 14 million tons of cold storage facility capacity per year. However, currently only 7.5 million tons of cold storage capacity can be supplied. Another example is the (processed) chicken meat industry. Producers in this industry require about 5 million tons of cold storage facilities to preserve and transport their products. However, only 1.5 million tons of cold storage is available to this sector.
At the start of 2016 the Indonesian government revised the nation's negative investment list (dafter negatif investasi) and opened the cold storage industry for the full 100 percent to foreign investment, without geographical restriction. Previously foreign ownership of cold storage facilities was limited to 33 percent in Sumatra, Java and Bali, while outside these three islands, foreigners were allowed to own a 67 percent stake. Yasni said that after this revision his institution received many calls from foreign investors (from Japan, South Korea, Thailand, the Philippines, Australia and the USA) who were interested to invest in cold storage facilities in Indonesia.
However, such interest is usually not followed up by investment realization. According to Yasni this is due to the lack of supportive infrastructure available in Indonesia, particularly the lack of sufficient and structural electricity supply as well as the underdeveloped road network (especially in the regions outside Java). Due to these obstacles investment in Indonesia's cold storage industry has only grown 5 percent (IDR 4 trillion) over the past three years.
However, there are some positive stories to tell. This year, Thailand-based investors have opened a 1,000-tons cold storage facility in Lampung (Sumatra), while China-based investors opened a 1,000-tons cold storage facility in Sorong (Papua). Yasni informed that for the development of each ton of cold storage facility an investor needs to invest around IDR 10 million (approx. USD $752).
Demand and Supply of Cold Storage Facilities in Indonesia:
| Product | Required Cold Storage Facility (in mln tons) |
Available Cold Storage Facility Supply (in mln tons) |
| (Processed) Fish | 14.0 | 7.5 |
| (Processed) Chicken Meat | 5.0 | 1.5 |
| Fruits & Vegetables | 30.0 | 1.5 |
Source: Investor Daily
Thomas Darmawan, Head of Fisheries at the Indonesian Employers Association (Apindo), said his institution will continue to request the government to boost the domestic fisheries industry. One strategy to boost this industry is by increasing the supply of cold storage facilities close to the centers of production. He added that Indonesia's Fishery and Maritime Ministry plans to build 15 large-sized cold storage facilities and 14 small-sized cold storage facilities.
The topic of cold storage facilities will also be on the agenda at the International Indonesia Seafood and Meat Expo (IISM) 2016 in Jakarta, held between 28-30 September. Sofianto Widjaja, Managing Director of Pelita Promo Internusa, said this event will be joined by at least 200 companies from 15 different countries, while he expects some 6,000 visitors at the expo.