Indonesia imported fewer food machines in 2020

Indonesia imported food and packaging machinery worth US$834 million (roughly 711.44 million EUR) in 2020. This corresponds to a drop of 7.8 percent compared to 2019, but is above the values for the years 2016 to 2018. In contrast, total machine imports fell by 18.7 percent in 2020. The food industry and packaging machinery segment thus remained comparatively stable during the corona crisis.

The reason for the moderate decline in demand in a time of low economic activity and travel restrictions for business people and service staff is the need for food, which was unaffected by the crisis. Agriculture as a supplier industry was one of the few economic sectors in Indonesia to see growth in 2020.

In the long term, demand will increase  

However, the prospects for a quick return of imports of food processing and packaging machines to pre-crisis levels are poor in 2021. The renewed lockdown policy in July will hit production and consumer demand hard and will probably spoil the moderate growth forecasts for the economy as a whole of around 3.5 to 4.7 percent.

In the long term, however, the prospects are good. More and more Indonesians are moving up the middle-class ladder and are buying less in traditional markets as a result, but are instead getting more processed food from supermarkets.

With a share of one-third, food and beverage processing is by far the largest area within the processing industry. It has been growing faster than the economy as a whole for years – by 1.6 percent in 2020, while the manufacturing industry shrank by 2.9 percent.

In addition, food processing is one of the five core industries that are to be digitized and networked in future as part of the government strategy "Making Indonesia 4.0". This requires the import of high-tech machines. Many prerequisites for Industry 4.0 are missing, but at least food processing, together with the automotive industry, is considered to be the most technically advanced industrial sector.

German deliveries are falling sharply 

Germany is one of the most important suppliers of food processing and packaging machines. Even if there are in some cases considerable differences in the German delivery figures and the mirror-image import figures based on the data from the Indonesian statistical office BPS.

According to UN Comtrade 2020, Germany delivered food and packaging machines worth $70.2 million to Indonesia. This corresponds to a minus of 36 percent compared to 2019 and is the weakest value since 2007. The long-term decline in packaging machines is particularly noticeable in the statistics.

Annual fluctuations can also be explained by a few large orders. But one of the main reasons for the declining German deliveries for years is likely to be the increasing competition from Chinese machines.

In the meantime, by far the largest number of machine imports in Indonesia come from China. After all, the dominance of the People's Republic in food and packaging machines is much less pronounced than in other sectors. Other important suppliers are Malaysia (almost exclusively supplies machines for processing palm oil), Italy, Japan, Singapore, Thailand, India and Austria.

German manufacturers successful in special areas 

Suppliers from Germany are ahead of the game, especially in special areas. In 2020, according to BPS, Germany was still the second most important supplier of packaging machines behind Italy. They were leaders in machines for the production of confectionary, cocoa and chocolate. Chinese suppliers only serve smaller market segments in both areas. 

Despite the high import demand for food processing, the archipelago is considered difficult - also in comparison to other larger ASEAN countries. Legal uncertainty and bureaucratic hurdles hinder business. 

Bringing service staff into the country was complicated even before the corona pandemic. The reformed investment law, which also provides for simpler work permits for foreigners, promises relief.

Original article here*