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Surging Output Sees Indonesia Wooed by Overseas Packaging Industry

With the current growth in Indonesia's manufacturing being compared to China's explosive development back in the 1990s, Jakarta's recent packaging and print expos played host to a global array of opportunity-minded industry players.

Photo: Leaders of the pack: As Indonesia’s exports soar, box businesses and crating companies have zeroed in. (Shutterstock.com)
Leaders of the pack: As Indonesia's exports soar, box businesses and crating companies have zeroed in.
Photo: Leaders of the pack: As Indonesia’s exports soar, box businesses and crating companies have zeroed in. (Shutterstock.com)
Leaders of the pack: As Indonesia's exports soar, box businesses and crating companies have zeroed in.

Jakarta's co-located Indoplas, Indopack and Indoprint expos drew heavy visitor footfall across their three-day run, while also attracting an impressively broad range of exhibitors. Given Indonesia's large consumer base, fast-growing economy and rapidly expanding, automation-minded manufacturing sector, such a turnout is wholly understandable. It is, after all, home to 253 million people, making it the world's fourth-largest country in terms of population. Add to that the fact that its GDP grew by 5.17% in 2018, a slight increase over the preceding year, and it's clear why its demand for plastics and packaging is huge and growing.

At present, more than 40% of Indonesia's plastics requirements are imported. The country's expanding middle class and its increasingly aging population are also driving demand for the specialised packaging required by health-supplement manufacturers and the pharmaceutical sector. Given such a backdrop, the country has become a priority export market for many overseas businesses active in the plastics and packaging industries.

One such company is the Fragstar Corporation, a well-established Malaysian business, which has been manufacturing and exporting plastic bags and a wide range of plastic packaging products, including several biodegradable options, since 1997. As well as its existing trade with Indonesia, it also exports to Singapore, Japan, Australia, New Zealand, the United Kingdom, the Netherlands and France, and is now looking to enter several additional EU and Asia-Pacific markets.

While broadly positive about the company's prospects in Indonesia, Business Manager Kuak Way Siang did note that local buyers were far from receptive when it came to Fragstar's more environmentally friendly products. Expanding upon this, he said: "In this market, plastic bags and food packaging account for the bulk of our trade. We have had a local office here for some 10 years now and this is the third time we've exhibited at this particular event, which has always proved a good investment for us.

"Given its strong fundamentals, we see the Indonesian market as one we are committed to over the long term. Curiously, though, while our biodegradable bag business is a strong performer in many of our other markets, here it has yet to really take off."

Another overseas operation to have established a local office is the Tokyo-headquartered Kanematsu KGK Corp, with its PT Kanematsu KGK Indonesia subsidiary having been in place since 2013. In recent years, it has expanded from its core business of offering automotive and motorcycle part machine-tooling, moulds and die production, adding industrial packaging equipment into the mix, with its systems optimised for use in the food and beverage, textiles and wood product sectors.

Charting the development of its Indonesian business over the past six years, Senior Sales Marketing Executive Bernard Wirawan said: "Not only does our Jakarta office now work with a growing number of Indonesian clients, but we also service several Japanese customers from here.

"While we import a wide variety of Japanese machinery, we've also extended our range to include Taiwanese and European equipment. We believe we have developed a loyal local customer base, largely on account of the reliability of our equipment and the quality of our after-sales support."

As with Way Siang before him, Wirawan was also aware that many of his local clients had yet to buy into the concept of environmental protection. Confident, though, that the situation was set to change, he said: "This is a still developing market, with the Indonesian government steadily introducing more environmental protection regulations. For our part, all our equipment has been designed with many of the international green standards in mind, making it easy for us to work with any local factory that is seeking to comply with revised government requirements.

"With regard to this event, we have found it notably slower than last year. This, though, may be because the value of the rupiah [the local currency] against the US dollar has dropped, which has made many local businesses somewhat wary of investing in imported equipment."

Flying the flag for Hong Kong, meanwhile, was Rehoo Industrial, a New Territories-headquartered industrial-equipment manufacturer, which was attending the show alongside Victoria Machinery, its local distributor. For his part, Alexander Glenn Sugiarto, Victoria Machinery's General Manager, was upbeat about the opportunities emerging in Indonesia, singling out the growing success of its food exporters and the willingness of many local operators to invest in automated systems as particularly positive indicators.

Laying out his store as to how his business fitted into the broader picture, he said: "For the whole of Indonesia, we are the sole distributor of Rehoo's range of metal detectors, weight monitors and security inspection equipment, all of which are imported from its Shanghai production facilities. It's a partnership that has endured for five years now and over that time we've seen our share of the Indonesian market grow, largely on account of our success in the seafood and poultry packaging sectors.

"The willingness of many local businesses to embrace automation has also been very good for us. Most of our new customers come to us when they are looking to upgrade their semi-automatic machinery. With local salaries rising quickly, they see automation as a way of cutting costs without having to compromise on the quality of their output, an eventuality that would damage their export prospects.

"Quality is also an important issue for us. Although we primarily distribute China-sourced equipment, reliability and precision are a bigger part of our offer than low price points. Rehoo has been in this market for 10 years now and prides itself on offering a high-end product range."

While it might be expected that local businesses resent the vast influx of overseas companies all looking to stake their claim to a share of the expanding Indonesian market, Benny Suhendra, a Director of Multi Cipta Solusindo (which also trades as MCS Machinery) had quite a different take on the issue. Essentially, he believes his business – a specialist in the design, manufacture, implementation, calibration and maintenance of packaging equipment for the pharmaceutical, cosmetics, and food sectors based in Tangerang, Indonesia's sixth largest city – has only been bolstered by the wave of foreign businesses setting up shop in the country.

Photo: Precision tooling courtesy of Kanematsu KGK.
Precision tooling courtesy of Kanematsu KGK.
Photo: Precision tooling courtesy of Kanematsu KGK.
Precision tooling courtesy of Kanematsu KGK.
Photo: Rehoo’s proprietary metal detection system.
Rehoo's proprietary metal detection system.
Photo: Rehoo’s proprietary metal detection system.
Rehoo's proprietary metal detection system.

Outlining his rationale, he said: "When overseas companies come here and look to open factories, that is an opportunity for us to work with them. At the same time, although many of our products are sourced from China, we have managed to find a way around the currency fluctuations that have badly affected some of our competitors, allowing us to remain very competitive in price terms."

With many comparing Indonesia's current phase of rapid industrial expansion to the situation in China 20 years ago, there are also signs that it will have to contend with one of the problems that blighted the mainland as it suddenly stepped up its level of product manufacturing – widespread counterfeiting. Looking to help stem this particular problem before it really has an opportunity to take hold was the Jin Shun Lee Group. Based in Johor Bahru, a city on the southern tip of the Malay peninsula, the company has recently diversified beyond its core stationery manufacturing business into security solutions and anti-counterfeiting measures.

Explaining why it sees its new range as being a good fit with the needs of the Indonesian market, a spokesperson for the company said: "Our primary range of security products are made in China by an SOE that has been manufacturing anti-counterfeiting products for more than 20 years. We are here because we can see similarities between the current state of play in the Indonesian market and the situation in China in the 1990s.

"As was the case for many mainland businesses back then, protection against counterfeit items is set to become a pressing problem here, one that we believe our product authentication labelling system can help counter. Each label carries a holographic imprint, making them impossible to forge, as well as a unique identification number that allows the authenticity of any product to be instantly established.

"With mobile purchases on the rise, we also have on offer a system of QR codes that provide access to the complete history of any product bearing one when scanned. This also allows any company to check that individual distributors are only selling products into their contractually agreed markets."

Photo: Indopack: Attracting purveyors of fine packaging from throughout the Asia-Pacific region and beyond.
Indopack: Attracting purveyors of fine packaging from throughout the Asia-Pacific region and beyond.
Photo: Indopack: Attracting purveyors of fine packaging from throughout the Asia-Pacific region and beyond.
Indopack: Attracting purveyors of fine packaging from throughout the Asia-Pacific region and beyond.

The co-located Indoplas, Indopack and Indoprint events were held at the Jakarta International Expo.

Marilyn Balcita, Special Correspondent, Jakarta

Content provided by Picture: HKTDC Research
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