3 March 2017
Vast Indonesian Food and Pharma Sectors Lure Overseas Manufacturers
The sheer size and the rapid projected growth rate of Indonesia's pharmaceutical and food and beverage manufacturing sectors have proven to be irresistible lures to many of the world's leading processing and industrial machinery suppliers.
With Indonesia's pharmaceutical and food and beverage (F&B) manufacturing industries all growing at a rapid pace, Jakarta's AllPack Indonesia trade event offered a revealing glimpse into these increasingly competitive sectors.
According to figures from Indonesia Investments, a Dutch-owned investment advisory service, the country's manufacturing industry was worth about US$156 billion in 2015, representing 18.1% of its GDP. Of this, F&B was the largest sector, accounting for 30.8% of the total revenue from all of the non-oil and gas manufacturing industries. A further 9.58% was contributed by the chemicals, pharmaceuticals and traditional medicine sectors. Inevitably, the opportunities emerging in the country's manufacturing sector have attracted a considerable number of overseas businesses.
One such relatively recent arrival is SMC Pneumatics Indonesia, a local subsidiary of the Tokyo-headquartered SMC Corporation. Its Indonesia operation opened in April 2014 and works from purpose-built premises in the EJIP Industrial Park in the Cikarang Selatan region of Java.
Explaining the thinking behind the company's move into Indonesia, P S Leow, SMC's Country Manager, said: "Indonesia's manufacturing industry is expanding at a rapid pace and, after more than 30 years of distributing our machines in the country, we saw an opportunity to open our own plant.
"Locally, there is a growing demand for pneumatic machinery and for quality after-sales support. We are committed to investing in our new plant and fully expect our local customer base to continue to expand."
Another pneumatic-machinery manufacturer – France's NEU Group – is also currently looking to expand into Indonesia. It has already earmarked a prospective site and is hoping to be operational within two years. At present, the company uses a local distributor for its range of pneumatics material handling and transfer system machines.
Assessing the company's current prospects, Deden Zainudin, a Senior Engineer with NEU Indonesia, the incumbent distribution company, said: "There is a huge market for our products in Indonesia. There have been occasions when we have had to turn down orders because we can't keep up with demand. As a result of this exhibition alone, we expect to have a full year's worth of orders from pharmaceutical companies and food-processing firms. Indonesia really is a huge market."
According to a number of exhibitors at the event, the pharma sector is particularly promising and continuing to grow rapidly from an already significant base. Figures from GlobalData, a London-headquartered market-research group, show that Indonesia's pharmaceutical market more than doubled in value between 2008 and 2015, growing to $7 billion from $3 billion.
Driven by a series of economic and healthcare initiatives on the part of the Indonesian government, the market is expected to be worth $12.6 billion by 2020. Overall, a number of factors are set to sustain this growth, most notably the high prevalence of infectious diseases, the widespread use of generic pharmaceuticals, the increasing affordability of healthcare products and the sheer size of the country's over-the-counter medicines market.
Acknowledging this huge future potential for growth, Mary He, the Sales Manager for Truking Technology, a Hunan-based manufacturer of pharmaceutical injection machines, said: "People in Indonesia are now more concerned about their health and, as the country's population is huge, I think the country's pharmaceutical sector will only continue to grow."
A veteran of the Indonesian pharmaceutical sector, Truking Technology has been a trade show regular in the country since 2007. As well as selling sterilisation and vial washing machinery, the company also provides quality-control systems for the pharmaceutical sector.
In terms of more recent trends, He sees many companies in the sector as being increasingly keen on adopting integrated solutions, saying: "More of our customers are now looking for one-stop manufacturing solutions, covering everything from concept and design to construction and operation. They also prefer sourcing everything from one supplier."
Although the company is yet to establish its own manufacturing base in Indonesia, He maintains that this remains under active consideration.
With Indonesia increasingly opening up to overseas investors, the country's machinery and equipment manufacturers are having to contend with an increasingly competitive market. Acknowledging this, Arya Aditama, a Sales Executive for Esco Utama, a local subsidiary of Singapore's Esco Technologies, said: "As competition within Indonesia is now intense, we focus on quality as a way of maintaining our market share. Inevitably, given the size of the local population, many overseas businesses – particularly China-based companies – are looking to set up here."
For its own part, Esco Utama has been operating in Indonesia since 2012. It specialises in the provision of controlled environment equipment and laboratory and clean-room systems, such as biological safety cabinets, laminar flow and laboratory fume hoods, laboratory ovens, incubators and thermal cyclers.
Unsurprisingly, then, a significant number of Chinese companies attended the event, with many of them sharing a national pavilion. Not all of them, however, were wholly upbeat about their prospects in the Indonesian market.
Tracy Liu, Sales Manager for Ningjin Runfeng Chain Transmission Equipment, for instance, was notably unimpressed with the low number of visitors to her company's stand, as well as the overall lack of serious enquiries from prospective buyers. She said: "We were expecting far more people to come and visit us but, so far, we have had very few inquiries and hardly any visitors. As we know there is a huge market for our products in Indonesia, we've been surprised at the low level of interest."
Based in the eastern Chinese province of Shandong, Ningjin Runfeng manufactures a variety of conveying mesh belts, roller chains, sprockets, chain plates, conveyor belts, dishwasher machines, and conveyor dryers.
Another company to maintain that footfall at the show was lower than it had anticipated was Murata Machinery, a Kyoto-based machinery and equipment manufacturer. Despite this, though, it remained upbeat about its prospects in Indonesia.
Looking to the future, Noboru Ide, the company's General Manager for ASEAN and India, said: "The manufacturing industry here is so big that there is a genuinely huge opportunity for us to expand and grow our customer base. With this in mind, we already have a sales and distribution office in Indonesia."
The company specialises in textile machinery, turning machines, sheet metal machinery and communication equipment, including a number of multifunctional digital products. It also provides factory automation and logistics systems, including automated material handling systems for clean rooms.
Somewhat happier with the reception his company had received was Shaukat Ali, Executive Technical Director of SSP Pvt, an industrial machinery manufacturing business based in the northern Indian city of Faridabad. Clearly somewhat circumspect about the experience, he said: "This is the first time we have exhibited here, so we were not expecting a huge crowd. We will be happy with one or two serious enquiries.
"All of our machines are low maintenance, energy efficient and cost-effective. We also pride ourselves on the quality of our equipment, even though our prices are cheaper than many of our competitors."
The company specialises in industrial dryers, industrial evaporators, coffee-processing machines and food and pharmaceutical-processing machines. It already has a number of clients in Indonesia, primarily in the coffee-processing sector, and is now hoping to extend its local customer base.
For Suji Asuka, Marketing Adviser for Nakakin Indonesia, a subsidiary of Osaka-based Nakakin, a specialist in the manufacture of pumps for the food industry, Indonesia solves the problem that the company is facing from its own becalmed domestic market. He said: "Japan's population is static, which is not a good situation. As a result, it is impossible for food manufacturers to expand in Japan.
"This is why we are now focussing on Indonesia and Thailand, countries where the populations are big and growing. From our point of view, as long as the local population continues to grow and people continue to eat and drink, the F&B market in Indonesia will never be less than vibrant."
AllPack Indonesia took place at the PT Jakarta International Expo Centre from 5-8 October 2016.
Geoff de Freitas, Special Correspondent, Jakarta