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Small Food Producers Dragging Sector Down

News From : DagangHalal.com (26 Aug 2009)

The country’s food and beverage sector will have its work cut out to meet its revenue target of Rp 500 trillion ($50 billion) this year due to the continuing difficulties faced by smaller producers, according to the industry association.

This year’s target was set significantly higher than 2009’s Rp 440 trillion, despite the likely fallout from the global recession. The Indonesian Food and Beverage Association (Gapmmi) had been banking on higher domestic demand resulting the from the elections. However, the boost was less than expected.

Meanwhile, long-standing problems continue to afflict the sector, especially small- and medium-sized enterprises.

“As part of the effort to achieve this year’s revenue target, the association had been hoping that SMEs would provide a greater contribution by improving productivity and competitiveness,” Thomas Darmawan, the chairman of Gapmmi, said on Monday.

He acknowledged that the difficulties SMEs faced in securing working capital was a major obstacle.

“SMEs are now facing lower growth this year due to financing problems and low levels of competitiveness.”

By contrast, he said the big food and beverage firms were faring better in the current tough economic climate on the back of well-known brands and established market segments.

Food and beverage SMEs are growing by only about 3 percent per year, while the big companies are expanding at about 10 percent per year on average, Thomas said. Thomas is also a member of the Indonesian Chamber of Commerce and Industry’s special committee charged with preparing a national industrial development blueprint for the government, which will focus on such issues as improving access to low-interest bank loans for SMEs.

“A number of factors are preventing SMEs from catching up with the big processors and constraining their competitiveness on both the local and export markets,” he said, pointing to a lack of funds for marketing, quality and design constraints, and labelling and licensing requirements to conform with halal standards.

According to data from the State Ministry for Cooperatives and Small and Medium Enterprises, there were 69,352 SMEs operating in the food and beverage sector in 2008, out of a total of 5.1 million SMEs in all sectors of the economy.

Thomas said better coordination was essential between the banking industry and the relevant government institutions, such as the Trade Ministry and Finance Ministry, so as to ensure lower sales taxes and loan interest rates.

“Without concrete support for SMEs, we are also unlikely to achieve our export target of at least $3 billion this year,” Thomas said.

The main overseas markets for the country’s food and beverage products are the United States, the European Union, Australia and Japan, with exports last year amounting to $2.9 billion.

Source: JakartaGlobe

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