RI TO BOOST FERMENTED COCOA BEAN PRODUCTION

By Andi Abdussalam

Jakarta, April 29 (ANTARA) - Indonesia, the world's third biggest cacao producer, has decided to begin giving the commodity  added value by  marketing or exporting it in fermented form starting this year.  The policy was expected to prevent a potential loss of about Rp1 trillion per annum.          "We have already begun producing fermented cocoa beans. Our target for this year is still small, namely between 5,000 and 10,000 tons. But we are resolved to increase the volume to between 100,000 and 150,000 tons a year in the long run," Syamsuddin Said of the Indonesian Fermented Cocoa Beans Association said.          The determination to earn more from cocoa exports motivated  Syamsuddin Said and Peter Jasman, chairman of the Indonesian Cocoa Industry Association (AIKI), to meet Industry Minister MS Hidayat recently to discuss their idea in more concrete terms.          So far, most of the cacao Indonesia produces is not marketed or exported in  fermented form so that earnings from the commodity are not as high as they can actually  be. The price difference between non-fermented and  fermented cacao beans is about Rp2000-Rp2500 per kg. Indonesia's annual cacao production is between 400,000 and 500,000 tons.          "It can be imagined that Indonesia's annual output can reach up to 500,000 tons. This means that there are about five hundred million kg of cocoa beans which lose Rp2000 per kg, or a total of about Rp1 trillion. This is farmers' money," said Syamsuddin who claimed that his association groups cacao farmers and cocoa collectors.          Therefore, the efforts to produce fermented cocoa bean output are a must. After all, Indonesia's cocoa industry faces stiffer competition following the implementation of the China-ASEAN free trade agreement (CAFTA) earlier this year.          This will also cause non-fermented cocoa beans at home to be uncompetitive because of the lower cost of imported cocoa powder.          As part of the free trade agreement, Indonesia must scrap its 5 percent import duty on cocoa powder, which would encourage imports from rival grinders Malaysia and Singapore at the expense of domestic grinders.          Malaysia and Singapore also benefit from zero tax on imported fermented cocoa beans, which are used to improve the flavor of cocoa powder, whereas Indonesia imposes a 5 percent duty on such imported beans from West Africa.          Indonesia imports about 8,000 tons of cocoa powder a year from Malaysia and Singapore, or a fifth of the amount needed by the domestic food industry.          Jasman said domestic grinders, which supply about 40,000 tons of cocoa powder to local food producers, import about 30,000 tons of fermented cocoa beans from West Africa.          "We must increase (output of) fermented beans. At the moment, more than 90 percent of Indonesian beans are not fermented," Jasman told Reuters recently.          Therefore, Syamsuddin hailed the Indonesian government policy to impose a 15 percent export tax on cocoa exports beginning this month. He hopes that the export tax funds would in the end return to cacao growers for development so that they can increase their productivity and improve the quality of Indonesia's cocoa output.          "With the use of the funds to boost productivity and to improve quality we can be a leading cocoa producer in the world in the coming two or three years with quality equal to that of Ghana. So far the quality of our cocoa product is inferior," Syamsuddin said.          However, the aim of the export tax has not yet been well popularized so that some farmers consider it disadvantageous for them. "With the policy, cocoa will be exported in the form of powder products or fermented cocoa ones, not in the form of raw cocoa beans," Agriculture Minister Suswono said.          He said that the value of fermented cocoa was higher and it would attract foreign investors to build their factories at home. The problem is that farmers are not informed of cocoa prices in the market, and in this case traders capitalized on it, Suswono said.          In a meeting last week with growers in South Sulawesi, one of the country's major cacao producers, the minister received complaints from local farmers. The minister promised to evaluate a finance ministerial decree which imposed a 15 percent tax on cocoa exports.         "Basically, this policy will fully be supported if it has the aim of improving farmers' income and competitiveness but we will evaluate it if it proves to disadvantage them," the minister said.          The finance minister has issued Decree No. 67 / 2010 on Cocoa Export Tax which reaches 15 percent effective April 1, 2010. Based on this decree, cocoa exports are subject to progressive taxes beginning from zero percent to 15 percent based on cocoa price developments in the world market.          In this case, Syamsuddin and Peter Jasman asked the government to take a firm stand not to change its cocoa export tax policy. So far, Indonesia's cocoa has been given a low grade by traders in the world market because it is not fermented and has no international reference prices in New York and London.          "Because it is not fermented, the price cut of Indonesia's cocoa product can reach up to US$350 per ton from the reference prices in New York and London," Jasman said adding that at present fermented cocoa sold at US$2.900 per ton in the world market.          He said that demand for this commodity in the world market continued to increase by about five percent per annum, where today demand reached 3.5 million tons.          Thus, with the imposition of the export tax, there would be many foreign and domestic investors who would make investment and build cocoa processing industries in the country's cocoa production centers.          Jasman said that Indonesia has a big potential for cocoa processing industries. Of the 40 processing factories with a production capacity of 300,000 tons, only five were still in production this year because they were not able to compete in the world market.          "I am convinced that with the imposition of the progressive export taxes, there will be many more investors who want to build factories in the country in the near future," Jasman said.      (T.A014/A/HAJM/13:35/A/O001) 29-04-2010 13:42:0