DOMESTIC CACAO INDUSTRY BEGINS TO THRIVE

By Andi Abdussalam

Jakarta, Oct 23 (ANTARA) - The government is optimistic that   tax imposed on cacao bean export will help develop the domestic cacao processing industry and give the commodity  added value  as   reflected in the industry's development in the past six monhs.          Earlier, Indonesia, the world's third largest cacao producer,  had exported about 80 percent of its beans. However, with the imposition of the export tax, exports could be cut for domestic grinders. The government hopes that in 2011 its exports of beans would drop from 80 percent to 50 percent.          According to Vice Minister of Trade Mahendra Siregar, national cacao processing industry has recovered with companies already producing to capacity.  "Right now it has fully recovered. Until the end of 2009 at least six companies have already produced 150,000 tons of processed cacao and this year the figure is expected to move up to 200,000 tons," he said.          The government has since April 1, 2010 imposed a 15 percent tax on cacao bean exports in order to boost local processing industry and increase the added value of farmers cacao production.  About  93 percent of Indonesia's 1.5 million hectares of cocoa plantations are owned by smallholders.          Since the imposition of the regulation last April,  several cacao processing companies have also planned to expand as of 2011 so that next year production of processed cacao is projected to rise to 300,000 tons or they would be able to process almost 50 percent of total national cacao bean production.          Not only expansion, there were even at least seven foreign investors who had expressed intention in developing cacao bean processing plants in Indonesia.           The seven foreign investors who  have expressed keen interest in building cocoa processing plants in Indonesia  are ADM Cocoa and Olam International of Singapore, Guanchong Cocoa of Malaysia, Cargill and Mars of the United States, Armajaro of Britan, and Ferrero of Italy, Director General of Agribusiness at the Industry Ministry Benny Wachjudi said.           Benny said Guanchong Cocoa was likely to build a cocoa processing plant with an annual capacity of 50 thousand tons early next year.          "I don't know when the investors will start investing. But they have asked for clarification on the possibility of the government reviewing the imposition of duties on cocoa exports," he said.           In addition, he said local cocoa producer PT Bumitangerang Mesindotama would also double the production capacity of its plant in Tangerang, Banten province, to 80 thousand tons per year.          The expansion project which would cost an estimated US$40 million would be completed in eight months' time, he said.           Benny said a number of downstream cocoa processing plants had begun to revive their activities after they ceased operation.           Chairman of the Indonesian Cocoa Producers Association (AIKI) Piter Jasman said the imposition of duties on cocoa exports had a positive impact on the growth of downstream industries. "Fifteen AIKI members have raised their production capacity. The national cocoa powder and butter production is projected to reach 300 thousand tons in 2011," he said.          Indonesia's grinders are now seen processing 150,000 tonnes of cocoa beans this year, up 15.4 percent from last year, but still below capacity of 345,000 tonnes per year.          According to Vice Minister Mahendra,  the development was a sign of growth and improvement in the added value of domestic cacao beans as earlier almost 80 percent of national cacao bean production was exported.            Mahendra said the recovery of the domestic cacao processing industry occurred following the implementation of cacao bean export tariff in April 2010.   The regulation has proven to be able to promote national cacao processing industry and attract foreign investment in the sector. "It has gone as expected before," he said.           Mahendra said according to the International Cocoa Organization (ICCO) Indonesia is the world's third biggest producer of cacao beans after Ivory Coast and Ghana.            The country's cacao bean production is recorded at 540,000 tons or 16.2 percent of the world's market while the Ivory Coast and Ghana respectively at 1.22 million tons and 680,000 tons.           According the trade ministry's data the value of cacao exports from January to July 2010 was recorded at US$977 million, up more than 40 percent compared to the same period of 2009 which was at US$670 million.           In the meantime, cacao bean exporters have asked the government to revise its cacao bean export tax regulation in order not to burden exporters and affect prices at the farmers' level.           "Their product could not yet be absorbed by local industry so that farmers' income was low," Chairman of the Indonesian Cacao Business Association (Askindo), Zulhefi Sikumbang said.  He said that in the last six months, the export tax was seemed to be borne by exporters while in fact it was borne by farmers.          Therefore, he called for revision of the government's regulation on cacao beans export tax. Under decree No. 67/2010, dated April 1, the Finance Minister imposes a 0-15 percent tax on cacao beans based on the reference price in US currency. Tax is imposed on cacao bean exports with reference price beginning US$2000 per ton.           Zulhefi said that export tax should be fixed based on the rupiah currency, not on the US currency, so that the rate would be in a fixed rate without any change in the rupiah rate against the US dollar changed.          "The cacao export tax rate should be fixed at Rp1,000 per kg," he said adding that export tax should be imposed only if the cacao beans price exceeded US$2,700 per ton at the commodity prices in New York.***2*** (T.A014/A/HAJM/22:49/H-YH) 23-10-2010 22:48