Marine sector opportunity study indonesia nov 2012


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Marine sector opportunity study indonesia nov 2012

  1. 1. Mapping of Market Opportunitiesin Indonesia for NorwegianSuppliers of Sustainable MarineSolutionsTechnologies and Services forFisheries and AquacultureA report prepared forInnovation Norwayby Dr. Victor PH NikijuluwNovember 20121
  2. 2. This report is made in occasion of the visit of the Norwegian Crown Prince and Princess toIndonesia in November 26th to 28th 2012. The report gives a good overview over the fisheriesand aquaculture sectors in Indonesia, today and future development. The aim of the report isto identify business opportunities for Norwegian suppliers of technology and services withinthese sectors. 2
  3. 3. ContentsGeneral information about the Indonesia Seafood Sector ................................................. 4 1. Natural competitive advantages for further develop the seafood sector in Indonesia ................................................................................................................................... 4 2. The main characteristics of the Indonesian Seafood sector (fisheries and aquaculture) .............................................................................................................................. 6 3. The framework enhancing sustainability seafood sector (fisheries and aquaculture) .............................................................................................................................. 9 4. International agreements and commitments about IPR are ratified in Indonesia 11 5. The main challenges concerning sustainable fisheries and aquaculture ................ 12 6. Possible areas of cooperation between Indonesia and Norway............................... 14 7. Common “pilot plants” for sustainable fisheries and aquaculture – demonstration of new technology and ideas ................................................................................................ 16More about the Indonesian market and business environment...................................... 18 1. Description of the market for sustainable marine solutions ..................................... 18 2. Potential business partners for Norwegian companies ............................................. 20 3. The main suppliers of sustainable solutions today .................................................... 23 4. The economical situation of the Indonesian Seafood Sector .................................... 25 5. Learning from each other............................................................................................... 28 6. National policies enhancing trans-national cooperation (B2B and B2R) ................ 30 3
  4. 4. General information about the Indonesia Seafood Sector1. Natural competitive advantages for further develop the seafood sector in IndonesiaIndonesia is the biggest archipelagic state in the world consisting of 17,508 islands and a coast-line of81,000 km, the second longest in the world. It is endowed with hundreds of bays, seas, and straits.Totally, it has 5.8 million sqkm of marine waters consisting of 3.1 million sqkm of territorial waters and2.7 million sqkm of Economic Exclusive Zone (EEZ) which is about 75% of Indonesia’s territory. Thewaters are blessed with rich fish and other aquatic resources.Based on the abundant availability of aquatic resources, various economic activities can be developedincluding fisheries and fish-farming. Although commercial fisheries have long been developed,subsistence or artisanal fishing still structurally dominates economic activities in both marine and islandwaters. About 90% of the Indonesian fishing fleet is traditional in nature, that run small or micro sizebusiness. Aquaculture begins to emerge as an important livelihood for many coastal dwellers and aproduction alternative under depletion condition of wild fish resources. Marine-based tourism can beconsidered as a potential economy activity that starting burgeoning in small islands and coastal resortsby luring both budget and high class holyday-makers.The potential of Indonesia’s marine fish resources is estimated 6.4 million tons of maximum sustainableyield (MSY), 80% of which or 5.12 million tons have been stipulated as the total allowable catch (TAC).The TAC is used as a reference point that should not be reached or exceeded in order that the resourcecan be sustainably and continually utilized.The resources are divided into large pelagic such as tuna and skipjack, small pelagic like sardines andscads, demersal fish such as groupers and snappers, shrimp, lobster, squid, crabs and coral fish. Inaddition, there are also ornamental fish which is getting more important derived by strong demand inthe international market. By species, small pelagic fish account for about 50% of the total resources,followed by demersal group, and large pelagic. The large pelagic and demersal fish share about 16% and28% of the total fish resources, respectively.With the 2011’s fish production of somewhat more than 5.41 million tons that slightly beyond the TAC,the fish resources seemed to have been over-exploited. The utilization of the resources, however, variesfrom species to species and between fishing areas. There are species (or group of species) such asshrimps that have showed a declining trend. Others species like squids and small pelagic fishes are stillunder-utilized, leaving rooms and opportunities for further development. Likewise, some waters in thewestern part of the country have been overfished, while those in the eastern tended to have not beenfully utilized.For the sake of sustainable fisheries resource management, Indonesian territorial and the EEZ watersare divided into 11 management areas. The three areas in western and southern parts are considered asa partition of the Eastern Indian Ocean, while the nine management areas in the eastern and northern 4
  5. 5. parts of the country are deemed as subsets of the Western Central Pacific Ocean. Since the countryborders with the Pacific and the Indian Oceans, Indonesian fishers have a privilege and can easily reachthose waters. Hence further to the 11 national fisheries management areas, Indonesia fishing industry issupposed to rely also on the Indian and Pacific Oceans fish resources. Fishing in those two oceans,nevertheless, are very limited since the nature and size of the Indonesian boats are not qualified enoughfor oceanic fishing.The country is also blessed with very long coastal areas which are suitable for brackish water shrimpculture. Other species that can be cultured in coastal areas are milk fish, sea cucumber, and seaweed.The coastal areas available for sustainable aquaculture development are about 1.7 million hectares. Ofthe 1.7 million hectares coastal areas, 913,000 hectares are potential for brackish waters shrimp andmilkfish farming. About 345,000 hectares (40%) have been converted to ponds, mostly for shrimp,indicating that future development is highly possible.Lakes, rivers and reservoirs, are mostly located in big islands such as Sumatra, Java, Sulawesi (Celebes),Kalimantan (Borneo), and Papua. About 550.000 hectares are appropriate for fish farming. The mainspecies reared are common carp, pangasius (catfish), and tilapia. The reservoirs in Java essentially donot function as fish farming areas but as agriculture irrigation and hydropower sources. However, cageculture develops significantly in the reservoirs. Many parts of the rivers and lakes, especially inKalimantan, Sumatera, and Sulawesi are used for fish farming. Although there are still many areas areuntouched, unused, and underdeveloped, seeing from aquaculture perspective. Lakes, rivers, andreservoirs are also limitedly used for fishing of wild fish.As there are thousands of islands, hence Indonesia also has a capacious potential of coastal or inshorewaters that can be turned into marine fish farming areas. The coastal waters that are potentially usedfor marine culture are estimated to be 2.0 million hectares. They may be used to culture snappers(598,120 ha), groupers (461,600 ha), mussels and clams (591,800 ha), sea cucumber (66,660 ha),abalone and pearl oyster (62,040 ha), and seaweed (1.2 million ha). The utilization of these potential isconsiderably law as they can only result in about 1.85 million tons fish and 5 million tons of seaweednow. A study conducted on 1998 revealed that if the potential are utilized optimally, production canpossibly reach 46.73 million tons fish per year. Indeed, the Ministry of Marine Affairs and Fisheries(MOMAF) previously set a target to increase fish production by accelerating and expansion of fishfarming. It planned to be the highest world fish producer by 2015, given the maximum utilization of theareas for fish farming. That challenging target however was revised last year by concentrating more notin volume of fish production but in its value.Traditionally, Indonesia raises pearl-oyster, groupers, and seaweed in coastal waters. The pearl cultureindustry slowly developed and just recently regained its momentum of revival after about 10 years longsleep due to global economic crisis. Indonesia is the house for the mother of the marine pearl, namedsouth-sea pearl, that supplies the world with the highest quality pearls. The grouper culture steadilygrows triggered and supported by constant and persistent demand from China and Hong Kong. Whilethe culture of seaweed increased tremendously to make Indonesia now be the biggest world producer.Other water bodies such as streams, ponds, and paddy fields, are often used as fish culture areas. Tightcompetition between fish culture and other economic activities to use these waters has made fisheryleft behind. Although fish cultures in ponds, streams, and paddy fields are limited, they have been ableto provide income and additional food sources for many rural households. Villagers in rural areas ofKalimantan, Sumatra, and Java commonly operate small fish ponds that provide fish for domestic 5
  6. 6. consumption. Although the island of Papua and Sulawesi are also endowed with plenty of waters thatsuit for aquaculture, in fact those untapped potential are not utilized yet. It may be attributed to the factthat local people depend on fish resulting from capture, not aquaculture activities.The country is also blessed with unique tropical biodiversity which offers potential resources for futuredevelopment. Unfortunately, the resources are not yet optimally tapped for the benefit of humankind. Itis estimated that there are about 7,000 species of marine fish in Indonesia waters. However, the numberof species that have high economic value and thus have been utilized are only 44 fishes or group ofspecies, 7 crustaceans, and 7 mollusks. There are 23 species, or group of species, that so far have beenreared on fish farm. They include shrimp, milkfish, carp, tilapia, various species of catfish. Indeed thenumber of cultivated species is far less than the total number of potential ones.2. The main characteristics of the Indonesian Seafood sector (fisheries and aquaculture)Almost all types of fish landed are consumed. The landed fish considered as by-catch and non-targetspecies are not discarded but consumed. Especially in the densely populated coastal villages in Javaisland, all kinds of fish are consumed. If the fish cannot be consumed directly and non-edible, they areprocessed first into other fish-based foods. The practices of making processed food from fish have beenlong developed in the villages of Java, handed down from generation to generation, from times ofunmemorable.Despite all fish are consumed, ordinary consumers tend to have a priority in selecting fish for homeconsumption. Fishes mostly chosen by low income group of consumers are small pelagic fish such asscads, sardines, and mackerel. From aquaculture species, this group normally demands for affordablespecies like tilapia, common carps, gourami, catfish, and pangasius. The middle income group normallyseeks for marine species such as tuna, skipjack, various species of small-size tuna, marlin, swordfish, andgroup of mackerels. Of aquaculture species, the middle income group consumers buy prawns, pangasiusand milkfish. While the upper economic class consumers tend to choose high-priced fish such as tuna(fresh), snappers, and groupers, tiger shrimp, fresh squids, octopus, coral depended species and otherground fish. These consumers also prefer imported fish like salmon, seabass, seabream, oysters,scallops, and mussels. The imported fish are only available in big cities or tourism areas.Fish now constitutes 60% of the total animal protein sources. The remaining 40% are contributed bychicken, meat, egg, and mutton. Although fish consumption dominate protein intake, the per capita fishconsumption level is relatively lower than that of other countries in the region. Last year, per capita fishconsumption reached 38 kg nationwide. It increased remarkably during the last 10 years due tointensive campaign, education, and extension programs run by the central and local government.Nonetheless, there is a disparity of consumption by regions (provinces) and by income baskets. Theaverage consumption in Java Island, the most densely island, was bellow 20 per capita, while it was over40 kg in eastern provinces. Since Java has a big population earning higher per capita income, it is a giantpotential domestic market to be tapped.Many non-profit and voluntary organization also partake in government-led campaign and extensionprogram at rural society. Fish formerly was rejected by most villagers as they believed it as an unhealthy 6
  7. 7. food, now becoming the first food to choose. The central government through Ministry of Marine Affairsand Fisheries (MOMAF) undertakes national campaign on eating fish as a healthy, energizing, and mind-sharpening food. The program is being adapted by local fisheries services at regency and province levels.Indeed in the district level, the campaign is often led by the spouse of regent who is normally thecoordinator of local woman organization.The disparity of supply of and demand for fish still exists although consumption has shown an increasingtrend. The supply regions are dominantly in the eastern part of the country while the demands are inthe west, especially in Java Island where about 60% of the total 240 million people are living. Henceproblems arise on how to bring fish from east to west, from sparsely to densely populated areas, fromrelatively low to high income regions.Due to transportation problem, carrying fish from the eastern part of Indonesia to Java Island tends tobe not economically feasible business. It is even cheaper to bring fish from Shanghai, Tokyo, andBangkok to Jakarta than from any ports of eastern Indonesia to Surabaya or Jakarta. The lack oftransportation facilities and services get worse during the high wave monsoon. The problem isexacerbated as most of the cargo servicing companies are not Indonesian flagging boats but foreigner-owned. This problem brings about not only lack of supply for domestic consumption but also supply ofraw material for processing industries. It also hinders export activities directly from the easternIndonesia and shuts opportunity of having better income that could be derived by local fishers andproducers.People in the eastern provinces and urban areas apparently prefer fresh (frozen) fish to processed fish.Hence providing fresh or frozen fish is another challenge in this very large country. It needs specialtransportation facilities that can maintain freshness of fish. To cope with these problems, governmentdevelops cold-chain system program by which transportation and storage system is developed so thatfish can be carried with refrigerated boxes and insulated trucks from producer areas to retail markets.During the last five years, the MOMAF has built ice-making plants in regencies and provinces. The plantsare operated and managed by local cooperatives, mostly fishermen cooperatives. The MOMAF alsoprovides and donates insulated trucks and motorized-three-cycles equipped with ice box to fish tradersso that they can transport fish in fresh and frozen condition. Under the program called Rural FisheriesBusiness Empowerment (RFBE), there have been thousands units of such facilities given and distributedto small-size traders and fish processors.Due to variability of monsoon, seasonality of production, scatter of production areas, and distance ofconsumer areas, cold storage facilities are inexorably needed. Nonetheless, cold storages are still less innumber and even not available in many areas. Investment in cold storage has been programmed by thegovernment. Yet it only confines to the locations inside the government-owned fishing port areas.Hence investment in cold storages may be considered as the first priority and widely open to privateinvestors.There are numerous types of processed fish in Indonesia, particularly traditional products normallyproduced by small-scale business units. The top one is “pindang fish”, a salted-boiled fish or fish boiledin brine. Each island and tribe seems to have their own types of “pindang”, mostly in the hinterland ofJava and Sumatera. The pindang also now developed and widely produced in villages of Bali Island andtend to be well accepted by Balinese. The “pindang” is made from skipjack, small-size or sometimescalled “baby” yellowfin tuna, and various species of small pelagic. The 2012’s pindang production is 7
  8. 8. estimated 1.06 million ton, resulting from 1.2 million ton raw fish. About 60% of pindang production isfrom Java.Given that pindang constitutes an important role of Indonesian fisheries especially for local fishconsumption, the MOMAF pays serious attention to its industry development. Starting this year, anempowerment program has been launched aiming at strengthening the business of small-sizeprocessors, providing technical assistance and working capital, and supplying raw materials. The targetof the program is that better quality pindang can be produced, its shell-life can be extended and theproducts can be accepted and sold in modern retailers, making it attractive and accessible to higherlevel consumers. Now in supermarkets and department stores in Jakarta and other big cities, pindangproducts are attractively shelved. Most of pindang, however, are sold to ordinary people through mobilepeddlers and hawkers moving by bicycles (motorized or non-motorized) or carts from one to anotherhousing complex. Pindang is easily found in every wet (traditional) market.Other traditional products are salted fish and smoked fish that are also produced traditionally by small-scale processors. The production of salted fish decreased gradually. This is can be posted for switching ofconsumer choices and preferences to “pindang” and increasing awareness on the need of healthy foodas well as less-salty food.. The salted fish, as it is made with mixing of salt, is formerly believed as anunhealthy food and triggering for high blood pressure.Smoked fish is still being extensively produced. Its demand is getting strong as the products now are inbetter packages and sold in modern retails and supermarkets. Traditional smoked fish is made fromskipjack, tuna, and eastern little tuna. This type of products, mostly made by fisher families in NorthSulawesi and Moluccas, are sold in local markets. Smoked fish in East and Central Java Provinces aremade from milkfish, slightly more modernized, and sold in modern retail markets. Other smoked fishproducts are made from freshwater fish, mostly pangasius and catfish. The processing is concentratingin Bogor area and the products are sent to Jakarta market and island of Sumatera. The smoked fish fromBogor are often exported to Malaysia and Singapore.The industry producing traditional processed fish, particularly “pindang”, increased gradually andobviously will not die. As long Indonesian ordinary consumers maintain their consumption habit,demand for these traditional products will persistently exist. However, it does not mean that Indonesianfisheries industry just relies and focuses on traditional products. The modern processing industry, on theother hand, develops tremendously and become the backbone of exported products. The high value-added products in the forms of ready-to-cook and ready-to-serve products made from shrimps,snappers, tuna, octopus, squids, and mackerels are being produced and sent to export markets in EU,Japan, and USA. Last year, export reached US$ 3.8 billion and targeted to above US$ 4 billion this year.There are more than 500 fish processing companies in Indonesia. Facilities owned by each companyusually consist of processing hall, ice plant, and cold storage. Some companies located by the shore,normally have their own small jetties and loading and unloading boats facilities. Most of the companiesare vertically integrated business, meaning that they encompass fishing or fish farming, outsourcing ofraw materials, processing, and trading. About 60% of the processing establishments concentrate inproducing frozen products, 10% in canned fish, 13% dried fish, 15% smoked fish, and 1% live fish.Distributed geographically, 54% of the establishments are located in Java and Bali, 14% in Sumatera, 8%in Kalimantan, 20% in Sulawesi, and 4% in Maluku and Papua. 8
  9. 9. Since most of the processing firms are located in west Indonesia, while fishing ground and producer ofraw materials are in east Indonesia, the firms them often encounter lack of raw materials problems. Thefirm raw materials indeed should be procured and brought from east to west Indonesia. High cost andefficiency may occur because of improper logistic system. Some firms often operate below theircapacity. In order to overcome problem of under capacity, raw materials are outsourced from othercountries. Some firms in Jakarta and Surabaya have recently imported raw materials. Yet the MOMAFonly allows the firms to import sub-tropical and cold water fishes. By this policy, the imported fish willnot jeopardize price of fish produced by local producers. Under this breakthrough policy for instance,cold water shrimps, crabs, and even salmon are imported, then processed to result in higher valueproducts and eventually resold to other countries. There are various species of bigger size crabsimported from North America, processed to be canned products, and resent back to North America.There are also companies in Bali and Surabaya importing frozen salmon and processed into smokedsalmon and sent to other consuming countries in Asia. These companies take advantage from relativelymore competitive costs and skilled labors availability in Indonesia.About 71% of these processing establishments are holding approval numbers from the EU competentauthority, meaning that with that number the whole production system of the establishment have beenproofed acceptable. The approval is given to each establishment after careful examination and scrutinyover the establishment that their production system must be in accordance with EU regulation, andhence they can export their products to EU member countries. The similar system has been developedbetween Indonesia and other markets such as Japan, the USA, Russia, South Korea, Australia, and China.Indonesia is very actively promoting mutual recognition agreement with respects to fisheries trading inother countries.There is a local regulation that underlies product control before being exported. The regulation that isbasically an implementation of agreements with importing countries is that each product shouldundertake laboratory check and examination before being exported. A health certificate is given foreach container of the examined products. To conduct this product quality testing, control laboratorieshave been developed in each provincial capitals. Now there are 40 fish inspection and quality controllaboratories all over Indonesia, and available in every provincial capital.3. The framework enhancing sustainability seafood sector (fisheries and aquaculture)The main and prominent basis for Indonesian marine sector development is the Indonesian Constitution,UUD-1945 that stipulates Indonesia as an archipelagic state. The statement implies that developmentmarine sector, including fisheries and aquaculture, is a manifestation and embodiment of thearchipelagic state. Another chapter of the constitution explicitly mentions that land and waters and allresources therein are owned by the state and must wisely utilized for the people welfare. Marine sectordevelopment, that focus on empowering fishers and coastal community, is programmed in the Medium-term Development Plan that should be carried out within five years, ending at 2014.The umbrella for fisheries (including aquaculture) development is based on the Law No. 31/2004concerning Fisheries that was amended by the Law 45/2009. The Law No. 31/2004 consisting of 111articles, of which some articles were amended in the Law 45/2009. Overall, the laws regulate all aspects 9
  10. 10. of fisheries starting from managing fisheries resources, approaches, methods and procedures of fishingand fish farming, controlling monitoring and surveillance of the fishing activities, as well as post-harvesting and marketing of fish.The law also explains the objectives of fisheries development and resource management that consiststhe following aspects:– Enhancing living condition of small scale fishers and fish-farmers.– Increasing government’s income and foreign exchange.– Providing employment opportunity– Increasing fish supply and consumption– Optimizing management of fisheries resources– Increasing productivity, quality, added–value, and competitiveness of fisheries products.– Guaranteeing raw materials for processing industries.– Optimizing utilization of areas fit for aquaculture and protecting their environments from degradation.– Ensuring sustainability of fisheries resources, fish farming areas, and implementing effective spatial managementThe amended articles 25 may be regarded as the framework for seafood processing and marketing. Itstipulates that fisheries business should be done in a system that includes pre-production, production,processing, and marketing activities. The government is responsible in facilitating marketing activitiesboth in the domestic and international markets. Sending fish products to international market is carriedout only if local production and supply of fish have fulfilled the need of domestic consumption. In thiscontext, government must create business environment according to laws and regulations thatguarantee effectiveness and efficiency of all production lines.Regarding quality of fish products, it is stated that quality standard of fish products must receive seriousattention. All business actors, therefore, must be responsible in maintaining and achieving good productquality. The central and local governments must make use of their efforts in order to result in goodquality products.To change these laws into the implementation, the Minister of Marine Affairs and Fisheries passed theMinisterial Decree No. 01/2007 on the Rules of Quality Standard and Product Safety in Production,Processing, and Distribution Channels. The Decree obligates implementation of HACCP (Hazard AnalysisCritical Control Point), GHdP (Good Handling Practices), DGP (Good Distribution Practices), SSOP(Standard Sanitation Operating Procedure, applied by fish processing companies), GAP (GoodAquaculture Practices), GMP (Good Manufacturing Practices), and GLP (Good Laboratory Practices).To complement this Ministerial Decree, the Directorate of Fish Processing and Marketing further issuedhis decree No. 03A/2007 on the Implementation of the Ministerial Decree. It focuses on the procedureon issuing health certificate of each product intended to send to export markets. As indicated before,each product ready to export should go through examination before being approved and given healthcertificate. The Directorate General is responsible to sign the certificate. Nevertheless, to make it morepractice, faster, and simpler, the signing of the health certificate is delegated to the head of qualitycontrol laboratory in each province. The laboratory is a technical unit under provincial fisheries service.But technical aspects of the laboratory are under supervision of the Directorate General. Thelaboratories must be accredited by the National Accreditation Agency in order that they are reliable inperforming their duties and functions. 10
  11. 11. Beside control and examination on the export product, the government also develops, enlarges,penetrates, and intensifies international market by adopting and following rules, regulations,commitments, and code of conducts that are related to fisheries production system. Indonesianfisheries legislation is a copy of international legislation in the same and related aspects of fisheries. Forexample, Indonesia adopts United Nations’ Code of Conduct for Responsible Fisheries (CCRF) andtransfers the CCRF principles in the national rules and regulations. Most of the articles of the Law No32/2004 Concerning Fisheries that was amended with Law 45/2004 are the translation and modificationof the CCRF’s articles. The definition of the fisheries in the Indonesian law is basically direct Indonesiantranslation of the same definition in the CCRF.In order to realize practices of responsible and sustainable utilization of fish resources, the CatchDocumentation Scheme (CDS) and Catch Certification (CC) are now being applied in large-scale industrialfisheries. Large-scale vessels are obliged to report their catch to the authority in fishing ports. The boatcaptain is provided with forms that should be filled up to document all the catch they have. Fisheriesobservers are also placed in large-scale fishing companies. The observers cannot be placed yet in smallboats as in reality it is a costly program and technically hardly applied. The small-scale fishing boats,nonetheless, must report their catch in local fisheries office so their catch can be finally documented.Together with other countries, Indonesia also manages regional fish resources. Currently Indonesia isactive and full members of two Regional Fisheries Organization (RFMO), namely the Indian Ocean TunaCommission (IOTC) and the Commission for the Conservation of the Southern Bluefin Tuna (CCSBT).Indonesia also is in the process to becoming a member of the Western and Central Pacific FisheriesCommission (WCPFC) and now actively participate in this organization as a non-member contractingparty. Involving both directly and indirectly in these RFMOs, consequently Indonesia must follow andobey all stipulated rules and regulations. Otherwise, the membership is questioned and fish landed fromthe RFMO-managed areas cannot be sold. Indonesia therefore, is avoiding and combating the IUUfishing in the international waters and preventing fish laundering.In the field of aquaculture, Indonesia is strictly following the GAP (Good aquaculture practices) andother sustainable principles demanded by the international community. In fact, Indonesia is nowpromoting vehemently organic fish farming and less use of external input factors. These are done in away that clean and sustained results can be obtained.4. International agreements and commitments about IPR are ratified in IndonesiaThe Law No. 6/1982 was the first law on the Property Rights. It then was amended several times withthe Law No. 7 /1987, Law No. 12 /1997 and lastly with the Law No. 19/2002. Hence the prevailing law onthe property rights is the Law No. 19/2002. The reasons for the amendment were the progress on thesame issue at the global level that required Indonesia to adjust its rule and regulations and so that thelaw can be effectively implemented.The international conditions that affect regulation on the property rights in Indonesia were TheAgreement Establishing the World Trade Organization (WTO) that includes Agreement on Trade Related 11
  12. 12. Aspects of Intellectual Property Rights (TRIPS). Indonesia ratified the WTO and TRIPS by Law No. 7/1994.Likewise, Indonesia also ratified Berne Convention for the Protection of Artistic and Literary Works bythe Presidential Decree No. 18/1997. Another international commitment concerning copyrights was thatthe World Intellectual Property Organization Copyrights Treaty (also called the WIPO Agreement onProperty Rights) was ratified by Presidential Decree No. 19/1997. Hence it can be said that regardingproperty rights, all related international agreements and commitments have been ratified by theGovernment of Indonesia. Consequently, Indonesia should keep and uphold all the said agreements andcommitments and in fact should promote their full implementation in the country.The prevailing Law No. 19/2002 consists of 15 chapters that are further elaborated into 78 articles. Thecontains of the Law are reflected by chapters and articles that comprise aspects of definitions andterms, scope of property rights, effective period of holding the rights, property rights registration,licensing, board of property rights, related rights, management of the rights, costs, dispute settlement,and sanction of violation. The law is being implemented and it is paving the way for improvements ofIndonesian industrial, investment, and trade sectors.The law is the legal basis for individual, group of individuals, corporation, organization, and society(including indigenous people) to register their invention and intellectual properties. If an inventionresulted from collaboration of more than one parties, the right holder(s) of that invention is given to theparty (parties) in accordance with previous agreement of the parties. The law does not specify explicitlyon the party that is not Indonesian. In practice, however, intellectual property rights resulted from acollaborative work must be clearly addressed in the parties’ agreement. The ownership and holder ofthe property rights are normally stated in agreements of collaborative efforts between any Indonesianentities and their foreign partners.5. The main challenges concerning sustainable fisheries and aquacultureFisheries (including aquaculture) provide employment opportunity for about 10 million people,particularly in coastal areas and small islands. The Number of those working directly and indirectly infisheries and other marine-based economic activities are expected to increase to be about 25 millionpeoples in 2020. The fisheries sector is also targeted to continually supply protein for the Indonesianpopulation. Per capita fish consumption is expected to reach 40 kg and above in order to fulfill idealfood consumption balance. Fisheries are also prioritized as a growth engine that propels economicdevelopment in coastal areas and small islands. Even in some provinces and districts, fisheries sector isplaced as the main underpinning of the social economic development. Besides contributing to the localGDP, fisheries are also nominated to generate export earnings, compared with other food industries.Hence there are multivariate objectives burdened by this sector. Attaining those objectives requiresconcerted efforts of every stake and shareholders. Those efforts essentially are process of creatinghigher value products out from available resources that are susceptible to global environmental andclimate changes. The development of fisheries sector cannot be isolated from policies and programs ofother sectors in the Indonesian economic structure. Whereas global market and investment trend willalso affect the sector now and in the future. All these aforementioned aspects are the contextualchallenges that determine and affect the Indonesian fisheries and in the years to come. The statementsof future challenges of the Indonesian fisheries sector may be summarized as follows: 12
  13. 13. – How big are the Indonesian fish resources? Is that 6.4 million tons MSY as has been claimed since 20 years ago and used as a reference point in policy-making and program formulation? Indeed, this fish potential needs to be assessed. Yet it needs a nationwide evaluation altogether encompassing all 11 FMAs. Based on the thorough evaluation and reassessment of the fish potential, the future resource management mechanism can be determined to meet sustainable fish production. The reassessment of fish potential is a strategic program that may bring about positive impacts to economic development.– Structure of production technology dominated by small-scale companies and operators both in fisheries, aquaculture, and processing industry. Although these small-scale businesses are labor intensive and may generate relatively higher employment, they tend to have lower productivity and eventually lower income. The domination of small-scale companies in fisheries needs to be downsized by restructuring production system with application of cutting-edge technologies. With modern and bigger size technologies, efficiency may be achieved, mass production can be manifested, fishing areas can be expanded, aquaculture can be intensified, product quality can be maintained and even improved, and market areas can be enlarged. Nevertheless, there should be programs aimed at the application of new technologies. Training, education and compensation program should be designed.– Technology in fishing is relatively old ones. Latest fishing technology that was adapted is that of trawling in 1970s. The FAD (fish aggregating device), locally named Rumpon, was firstly commercially used in early 1980, introduced by state-owned enterprise. The purse seine fishing equipped with a power block in the net setting and rolling was introduced in Northern Java fisheries in early the 1990 and now widely used in the whole country. Thenceforth, fishing technologies have been undeveloped or relatively stagnant. How to create fishing technologies with high selective catch, biologically safe, economically feasible, socially acceptable, and ecologically recommendable, are therefore a contextual challenge.– There are still many aquaculture resources unutilized. It needs capital, skilled labor, and appropriate technologies to exert the resources. New species need to be introduced, not only by cultivating wild species but also domesticating non-residence species. Some cold-water species such as salmon, bivalve, and tuna should be carefully researched on their farming possibility in Indonesia. The development aquaculture can compensate declined fisheries and even will become the main alternative of future protein source– Land-use planning that includes aquaculture areas is a big problem. By proper zoning of land-use, investment can be steadily done for long term. In this concern, a seascape that is the zoning of water areas according to their characteristics and potentials should be given first priority.– Many aquaculture species are imported and showing an increasing demand in local market. Salmon from Norway, Pangasius from Vietnam, and Lele (local catfish species) from Malaysia. Will importation of these species politically accepted in the future? Can this importation devastate local aquaculture industry? If the importation is banned, consumers will suffer and producers will gain and take advantage of the higher fish price. Such a policy however will strengthen domestic producer. On the other hand, if the importation is not abolished, consumer will take benefit and producer will lose. In the long run, this policy will jeopardize and finally kill local production system. This dual policy aspects needs to be solved. A sort of accommodative policy that sub-optimally satisfies both consumers and producers should be unavoidably formulated. 13
  14. 14. – Preserving and keeping fish in fresh condition is a challenge. As in other tropical areas, due to high temperature, fish is fast deteriorating. Indonesia has been long practiced traditional technologies in preserving fish, one of which is sun-drying. But with sun-drying, fish form is totally changed from fresh ones. Ice use was developed. Cold-chain system was introduced, cooling sea water system was also applied. What are next technologies for fish preservation? They might be low cost containers, boxes, made up from materials that keep the freshness of fish.– Local demand for fish is expectedly increased. Indonesia needs a lot of fish to feed its population. Short cuttingly, fish can be imported. However, this is not the right policy in the long run perspective. This local demand should be fulfilled by local production, implying that local fish production both from fishing and farming mush be boosted.– Indonesian products and commodities are often priced lower than similar products of other countries. Consequently, Indonesia should export voluminous fish to have certain amount of earnings. In fact, if quality of the products is improved, with lower export volume, the same amount of earnings can be generated. Export demand is competing with the needs of local market. Hence, there should be a plan and program to switch from volume to value, to develop value-added products, to sell in high-end markets.– Developing processing industry in eastern part of Indonesia should be placed in the top agenda list. The type of the industry should be an integrated one, avoiding high cost and fostering relationship between production areas in the east and consumption areas in the west. The industry, as indicated before, should use cutting-edge and technologies in such a way that their products can be accepted in this very competitive global market.– Export markets for Indonesian products should be extended beyond the current Japan, USA, and EU markets. New potential markets such as in Latin America, Africa, Middle East, Eastern Europe, and China should be tapped. At the same time, the traditional markets which are obviously very important should be maintained.– Development of products that can enter international markets is a must. With the current product type and marketing approach, it is difficult to penetrate and create new demand. New seafood products should be developed. New marketing approaches including marketing mix of campaign, advertising, collaborating with entities in potential markets, active promotion, and reducing production costs, should be carried out.– Laboratory testing and product quality monitoring should be developed, not only at capital cities of each province but also in some important centers of regencies and municipalities. With the laboratories closed to producers, faster and more efficient services can be done and lastly reducing costs and increasing incomes.6. Possible areas of cooperation between Indonesia and Norway 14
  15. 15. A collaborative research programs between Indonesia and Norway can be manifested in thereassessment of fish stock in 11 Indonesia’s FMAs. The stock assessment requires scientists whosebackgrounds are in fisheries biology, resource economics, mathematics and modeling, and marineecology. Since fisheries management is a bio-socio-economic interrelated approaches, the currentpractice of Ecosystem-based Fisheries Management (EBFM) mechanisms may be promoted. Since fishstock assessment is an obligation and responsibility of government, the G-to-G relation betweenIndonesia and Norway should be developed. The Indonesian Institute of Science (LIPI), the Agency forTechnology Assessment and Application (BPPT), and particularly the Agency Fisheries Research andDevelopment (LITBANG KKP) is potential collaborating institutions from Indonesian side. The possibleinstitution from Norway for this collaboration can be government research agencies and universities.Private research companies may show their interest in this collaboration so long as it bring about specialbenefits and returns to the companies.Beside basis research to understand state of Indonesian fish stock, applied researches aiming atimproving production technologies in the fields of aquaculture, fishing, and fish processing are also in adire need. Two important aspects in aquaculture that need to be improved are in the aspects of feedand seed. In the feed aspect, collaborations are should be able to find lower cost and more efficientfeed. While in fry aspect, collaborations are needed to result in quality fry through improved hatcherytechnologies and availability of good brood stocks. While some aspects of this collaboration may beunder government responsibility, more spaces of cooperation can be developed between privatecompanies, especially those in hatchery business.The business to business (B2B) cooperation can be developed in providing and supplying more efficientfishing technologies, fuel-saving technologies, and selective fishing methods that do not threaten anddevastate fish resource sustainability. The Indonesia’s GAPPINDO (The Association of the IndonesianFisheries Companies) is the right candidate of collaborator from the Indonesian side.The B2B cooperation is also needed in developing Indonesian processing industry that is able to producehigh value products, sold at domestic and international markets. This cooperation has a brighter futureas the majority of the Indonesian products now are raw fish and therefore they can be processed firstbefore being sent to the markets. This cooperation may take advantage from the Norwegian expertise inproduct development and Indonesian comparative advantage in skilled and trained labors and fishresources as well as full commitment and obsession to develop national fish processing industry. Thepotential business partners from Indonesia are the companies grouping in the APIKI (Indonesian FishCanning Companies) and AP5I (Indonesian Cold Storage, Processing, and Marketing Companies).About 60% of Indonesian export value is derived from shrimp export. However, most of the exports arealso frozen shrimp (head-on and head-off). To increase export value, this raw shrimp should be replacedby cooked and semi-cooked products. Indonesian companies may learn from their Norwegiancounterparts on how to produce ready-to-serve shrimp products. Lessons on market penetration anddemand creation should also be learned from Norwegian companies. The B2B collaboration should beestablished to realize this high impact business.Providing that positive trend of importing cold-water farmed species is getting stronger, attemptsshould be made to cultivate those species in Indonesia. There are many areas in Indonesia that shouldbe carefully studied to find their possibility of becoming farm areas for those cold-water species. Forinstance, salmon may be farmed in the highland of Papua, Sulawesi, and Java. Seabream and seabasshave been successfully cultivated in Seribu Islands of the Jakarta Bay and Batam Waters in Riau. Hence, 15
  16. 16. those species have a possibility to be farmed in similar areas in other parts of Indonesia. The potentialcollaborators from Indonesia side are salmon-importing companies and processing companies thatproduce fish fillets and other types of highly-priced products.Indonesia is now the world number one producer of seaweeds. Unfortunately about 90% of importedseaweeds are dried-raw seaweeds. The raw seaweeds are processed in other countries and sent back toIndonesia in other applied product forms. To make it more efficient, the seaweed processing industrythat changes raw seaweed into ready-to-use and ready-to-eat products should be developed inIndonesia. This seaweed industrial development may use the Norwegian expertise and experience inthis industry. The potential collaborators from Indonesia are companies grouping in the ARLI (IndonesiaSeaweed Association).Investment in an integrated fishing industry, especially in the eastern part of Indonesia is a must in orderto gain efficiency by sustainably utilizing the country resource endowment. Expecting Indonesiancompanies alone to invest in this business seems to be unrealistic. Therefore, a joint investmentmechanism between Indonesian and Norwegian business sectors should be established. FromIndonesian side, the PT Perikanan Nusantara (a state-owned fishing company) can be the potentialpartner for this joint venture.Strategic promotion and campaign trough product branding should be developed for Indonesian tunaproducts. The target markets for the products are the EU countries, the USA, and other non-traditionalmarkets like the Middle East region, African and South American countries. This development needs atechnical assistance from the Norwegian government. At the business level, B2B collaboration can bedeveloped. The ASTUIN (Indonesian Tuna Association) and ATLI (Indonesian Tuna Long-line Association)can be considered as potential collaborators from Indonesian side.7. Common “pilot plants” for sustainable fisheries and aquaculture – demonstration of new technology and ideasPilot plants that can be developed to embody Indonesian and Norwegian common interests andconcerns in sustainable fisheries and aquaculture business is as follows:– Tuna Farming. Research on tuna farming was done in Bali more than 10 years ago. It was collaborative program between Government of Indonesia and Japan. The research was not followed up by commercial farming, although it showed a positive result of developing tuna farming in Indonesia. With the expertise owned by Norwegian fish farming companies, coupled with the Indonesian tuna (especially southern bluefin tuna) resource endowment, commercial tuna farming may be considered as a pilot project that can be developed.– Salmon Farming or Fattening. Indonesia import salmon from Norwegian both local consumption and processing industry raw material whose products are exported. Instead of bringing large-size salmon from Norway, small-salmon (fingerling size) can be brought and farmed or raised in Indonesia. An integrated salmon industry should be considered that starts from hatchery business and goes downwardly from farming to the processing industries. 16
  17. 17. – Seaweed processing. Seaweed processing industry can be taken into consideration in the embodiment of bilateral collaboration between private sectors. The processing industry should be established to change raw seaweed to become refined-caraggeenan that are used and applied in various manufacturing industries. Processed seaweed can be sent to fulfill increasing demand for seaweed all over the world, particularly in Europe.– Organic shrimp farming. Due to increasing health and environmental concerns, global consumers now are seeking for organic food. There has been a Japanese company working with small-scale shrimp cultivators to culture organic shrimps. The products are ending up at high class retail markets in Japan. This organic food-producing industry that is based on aquaculture may expand in Indonesia. There spacious potential of aquaculture land can be used to extensively produce organic shrimp. Again, the Norwegian expertise, experience, capital, technology, and market access can be combined with comparative advantage components of Indonesia such as lands and labors to realize and develop this sustainable industry.– Developing Common Product Branding. The two governments and private sectors may work to build so-called a strategic “Common Product Brand”. The brand is important in positioning in the high competitive environment of the global market. The product branding can be established and introduced firstly in the continually raising Indonesian market and the stable European market, before going penetrating into other regions. The product branding should be started with and based on government decision and agreement, then followed by private companies’ actions to develop the brand. A common brand that unites two countries’ identities such as “IndoNorway Fish” or “NorwIndo Fish” deems to be envisaged. 17
  18. 18. More about the Indonesian market and business environment 1. Description of the market for sustainable marine solutionsConsidering fish resources availability and the levels of their utilization (exploitation), Indonesia will notintensively expand fishing capacity beyond its current level. In fact in some FMAs, total fishing capacityshould be reduced and reallocated. Hence the policy regarding fisheries is that to maintain current levelof fish production and consequently to properly manage fishing efforts.With that policy, increased fish production relies on aquaculture. Indonesia has spacious areas of landsand waters that can be converted into aquaculture medias. Target on aquaculture has been set that itshould be intensified, extended, and diversified to provide fish for local consumption and as rawmaterial for export-oriented processing industry. Before being corrected, aquaculture production wastargeted to reach 27.35 million ton in 2015, while maintaining the production from capture fisheries. Toreach the target, minapolitan program that was the acceleration and expansion program was launchedand implemented for several years. Table 1. Target Fish Production from Capture and Aquaculture 2010 2011 2012 2013 2014 2015 Production 10.76 12.26 1485 18.49 22.39 27.32 (million ton) Capture (million ton) 5.38 5.41 5.44 5.47 5.50 5.50 Aquaculture 5.38 6.85 9.41 13.02 16.89 21.82 (million ton) Consumption (kg/capita) 30.47 31.57 34.09 36.31 38.67 40.0 Export 2.9 3.2 3.6 4.2 5.0 6.0 ($ Billion) Source ; MOMAF-RI (2009)Currently, the increased fish production is not the main target anymore. The emphasis of fisheriesdevelopment was slightly revamped from volume-targeted oriented to value-targeted oriented. Hence,although high production volume still wants to be achieved, the top of the target is to increase value ofproduction through industrialization that converts raw fish into highly-priced products. In other words,having a high fish production volume is important and necessary, but more important one is to gethigher value of that production.Keeping in mind those development objectives and paradigm, technologies that are in a dire need byIndonesian fisheries (including aquaculture) are given below: 18
  19. 19. – Sustainable fishing technologies that are employed selective gears and methods in order that they can be used to maintain current fish production level from capture activities. Beside fishing boats, additional fishing tools such as navigation equipments are also needed.– Appropriate technologies that can be applied by small-scale fishers running their small-size companies (business). There is a substantial need to modernize about 173.000 small scale non- powered fishing boats in such away they become more efficient. If the fleet is motorized, improving one step from non-powered to powered boats, it will be a huge business and investment. All the powered boats now are using fossil energy, mostly kerosene and gasoline. Hence increasing price of kerosene and gasoline is a serious problem encountered by fishers. To replace fossil energy with LNG (liquefied natural gas) or non-fossil energy will make a more efficient and fishing operation. This will be a lucrative business for suppliers of these technologies. Table 2. The Structure of Indonesian Fishing Fleets Number % Number % 2006 2006 2010 2010 TOTAL 590,317 100.00 570,826 100.00 Non-powered boat 249,955 42.34 172,907 30.29 Outboard motor 185,983 31.51 231,333 40.53 < 30 GT Boats 149,735 25.37 159,875 28.01 30 - 300 GT Boats 4,495 0.76 6,557 1.15 > 300 GT Boats 149 0.03 154 0.03– Since only few large-scale boats now are operated in Indonesian waters, this will be a-must investment area to supplying large-scale boats that catch fish not only in the internal (territorial) waters but also the RFMO areas. The government now is curtailing import boats to give an opportunity to domestic shipyard (boat-building) companies to expand their business. Therefore investing in shipyard and docking will have a bright prospect.– Preservation, cold storage, ice-making, and fish transportation technologies are unavoidably needed in this country. There are voluminous fish that are handled, transported, traditionally processed, and finally eaten without properly preserved. Facilities required to preserve and store fish are lacking. Estimate post harvest losses due to unproductive fish handling is about 20%. Therefore, improving in handling will reduce loss and provide more fish for consumers. The cold-chain system that was introduced and programmed by the government will be successfully undertaken if enough ices are available not only for fishers but also for fish traders. Hundreds of local (wet) markets established by the government, almost in each district and town, require ices for daily traders operation. Hence, investment in post harvest equipments and technologies, including ice-plants and storages, should be given first priority.– Integrated aquaculture is an area of investment that cannot be hindered. To set aquaculture as the main contributor of fisheries production indeed requires participation of the private companies. Some species that are considered as aquaculture champions are shrimp (prawn), pangasius, tilapia, catfish (lele), milkfish, seabass, seabream, mussels, seaweeds, sea-cucumbers, and clams. For the 19
  20. 20. non-edible species, pearls-oyster culture is being reinvigorated. The species included in the current aquaculture revitalization program are shrimp, milkfish, pangasius, and seaweed (Table 3). Table 3. Aquaculture Revitalization Program Production Seed Species Location Areas Target Needed 102,925 ton 8.1 billion Shrimp 22 Regencies 82,870 ha (Rp 5.89 trillion) (Rp163 billion) North coast of Java 157,536 ton 1.3 billion Milkfish and South Cost of 156,949 ha (Rp 3.15 trillion) (Rp196 billion) Sulawesi 97,167 ton 251 million Pangasius 12 Regencies 3,239 ha (Rp 1.06 trillion) (Rp63 billion) 442,047 ton 75.8 ton Seaweed 5 Regencies 12,630 ha (Rp 309 billion) (Rp189 billion)– Investment in aquaculture may be focused in the following aspects:  Production and technology of quality fries and fingerlings. Technology on different scale of hatcheries, single and multi-species hatcheries.  Production and technology of feeds with recommended formula of ingredients contain, low price, and uses local available materials.  Production and technology of aquaculture media such as nets, cages, moorings, feeding equipments, floats, aerators system, and post harvest equipments.  Production and technology of water quality monitoring and management, and pests and diseases protection. 2. Potential business partners for Norwegian companiesThe companies potentially can cooperate as partners/buyers of Norwegian business entities areselectively chosen, recommended, and given below according to office location and their business line. North Sumatera Province – PT Aquafarm Nusantara. An integrated tilapia farm. Address: Jl. Sei Bingei 36. Desa Naga Kisar, Kecamatan Pantai Semin, Deli Serdang. Email: Phone: +62-61-6627658. Products: Frozen and Fresh tilapia, skinless fillet. Production capacity: 150 ton/day. Markets: Asia, USA, and EU. – PT Toba Surimi Industries. A fish processing company. Address: Pulau Pinang Masbar KIM-1 Medan. Phone: +62-61-6850038. Product: frozen and fresh fish, crabs, soft-shells, canned fish, canned shrimps. Production capacity 100 tons/day. Markets: Japan, China, EU, USA. – PT Medan Tropical Canning. A fish processing company. Jl. K.L. Yos Sudarso. Km 10.5. KIM Medan 20242. Phone: +62-61-6851973. Email: Products: frozen and fresh fish and shrimp, canned tuna. Production capacity: 35 tons/day. Markets: Korea, Japan, South Africa, USA, EU. Lampung Province 20
  21. 21. – PT Central Pertiwi Bahari. An integrated shrimp farm. Jl. Ir. Sutami. Desa Sindang. Tanjung Bintang. Phone: +62-721-351310. Products: Frozen raw shrimp, frozen cooked shrimp. Production capacity: 100 tons/day. Markets: EU, USA, Japan. – PT Philips Seafood Indonesia. Address: Jl. Ir. Sutami, Karang Timur, Bandar Lampung. Phone: +62-721-350441. Fax: +62-721-350442. Products: Frozen shrimp, Pasteurized crabs crab cake, canned crab meat. Production Capacity: 5 tons/day. Market: USA, EU. Jakarta – PT Central Proteina Prima TBK. Wisma GKBI Lantai 19. Jl. Jenderal Sudirman Kav. 28 Jakarta 10210. Phone: +62-21-57851788. Fax: +62-21-57851808. Email: Website: The company is an integrated shrimp producer and processor. The Indonesia market leader in shrimp fries and feeds. Products: frozen and processed shrimps, fries, feeds, and probiotics. – PT Indomaguro Tunas Unggul. Integrated fishing company. Address: Jl Muara Baru Ujung, Pelabuhan Perikanan, Blok G 1-2, Jakarta Utara. Phone: +62-21-6619705, Fax: +62-21-6613531. Products: Frozen processed fish. Production capacity: 20 tons/day. Market: Asia, USA, EU. – PT Wirontono Baru. Shrimp processing company. Address: Jl Ancol Barat III/1-2 Jakarta Utara. Phone: +62-21-6907792, fax: +62-21-6912008. Products Frozen shrimps (raw and processed), Markets: Japan, Hong Kong, USA, EU. Banten Province – PT Wahana Satria Abadi. Address: Komplek Pergudangan Nusa Indah Blok B. No.37. Jl, Husein Sastranegara Jurumudi. Tangerang 15124. Phone: +62-21-5409595, Fax: +62-21-5400761. Email: Website: Business line: distribution of commercial refrigeration products. West Java Province – PT Fresh On-time Seafood. Integrated Fishing and Aquaculture Company. Address: Jl Raya Narogong Km 26.5. Kawasan Industri Kembang Kuning, Celeungsi, Bogor. Phone: +62-21- 8233817. Products: Frozen and fresh fish, crab, shrimp, squid. Production capacity: 50 tons/day. Central Java Province – PT Juifa International Foods. Address: Jl. Lingkar Timur No. 53 Tegal Kamulyan Cilacap. Phone: +62-282-521002, Fax: +62-282-521007. Products: frozen and canned fish. Capacity: 100 tons/day. Market: Thailand, Japan, USA. East Java Province – PT Aneka Tuna Indonesia. Products: canned tuna, Address: Jl Raya Surabaya Malang K, 38. Gempol. Pasuruan. Phone: +62-343-851362, Fax: +62-343-851369. Email: Capacity: 50 tons/day. Market: Japan, USA, EU. – PT Bumi Menara Internusa. Address: Jl Margamulyo No, 43 Tandes. Surabaya. Phone: +62-31- 7491000, Fax: +62-31-7431005. Product: Frozen and processed, cooked fish and shrimp. Capacity: 50 tons/day. Market Japan USA, EU. – PT Kelola Mina Laut. Integrated Fishing and Aquaculture Company. Address: Jl. Raya KIG Raya Selatan, Kav C-5 and C-13, Kawasan Industri Gresik, Phone: +62-31-3976351, fax: +62-31- 3976350. Capacity: 100 tons/day. Products: frozen cooked fish, shrimp, and crab. Market: Japan, USA, EU, China, Korea. 21
  22. 22. – PT Sekar Laut. Fish Processing Company. Address: Jl Raya Darmo, 23-25 Surabaya. Phone: +62- 31-8921036, Fax: +62-31-8941244. Products: Dried products, shrimp crackers. Market: China, Japan, USA. – PT Rex Canning. Fish Canning Company. Address: Jl. Raya Beji Bangil Km 4. No. 42 Pasuruan 67154. Phone: +62-343-656470, Fax: +62-343-656475. Capacity 50 tons/day. Products: canned tuna, canned crabs, canned shrimp. Market: Asia, EU. – PT Gema Ista Raya. Canning Company. Address: Jl. Temboro No.17 Tanggulangin. Kejayan. Pasuruan. Products: Canned sardines, tuna, shrimp, crab, and snail-meat. Market: Local market. Bali Province – PT Arabikatama Khatulistiwa Fishing Industry. Address: Jl By-Pass Ngurah Ray. No. 92XX. Pasanggaran Denpasar. Phone: +62-361-710677. Fax: +62-361-710680. Products: Frozen and fresh tuna. Capacity: 30 tons/day. Market: Indonesia, Thailand, Korea, Japan, USA. – PT Bali Raya Permai. Canning Company. Address: Desa Tegal Badeng Negara. Phone: +62-365- 42500, Fax: +62-365-41875. Product: canned tuna, canned sardines. Capacity 50 tons/day. – PT Inti Mas Surya. Integrated tuna fishing company. Address: Jl Ikan Tuna Raya Barat, Pelabuhan Benoa, Denpasar. Phone: +62-361-724246. Fax: +62-361-721159. Products: fresh and frozen tuna (steak, loin, whole, gutted). Capacity: 25 tons/day. Market: USA, EU. South Sulawesi – PT Bogatama Marinusa. Integrated aquaculture company. Address: Jl. Kima Raya 2, No. N-6. Kawasan Industri Makassar. Phone: +62-411-513378, Fax: +62-411-513373. Products: Value- added shrimp products. Capacity: 20 tons/day. Market: EU, USA. Japan. – PT Mitra Kartika Sejati. Integrated Shrimp Farming. Address: Jl Teuku Umar 40 Ujung Pandang. Phone: +62-411-525430. Fax: +62-411-514515. Products: Frozen shrimps. Capacity: 20 tons/day.Almost all companies given in the above list are led and managed by western graduates. They are oftensecond generation owners that get into the business after finishing their education. They cancommunicate easily and build friendship relationship and partnership. Hence there is no barrier in termsof communication and individual approaches for foreigners to start up their business in Indonesia.Like doing business in many other countries, uses of advance tools of communication such as internet,email, skype, and fax, and telephone are common practice in Indonesia. Once partners share theiridentities to public, then it means that they can be freely contacted. However, these methods of indirectmeeting sometimes less effective than face-to-face contacts. Especially with unknown potentialpartners, the face-to-face meeting is quite important. Therefore, indirect meeting should be followed upby face-to-face meeting.When the face-to-face meeting should be done? Many Indonesian businessmen now receive and invitetheir business partners to meet, not necessarily in the office, but in common meeting place such inhotels and restaurants. However, foreign business partners who visit the office of their Indonesianpartners will be very much appreciated. After all, Indonesian like to host their guests and visitors andtraditionally treat the guests honorably more than they do to their own family members. When businessmeetings are done in restaurants, please be advised that some of Indonesian businessmen do not drinkalcohol and eat pork. At a luncheon or dinner meeting, different choice of meals is not a problem forIndonesian businessmen. 22
  23. 23. 3. The main suppliers of sustainable solutions todayIndonesia is an open country to all people around the world. The government actively promotes andinvites hungry investors to avail themselves of marvelous business opportunities in Indonesia. Manybusiness people have shown their eagerness and earnestness to do business in Indonesia. The trend offoreign investment in Indonesia continuously rises. Since the last five years, when Indonesia has beencredited as a G-20 member, more influx of foreign investors has come to Indonesia. Now Indonesia isthe 16th largest of the world economy and has been predicted to be the 7th largest by 2030. Surely, thisstate will attract more investors to plow up their money in Indonesian economy.In the fishery and aquaculture, most of the investors are from the Asian countries and only a few fromEurope. Taiwanese businessmen choose tuna long line fisheries as a main business. They dominate thisbusiness line both in Jakarta and Denpasar bases. Taiwanese small-size businessmen were the ones whointroduced and developed high-value added fish products in Indonesia back in the early 1990s.Afterwards, the products are widely produced and easily accepted by consumers. Taiwanesebusinessmen also initiated intensive shrimp farming in Indonesia, starting from South Sulawesi andfurther went other provinces.The investors in Thailand and Korea invested in integrated fishing, especially in shrimp, ribbon fish, anddemersal (ground) fish. They send their products mostly to their own country markets. The Japanesecompanies were the ones pioneering shrimp catch in Indonesia, beginning in late 1960s, as an earlyresponse of the Indonesia new regulation on foreign direct investment. Now Japanese investors do notonly develop their ventures in the common species like shrimp and tuna but also in aquaculture ofmarine eel. There is a Japanese company, the Nissui Group, that has successfully maintained the onlyleft tiger shrimp farming in Indonesia, located in Seram Island. Other tiger shrimp farming companieswere closed because of being shoved out by the appearance and raising of vannamei shrimp.The world largest shrimp farming company, a joint venture between Indonesia and Thailand, is locatedin Lampung Sumatera. The company now diversifies products, moving from only producing raw frozenshrimp into value added products. They also diversify business line to upstream of aquaculture byproducing shrimp fry and feed.Some companies from Singaporean companies invested in ornamental fish culture, especially in arwana(giant goldfish) in Kalimantan. Likewise, the Philippines companies invested in integrated tuna fishing,including canned tuna industry, in Manado, North Sulawesi.In the field of fish processing, beside integrated Japanese and Korean companies, most of this businessline is undertaken by Indonesian private companies. They collect fish from small-scale producers andtraders as well as operate their own boats or farms.Aside from private initiated cooperation, there is cooperation that is promoted by the government.Though they are government initiatives, at the end public or private are involved and derived benefitstherein. Below are the tables showing some of the cooperation that still works effectively. 23
  24. 24. Table 4. Indonesia International Bilateral Cooperation in Fisheries and AquacultureNo Country / Institution Remarks Sustainable coastal fishery resource management project, in1 Sweden Indramayu and Pekalongan Cities. Management of red snapper stock in Arafura Sea, Management of2 Australia MOU Box, Joint Research on Tuna3 Japan (JICA) Active cooperation in various projects France (SMCDP = Support to Marine4 SMCDP, at BBL Batam Culture Development Project)5 Australia (ACIAR) Active cooperation in various projects6 Cambodia, Malaysia Active cooperation7 Philippines, Vietnam, Thailand, PRC Active cooperation based on MOU8 Sudan, Samoa, Tonga Joint cooperation with Ministry of Foreign Affairs IJ-EPA (Indonesian-Japan Economic Reduction of tariffs on Indonesian products sent to Japanese market.9 Partnership Agreement Capacity building for small-scale enterprises (SMEs). Technical Assistance from Indonesia to Algeria in the aspects of10 Algeria shrimp and tilapia cultures. Focus on environmental and social responsibility for sustainable11 Chile aquaculture. Diplomatic efforts for dumping, bioterrorism act, turtle excluder12 USA device (TED), Country of Origin Labeling (COOL), and others13 Spain Fisheries training and development in Indonesia. JBIC (Japan Bank for International14 Jakarta Fishing Port, Rehabilitation and Improvement. Cooperation)Table 5. Indonesia International Multilateral Cooperation in Fisheries and AquacultureNo Country / Institution Remarks1 IOTC (Indian Ocean Tuna Commission) Full Member CCSBT (Commission for the Conservation of the2 Full Member Bluefin Tuna) WCPFC (West and Central Pacific Fisheries3 Cooperating non-member Commission) The Regional Plan of Action to promote responsible4 Australia- ASEAN fishing practices including combating IUU fishing in the region. SAFVER (Sustainable Aquaculture Development for Food Security and Poverty Reduction Project).5 ADB (Asian Development Bank) CTI-CFF (Coral Triangle Initiative on Coral Reefs, Fisheries, and Food Security). BIMP-EAGA (Brunei, Indonesia, Malaysia, and the6 Active cooperation Philippines, East-Asean Growth Area)7 FAO, UNEP, GEF (Global Environmental Facilities) Active cooperation, Technical assistance Project.8 APFC (Asia Pacific Fisheries Commission) Active cooperation9 Indonesia- The Netherland-Malaysia Trilateral partnership for shrimp product safeguarding NACA (Network on Aquaculture Center in Asia10 Pacific), SEAFDEC (Southeast Asian Fisheries Full Member Development Center) 24
  25. 25. 4. The economical situation of the Indonesian Seafood SectorFrom economic perspective, there are three main targets of the Indonesian seafood sector, those are:(1) providing fish to low-income people, (2) increasing national fish consumption, especially forinhabitants of Java Island, and (3) earning more foreign exchange through increased exports of fisheriesproducts.By end of the year 2015, local fish production from aquaculture is expected to increase and provide fishfor low-income people. This target is in connection with the national food security program wherebylocal income group are encouraged to make and produce their own food. Under this program,government provides technical assistance and cash transfer to household producers so they can startbuilding their food system. The program named Rural Fisheries Empowerment (PUMP). About Rp 500billion were allocated for this program on 2011 and 2012. There will be more allocation of thegovernment budget for this purpose in the years to come.Fish consumption is targeted at 40 kg per capita by the year 2015. The 2011’s per capita consumptionwas 38.67 kg. Increasing just 2 kg per capita for a population of 240 million, will bring about a substantialimpact on the production system. This increase in average consumption will additionally require about0.5 million tons of fish. The total amount of fish needed to realize this target is about 10 million tons(equivalent fresh fish).This consumption target will be hardly achieved, unless more lowly-priced fish can be provided. Theresults of the 2010’s SUSENAS (survey of the national social economic) indicated that consumption inrural area was higher than in urban areas. The higher per capita income of the population, the more fishwere consumed. This trend occurred both in rural and urban areas. The higher consumption of ruralareas indicated that they might not have other substitutions. While in the urban, people could have fishsubstitutes, leading relatively low fish consumption. Nevertheless, this consumption pattern can bepositively interpreted that there will be more room of opportunities to increase fish consumption inurban areas. At the same time, seafood business in the urban area will have brighter prospect todevelop. Indeed, it needs campaign, promotion, extension, and education for people to choose and eatfish. Table 6. Per Capita Fish Consumption (in kg) Based on The National Social Economic Survey Monthly Urban+ Expenditure Urban Area Rural Area Rural Area <100 0 9.40 940 100-149 8.90 16.09 14.70 150-199 13.03 17.87 16.63 200-299 17.52 23.21 21.22 300-499 24.24 30.37 27.48 500-749 29.12 38.73 33.36 750-999 34.67 44.50 38.06 >1.000 36.28 49.48 38.91 25
  26. 26. The consumption by provinces is given Table 7. Lower fish occurred in densely populated Java islands,while higher consumption happened in eastern part of Indonesia. As Java is more urbanite andeconomically developed than outer Java, hence more fish should be provided in Java to acceleratedemand for and consumption of fish in Java. Table 7. Fish Consumption by Provinces (Kg/capita), 2011 MONTHLY EXPENDITURE (Rp 1.000) Provinces < 100 - 150 - 200 - 300 - 500 - 750 - > 1000 100 149 199 299 499 749 999 Average Aceh 0.00 21.59 20.52 27.34 33.01 41.57 47.55 50.31 36.31 North Sumatera 4.11 10.68 21.51 26.73 33.11 39.63 43.13 40.32 34.24 West Sumatera 0.00 12.21 11.37 15.28 20.36 27.13 24.25 28.97 22.77 Riau 0.00 23.33 19.52 21.33 26.55 31.04 33.90 38.61 30.48 Riau Islands 0.00 6.00 12.16 25.06 27.39 31.99 34.52 37.33 32.93 Jambi 0.00 27.03 20.21 19.44 24.86 28.82 28.56 31.78 25.73 South Sumatera 6.21 10.60 13.13 16.91 22.13 27.08 30.33 34.26 22.92 Bangka Belitung 0.00 0.00 17.78 17.43 26.39 33.11 38.04 38.33 32.19 Bengkulu 0.00 4.11 10.09 15.46 20.98 25.65 30.07 29.71 21.33 Lampung 8.89 4.60 8.18 12.19 17.76 21.97 22.36 23.81 16.76 Jakarta 0.00 0.00 0.00 6.39 11.55 12.98 21.36 21.28 17.60 West Java 1.53 10.42 9.71 11.88 14.10 17.73 20.31 23.25 15.74 Banten 0.00 8.74 11.11 14.41 17.45 21.56 24.09 28.59 20.24 Central Java 3.17 4.91 6.18 8.02 10.91 13.34 13.06 14.33 10.07 Yogyakarta 0.00 0.33 1.10 2.50 3.63 7.28 9.50 9.81 5.37 East Java 3.68 8.97 10.17 13.67 17.09 18.19 21.05 20.52 16.05 Bali 0.00 2.30 7.49 9.84 10.81 14.03 16.25 15.10 12.90 West NT 4.04 11.73 11.91 15.61 22.36 28.44 30.74 33.11 20.95 East NT 0.69 4.01 8.30 12.11 18.11 25.60 36.59 42.92 16.30 West Kalimantan 0.00 12.55 17.25 24.81 27.67 33.01 34.36 32.40 28.31 Central Kalimantan 0.00 14.95 23.63 28.39 29.33 32.93 36.79 44.64 33.09 South Kalimantan 0.00 20.98 22.20 24.89 30.07 32.04 34.19 34.42 30.94 East Kalimantan 0.00 0.00 15.76 23.22 25.27 30.58 32.81 35.69 30.51 North Sulawesi 0.00 9.10 18.17 26.83 35.00 35.39 41.88 39.47 33.65 Gorontalo 10.81 18.75 23.66 25.29 33.90 40.80 41.49 40.60 31.27 Central Sulawesi 4.14 9.61 16.28 19.44 26.47 34.13 44.12 40.91 28.23 South Sulawesi 21.26 20.03 27.39 34.26 40.39 44.35 53.94 50.28 38.99 West Sulawesi 0.00 11.11 22.87 33.06 44.81 59.53 53.20 71.82 39.12 Southeast Sulawesi 11.93 25.14 31.20 36.20 40.04 49.87 45.71 53.17 40.01 Maluku 24.07 20.44 24.53 33.50 38.99 50.08 58.23 55.34 41.47 North Maluku 0.00 24.32 22.51 31.32 39.27 40.22 48.57 44.15 38.17 Papua 14.84 23.38 12.70 11.34 15.15 25.68 33.24 44.48 21.62 West Papua 0.00 4.24 19.57 23.33 31.07 32.88 40.80 46.76 33.78 26
  27. 27. In addition to campaign programs, other action programs to increase domestic fish consumption are asfollow:– Increase production volume by fish products more preferred by consumers– Improve distribution network by providing investment credit and working capital to fish traders.– Develop national fish distribution system.– Develop mobile marketing (mobile hawkers) that can move speedily from one to another areas.– Improve product branding of small-scale enterprise.– Involve mass organization, especially woman group in fish consumption campaign.Type of products consumed is dominated by traditional processed products such as pindang and saltedfish. Indeed, if raw fresh or frozen fish are available, some consumers especially those in the cities preferthese products to processed ones. Hence attempts to supply the market with fresh or frozen fish shouldbe taken into consideration. This may become a lucrative business.In 2010, about 4.2 million tons of processed products were produced for the Indonesian domesticmarkets. They were produced by about 500 processing establishments and about 150,000 small-size fishprocessors. Number of pindang processors were somewhat more than 82,000 units all over Indonesia.About 75% of them were in Java. If large scale (industrial scale) establishments apparently focus onexport markets, the small-size and individual fish processors concentrate their business for domesticmarker. Recently, some small-scale processors upgraded their business practices in order to expand tointernational market.Indonesian seafood export reached US$ 3.8 billion in 2011 and is expected to meet US$ 5 billion in 2014.The market share of Indonesia seafood products were 30.40 for the USA, followed by Japan (22.89%),EU (13.06%) and China (6.28%). The china export market emerged recently as an important destination.Its share tends to increase every year. Indonesia was successfully diversified its seafood export marketto South America, East Europe, Russia, Africa, and the Middle East. Indonesian canned tuna are nowexported to more than 20 African countries. Some products are now sent to South American regions inreplace of fishmeal imported for poultry and aquaculture feed. Table 8. Market Share of the 2011 Indonesian Seafood Export Value Countries Value $ 1,000 Share (%) Japan 806,060 22.89 USA 1,070,484 30.40 EU 459,923 13.06 China 220,998 6.28 Others 963,626 27.37 TOTAL 3,521,091 100.00Table 9 portrays Indonesian main export commodities. Shrimps constituted about 37% of the 2011export value, followed by tuna (14.16%) and crabs (7.45%). The table also indicates that there manyexported items that have smaller sharing that are grouped as other fish. For instance, Indonesia exportshuge amount of seaweed, sea cucumbers, ornamental (aquarium) fish, squids, and snails. Sharing ofeach product however was less than 4%. 27
  28. 28. Table 9. Shares of Indonesian Export Product, 2011 Products Value $1,000 Share (%) Shrimp 1,309,674 37.20 Tuna 498,591 14.16 Other fish 1,075,401 30.54 Crabs 262,321 7.45 Others 375,105 10.65 TOTAL 3,521,092 100.00Detail government action programs to meet the export target are as follow: – Develop high competitive products according to quality requirements demanded by the importing countries – Diversify products and reroute the markets – Improve capacity of processing firms, both industrial scale and small-size firms – Develop bilateral and multilateral cooperation as an attempt to reduce import tariffs imposed by the importing countries – Maintain and expand USA, Japan, and EU markets that traditionally have been accessed – Extend and penetrate new markets, especially in China, Korea, Middle East and AfricaTo expedite and expand seafood industry, the government now is promoting and implementingindustrialization program. In a narrow way, industrialization means to develop processing industry inorder to result in more value-added products. For this program, government targets to raise investmentby Rp 1.5 trillion each year till 2015. The government also provides technical assistance and direct cashto empower small-scale seafood processors so that they can improve their products. Increasedproduction of value-added products are set to attain by undertaking the following action programs: – Supply of raw materials from aquaculture – Implementation on national logistic system on fish, in accordance with the overall national logistic development – Development of nationwide Cold-Chain-System (CCS) – Quality improvement that focus on large-scale processing firms – Increasing utilization of existing capacity of the processing firms – Revitalization of idle processing firms – Expansion and increasing number of processing firms in the needed areas 5. Learning from each otherIndonesia and Norway have different fish species that live in their respective water ecosystems. Fishliving in Indonesian waters are tropical species, while they are cold waters species in the Norway.Consequently, technologies used in each country are different in their application and apparentlydifficult to exchange. Technologies successfully invented and applied in Norway are not guaranteed tofruitfully being used in Indonesia. Contrarily, the ones widely practiced in Indonesia may not beautomatically accepted in Norway. It needs certain adjustment to transfer and exchange technologies 28
  29. 29. and innovations owned and mastered by each country. The innovation exchanges that may be moreeasily done if they are dealing with processing industry and marketing. The processing technologies,methods, and practices developed in one country can be transferred and applied in the other countrywithout significant adjustment.With that limitation, what can be offered by Indonesia in order to enhance innovation in Norwegiansupply and seafood sector are probably confined to the following items: Fishing gear technologies that can be categorized as “selective fishing gears” that selectively catch only certain sizes of fish and therefore leaving other fish to be uncaught. These so-called “selective gears” obviously will give less pressure to fish resources and hence guarantee the sustainability of the resources. Indonesian fishers and fishing companies have experience in operating these gears and this can be shared with their Norwegian partners. One of the technologies is hand-line fishing that is operated by individual fisher or several fishers in a small group, using smaller size boats to capture high price fishes such as tuna, skipjack, marlin, sailfish, groupers, and snappers. Another technology is pole and line fishing that is operated by several fishers (anglers) altogether in one boat. This pole and line fishing is normally used to catch tuna (and tuna like species). It is a high selectivity fishing method and therefore recommended to be developed in replace of many other unselective gears. Price of fish caught by pole and lining fishing is valued higher than those caught by other gears. The use of pole and line in Norwegian waters, however, should be preceded by research on its applicability. In aquaculture, Indonesia may offer the backyard-hatchery multispecies technology. The backyard refers to small-scale hatchery that is built up in small parcel of land. It is capital-saving and can employ 2 or 3 peoples. In the last 15 years, Indonesia has successfully developed this technology to result in milkfish and shrimp fries. The fries are not only used for domestic aquaculture but also exported to other countries. Now more than 50% import milkfish fries market of the Philippines are supplied by the Indonesian backyard hatcheries. This technology may be applied to other marine or freshwaters species to increase availability and supply of fries to fish cultivators. The multi-level cage culture technology can also be offered to develop Norwegian aquaculture. The multi-level cages are the ones comprising two or three storey cages. Each storey is for different species. The upper storey cage is normally for smaller size fish, the bottom storey is for the bigger size fish. The fishes can be harvested at different time. This technology saves the use of feeds. The fish that are intentionally fed are in the upper storey only. The ones in the middle or bottom storey are not willfully fed. Various value-added products have been successfully developed by Indonesia private companies that are ended in European market. Some processing companies even can produce more than 50 different products that use local ingredients. Many products are mixed with tropical fruits like coconuts and pineapples. For instance, there is a product named coconut-coated shrimp, that is shrimp bandaged with young coconut meat. 29
  30. 30. 6. National policies enhancing trans-national cooperation (B2B and B2R)The government has established an Investment Policy Reform Initiative having its objective is toencourage and facilitate private sector investment through reform and implementation of transparent,predictable, market oriented policies applied equally to both foreign and domestic investors. TheGovernment has recently adopted major policy changes, including liberalizing the rules for foreigninvestment. The Government is committed to the rapid elimination of the remaining restriction onforeign and local private investment. The Government is fully committed to these policies and will takethe necessary steps to ensure their effective implementation.Investors shall be permitted to invest in any sector of the economy except in a small number ofactivities, which are listed on "Negative List". There shall be no restriction on the size of the investment,the source of funds or whether the products are destined for export or for the domestic market. Existingforeign investors may invest in activities other than those initially authorized, except for activities statedon "Negative List".Industrial licenses are still needed based on the principles of fairness, simple, quick and transparentmechanism and procedure. Procedures for company formation are to be administered so as to permitprompt establishment of business enterprises.The Government is committed to enhance the countrys investment climate and internationalcompetitiveness by further reducing and simplifying taxes and duties through ongoing tax and tradepolicy reform programs. The current Indonesia tax law provides tax incentive to investor who invest incertain sectors and or certain areas as follows:  Investment Allowances  Accelerated depreciation and amortization  Expanded loss compensation but not more than 10 years  10% tax rate for dividend paid to foreign taxpayer, except to prevail tax convention maintaining lower tax rateIndonesia always tries to maintain equal treatment in tax law not only for taxpayers but also for taxcases that have similarities. By giving tax incentive to investors, Indonesia must assure that this incentivegranted still reflect the principle of equal treatment and the application of that principle did not departfrom the objective of tax incentive.The Government will continue to ensure, according to pre-set criteria and procedures, that foreignexchange for import transactions and dividend payments is freely available and the Government iscommitted to ensuring the ease of repatriation of capital and payments for business services.Within the framework of the labor laws of Indonesia, the Government recognizes that enterprises mayrequire foreign expertise. Accordingly, it will continue to make residence permits readily availableaccording to prevailing regulation for key personnel required for employment in such enterprises.The Government recognizes the importance of infrastructure to support investment and is committed tomake available adequate infrastructure such as transport, electricity, water and communications 30