agriculture investment in indonesia

The New Leaf of Agriculture Investment in Indonesia

  • InCorp Editorial Team
  • 5 December 2024
  • 6 minutes reading time

Indonesia is a land of abundance, widely regarded as one of the world’s leading agricultural nations. Its diverse agriculture investment sector contributes significantly to the economy by producing essential food crops, horticultural products, and plantation commodities. These outputs feed the nation and are key export products driving foreign revenue.

With more than 60% of its population engaged in agriculture, the sector holds immense potential for investments that can empower communities, enhance sustainability, and ensure economic growth.

Prominent expert Dr. Andi Nuhung Iskandar highlights the importance of focusing on agricultural workers to drive national development. Through investments, Indonesia’s agriculture can produce globally competitive products while fostering community empowerment.

Understanding Indonesia’s Agriculture Sectors

Indonesia’s agriculture sector is multifaceted, encompassing a wide array of sub-industries:

  • Food Crops: Staple crops such as rice, corn, and soybeans form the backbone of domestic food security.
  • Horticulture: Fruits, vegetables, and spices such as nutmeg, cloves, and cinnamon cater to local and international markets.
  • Plantations: Cash crops like palm oil, coffee, cocoa, and rubber dominate the export market.
  • Fisheries: Indonesia’s extensive coastline makes fisheries a vital part of its agricultural landscape, supporting small-scale and industrial operations.

Why are Plantations a Key Driver?

Plantation crops like palm oil and coffee are central to Indonesia’s export economy, contributing billions annually. Specialty varieties like Arabica Gayo 3 have placed Indonesia on the global map, attracting premium buyers seeking quality and sustainability.

Which Agriculture is Most Profitable?

Indonesia boasts several highly profitable agriculture investments, including:

  • Coffee: Specialty coffee varieties like Toraja, Mandailing, and Arabica Gayo enjoy strong global demand, and exports to premium markets are increasing.
  • Palm Oil: As the world’s largest producer, Indonesia’s palm oil sector continues to yield substantial profits.
  • Cocoa: The rising popularity of chocolate globally has boosted cocoa’s profitability.
  • Organic Produce: Fruits, vegetables, and spices grown organically fetch higher prices in both local and export markets
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Benefits of Investing in Agriculture

Investing in agriculture in Indonesia provides both financial returns and socio-economic benefits:

  • Agriculture is a resilient sector, providing steady returns even during economic downturns.
  • Over 60% of Indonesians rely on agriculture, and investments directly create jobs and boost rural economies.
  • Investments can align with global environmental goals, especially in organic and sustainable farming practices.
  • Coffee, palm oil, and spices enjoy global demand.

Why Should You Invest in Indonesia’s Agriculture

Indonesia’s government has implemented policies to modernize agriculture, including:

  • Subsidies for seeds and fertilizers.
  • Tax benefits for agricultural businesses.
  • Development of rural infrastructure to enhance connectivity and logistics.

The Forecast of Indonesia’s Agriculture Sector

Indonesia’s agriculture sector shows promising growth, driven by increasing global demand and domestic improvements. These include:

Specialty Coffee

The specialty coffee segment is projected to grow at an annual rate of 6-8%, driven by demand in North America and Europe. The Arabica Gayo 3 variety stands out for its high quality, earning praise from international markets and boosting Indonesia’s reputation in the premium coffee space.

Specialty coffee markets are thriving, with Indonesian coffee exports generating USD 19.5 million at Boston’s 2023 Specialty Coffee Expo. Regions like Gayo, Mandailing, and Toraja produce sought-after varieties, making coffee a major driver of agricultural investment and economic growth.

Sustainability is also vital to coffee farming. Eco-friendly practices not only increase yields but also help farmers meet the standards of premium markets. These efforts secure stable incomes for farmers while appealing to environmentally conscious buyers.

Palm Oil Export

Indonesia remains the world’s largest producer and exporter of palm oil, a cornerstone of its agricultural economy. Despite challenges from sustainability concerns, demand for palm oil is expected to remain strong, driven by its diverse applications in food, cosmetics, and biofuels.

Investments in sustainable palm oil production are increasingly important. Certification programs such as RSPO (Roundtable on Sustainable Palm Oil) are helping producers align with global sustainability standards, ensuring long-term viability and market access.

As a result, palm oil continues to attract significant foreign direct investment (FDI) and remains a vital contributor to Indonesia’s GDP.

The Growing Aquaculture

Indonesia’s vast coastline and abundant marine resources make aquaculture a growing segment of the agricultural sector. Innovations in eco-friendly aquaculture techniques boost fish and seafood production, catering to domestic and export markets.

Popular products include shrimp, tuna, and seaweed, which are in high demand globally. Investments in aquaculture are focused on sustainable practices, including improved water management and reduced environmental impacts. This ensures long-term growth while meeting international market standards.

Agriculture Digitization

Technology is transforming Indonesia’s agriculture, improving productivity and efficiency. Precision farming tools like drones and GPS help farmers monitor crops and soil conditions, reducing waste and boosting yields.

Blockchain technology makes the supply chain more transparent, building trust with global buyers by verifying the origins and processes of agricultural products.

Mobile platforms connect farmers directly with buyers, eliminating mediators and ensuring fairer prices. These digital tools make Indonesia’s agriculture more innovative, competitive, and ready for the future.

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Investment and Government Support in Modernizing Agriculture

Foreign companies are permitted to set up in Indonesia, specifically in agriculture. The relaxation of regulations should be utilized to provide added value to the agricultural sector and the people who benefit from the business. The inflow of investments would also help make the agriculture sector resilient and sustainable.

Government support also allows for more job opportunities, knowledge, and access to technology. However, the development is only possible with the transfer and help of technology and expertise.

Alongside the investment inflow, the Indonesian government and relevant stakeholders must ensure a transfer, as mentioned above. This is done to support the modernization of farmers, increase productivity, and improve quality. A certification process could improve the quality of commodities, opening the door for export.

Agriculture investment is required to increase added value when the sector is still a labor-intensive industry yielding relatively low productivity. The role of investment is also of the utmost importance due to factors like climate change, which effectively threatens the sustainability of the agricultural sector.

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Start Investing in the Agricultural Sector with InCorp

Indonesia’s agriculture sector is a beacon of opportunity, offering high returns, socio-economic benefits, and alignment with global sustainability goals.

With abundant natural resources, government support, and a growing emphasis on technology, investing in Indonesian agriculture is both profitable and impactful.

Navigating the regulatory and logistical challenges of investing in Indonesia can be daunting. That’s where we come in with:

Fill out the form below and make the most of Indonesia’s thriving agriculture sector.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

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Frequent Asked Questions

You can transfer the license as long as your current local distributor agrees to change the product license holder. The procedure will be different for each product category. We can only recommend you try to prevent these issues by setting cooperation with a trustworthy partner from the beginning

Before you can distribute your products in Indonesia, you will have to register your product with the BPOM (National Agency of Food and Drugs) and MoH (Ministry of Health). Only an Indonesian legal entity can register the product. If you decide to distribute your product via a local distributor, they will register the product under their entity in Indonesia and become the product license holder. Cekindo can act as your local distributor and register the product under its name.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.