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RI food and beverage industry faces dollar appreciation dilemma
In a dilemma: Indonesian Food and Beverages Association (GAPMMI) deputy secretary general Stefanus Indrayana says Indonesiaâs food and beverage industry is suffering cost pressures triggered by the depreciation of the rupiah against the US dollar
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In a dilemma: Indonesian Food and Beverages Association (GAPMMI) deputy secretary general Stefanus Indrayana says Indonesiaâs food and beverage industry is suffering cost pressures triggered by the depreciation of the rupiah against the US dollar. (kompas.com) (GAPMMI) deputy secretary general Stefanus Indrayana says Indonesiaâs food and beverage industry is suffering cost pressures triggered by the depreciation of the rupiah against the US dollar. (kompas.com)
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span class="caption">In a dilemma: Indonesian Food and Beverages Association (GAPMMI) deputy secretary general Stefanus Indrayana says Indonesia's food and beverage industry is suffering cost pressures triggered by the depreciation of the rupiah against the US dollar. (kompas.com)
The depreciation of the rupiah, which has now exceeded its psychological limit of Rp 14,000 per US dollar, has led Indonesia's food and beverage industry to suffer from a dilemma, experts have said.
The weakening of the rupiah has occurred concurrently with a decline in people's purchasing power. The decline is reflected in Indonesia's slowing economic growth, which stood at only 4.7 percent in the first semester of 2015.
Indonesian Food and Beverages Association (GAPMMI) deputy secretary general Stefanus Indrayana said Indonesia's food and beverage industry is suffering cost pressures triggered by the rupiah depreciation.
'The dilemma is that it is unlikely for food and beverage producers to increase selling prices in the current condition. People's purchasing power is also under pressure,' Stefanus said as quoted by kompas.com on Thursday. He was speaking during a discussion in Jakarta on Wednesday evening.
Stefanus admitted that the fluctuating rupiah exchange rate had complicated manufacturers' business planning activities. To solve the problem, he said, business players should be more selective in choosing product components.
'Just classify imported and domestic products. If there are components that could be substituted, just substitute them. We have a high supply of domestically-produced crude palm oil, and its price is falling. For electricity sources, we could choose either gas-fueled power plants or coal-fired power plants,' said Stefanus.
He said these strategies would be quite effective in preventing production costs from soaring further. Food and beverage manufacturers would not need to increase the selling price of their products.
'If they increase the prices, consumers' purchasing power will continue to decline. This will give them more troubles,' said Stefanus.
Institute for Development of Economics and Finance executive director Enny Sri Hartati said the weakening of the rupiah had added pressure to the work performance of the industrial manufacturing sector as it typically used a lot of imported components.
The food and beverage industry is among the industries in Indonesia most affected because the industry relies on imported components, she went on to say.
'Mineral water, for example, costs around Rp 5,000 (36 US cents) per bottle whereas water as its main material costs no more than Rp 500. It is the imported bottle that makes the product much more expensive,' said Enny. (nov/ebf)
