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Jakarta Post

Indonesia’s horticultural products more expensive than neighbors, says Japan’s Nanyang

  • Mardika Parama

    The Jakarta Post

Jakarta   /   Thu, July 23, 2020   /   08:26 am
Indonesia’s horticultural products more expensive than neighbors, says Japan’s Nanyang A farmer tends to hydroponic crops in Semarang, Central Java, in this undated file photo. (Antara/Aditya Pradana Putra)

Indonesia’s exports of horticultural products such as fruit, vegetables and spices to Japan remain uncompetitive because of high prices, officials have said.

Japanese food products importer Nanyang Trading Co.’s president Katsunari Kasugai on Tuesday said that Indonesian frozen horticultural product prices were 40 percent higher than those from neighboring countries like Thailand and Vietnam, because of high production costs and small production scale.

“I believe Indonesian exports [of frozen fruit and vegetables] could increase if we could push down the production costs, as [Indonesian products] are more reliable and are of better quality than products from Thailand and Vietnam,” Kasugai said during an online discussion held by The Indonesian Trade Promotion Center (ITPC) Osaka.

Indonesia has been struggling to capture a larger horticultural market share in Japan despite having a bilateral trade deal in the form of the Indonesia-Japan Economic Partnership Agreement (IJEPA), which exempts fruit products including bananas and pineapples from tariffs, within determined quotas.

Indonesia exported US$30 million worth of horticultural products to Japan in 2019, accounting for only 0.46 percent of Japan’s $5.79 billion horticultural product imports, according to Indonesia’s Trade Ministry data.

The largest supplier of horticultural products to Japan is China with 27.2 percent of the import market share, or around $1.58 billion worth of products, followed by the Philippines with $920 million and the US with $680 million.

While the market share of Indonesian horticultural products remains low, it has the potential to grow amid rising numbers of migrant workers in Japan who are the main consumers of the products, according to Kasugai.

“Indonesian green peppers are usually marketed toward Southeast Asian migrants, while banana blossoms are widely consumed by migrants from the Philippines and South America,” he said.

However, Kasugai fears that demand for frozen food and horticultural products will flatline over the next years, as the COVID-19 pandemic batters Japan’s economy and sends foreign workers back to their home countries following waves of layoffs.

“I think there will be no import growth for frozen food products in the next two to three years because of the pandemic. Currently, we are focusing on maintaining our current import rates rather than increasing them,” he said.

Japan’s economy may contract by 4.7 percent in the year to March 2021, according to a Bank of Japan projection on July 15 as quoted by AFP. The contraction would be Japan’s worst economic result since the global economic recession in 2008.

Some firms in Japan have reduced their workforce by laying off non-regular workers to cope with the deteriorating business conditions, Japan Center for Economic Research (JCER) senior research fellow Jun Saito wrote in an analysis in June.

“The [workforce] reduction is currently taking place only among non-regular workers. Regular workers, on the other hand, are still kept on owing to the lifetime employment system,” the analysis reads.

The number of non-regular workers dropped by almost 100,000 in April compared with the same period last year, according to JCER data. Simultaneously, the number of new job offers for part-time and regular workers in April dropped by around 30 percent year-on-year.

Despite the oncoming challenges of recession, the Indonesian Embassy in Tokyo’s trade attaché Arif Wibisono said that Japan’s market remained crucial for Indonesian products as the country served as a hub for other countries.

“If you can get your product into Japan’s market, it is easier to market your product in other countries as it already meets Japan’s high standards,” he said during the discussion.

Arif said the government was also vying to ensure better market access for Indonesian products by negotiating trade barriers and quotas between the two countries, including those stipulated under the IJEPA.