Vietnam investors ‘bullish’ on Indonesia

09:27 | 21/05/2015 Economy

Indonesia – a kaleidoscope of culture and lifestyles – is now emerging as Southeast Asia’s largest economy creating many bright spots for Vietnamese investors in the fast moving consumer goods (FMCG) sector.

Vietnam investors ‘bullish’ on Indonesia

At a recent seminar held in HCM City addressing Indonesia’s integration into ASEAN, leading economists underscored the fact that its 253 million strong population and rising personal incomes are lifting millions into the middle class every year.

The FMCG sector they said represents the first items consumers in emerging markets spend more money on as their disposable incomes rise.

The sector includes products for which Vietnam businesses have strengths—such as fish, seafood, meat, poultry, rice, fruits, vegetables, dairy products, baked goods, alcohol, pre-packaged foods and soft drinks.

Ho Xuan Lam, deputy director of the International Trade Promotion Centre (ITPC) stressed that currently the Indonesian government has removed the import quota and duties on 38 different fruits and vegetables.

Both nations have been working collaboratively over recent times to enhance trade and investment Lam said and this May 15 the Vietnam Embassy in Indonesia is organizing a forum to promote agricultural exports.

Lam underscored the point that building strong brands is vital for Vietnam businesses seeking to gain a foothold in the market as Indonesian consumers are quite finicky and seem to attach more importance to brands than other nations in the region.

Donna Gultom, director of ASEAN Cooperation under Indonesia’s Ministry of Trade said Vietnamese businesses should thoroughly master the market regulations and insure they prepare export permits and provide a Certificate of Origin (CO) for their products.

She said businesses should also be sure to label their products in the Indonesian language and be cognizant of the fact that strict compliance with labelling on packaged foods and beverages is mandatory.

Nguyen Anh Ngoc, vice president of Vietnam-Indonesia Friendship Association in HCM City, said a local presence or cooperation with Indonesian firms is highly recommended and can help marketing efforts.

In particular Ngoc said it can help the Vietnamese business customize its product and adopt marketing campaigns that resonate with Indonesian shoppers and create a strong brand attachment.

While the Island of Java remains the heartland of commerce and retail, ample potential is waiting to be unlocked across the Indonesian archipelago. Second-tier cities such as Medan in North Sumatra or Makassar in South Sulawesi have witnessed a strong increase in business activity over the past several years.

The urbanization movement in Indonesia has also tended to promote new lifestyles, creating demand for products consumers may previously have considered unnecessary. This is a trend that is buoying sales of personal care products across Indonesia’s perse consumer market.

The fact that urban families tend to have fewer children leaves more disposable income to be spent on non-essentials such as beauty products or even higher quality foodstuffs and parents normally spend more per child.

This has created a vast array of bright prospects for Vietnamese businesses selling premium-brand baby and childcare products to boost exports to Indonesia, a country with Asia’s second highest birth rate.

One FMCG category set to benefit from changing Indonesian lifestyles is infant formula milk which has seen sales increase by 9% per annum (Reuters). As more women in city environments are formally employed, they are finding it harder to maintain a breast-feeding regime and are therefore more ready to opt for commercial alternatives.

Transnational as well as domestic producers are investing heavily in new dairy plants to meet swelling demand such as Nestle and Fonterra in addition to Indofood Sukses Makmur who have a prominent presence in the market.

The upcoming ASEAN Economic Community (AEC) will see increasingly tight integration of local markets in the 10-nation bloc. The AEC, which is scheduled to be fully implemented by 2016, creates a unified market for goods and services, skilled labour, trade and investment.

For Indonesia’s FMCG sector, it will bring both challenges and opportunities. A market of 600 million people has obvious allure for consumer goods makers. Imports to Indonesia are set to become easier as tariff barriers fall, standards are harmonized and the AEC aims for closer integration with global trade.

                                                                                                                                                                       Source VOV News