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Restructuring of agrifood chains in Indonesia: National and local meso study report (A)

Restructuring of agrifood chains in Indonesia: National and local meso study report (A)
2007
Universitas Padjadjaran, Regoverning Markets Project published in print by Capas Padjadjaran University and online at www.regoverningmarkets.org. Copyright ©2007 IIED - all rights reserved
Bahasa Inggris
Universitas Padjadjaran, Regoverning Markets Project published in print by Capas Padjadjaran University and online at www.regoverningmarkets.org. Copyright ©2007 IIED - all rights reserved

The retail and processing ‘symbiosis’ is a key part of food market restructuring in Indonesia. The rapid growth of the supermarket sector was triggered by the removal of the Foreign Direct Investment (FDI) restriction in 1998 and complemented by the growth of the urban population and investment in property. The fresh fruit and vegetable sales (FFV) share in supermarket sales increase very rapidly in a short time, and a very high proportion of those fresh fruit and vegetable sales are of imported produce – at least double to triple the imports share in supermarket fresh fruit and vegetable sales in comparable developing countries. The leading supermarket chains have moved very early on to the use of supply channels other than the traditional wholesale markets. They increasingly source local vegetables via new-generation specialized wholesalers dedicated to the modern market and grower/packer/shippers using outgrower schemes. The reason behind this early move by the supermarket sector to new commercial agents outside the traditional wholesale markets was the poor quality and efficiency of the main wholesale market system. Food industry development has also been very consistent with the retail market restructuring. In 1995, food stuffs – whether fresh or processed – were nearly all sold via small shops and wet markets. By 2005 most of processed foods were being sold via modern retail outlets. While supermarkets went from approximately 5 ? 30 percent of food retail sales overall from 1995 to 2005 (as was usual in all countries), the penetration was much quicker in processed foods and much slower in fresh foods. The share of fresh fruit and vegetables sold via modern retail outlets is low, less than 10 percent. Hence the effect of market restructuring is expected to be via a chain process of retail, affecting processing which in turn affects farmers, rather than the (expected slight) effect of retail directly on farmers.

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