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2011

Agribusiness Update

Beef Cattle Industry at a glance


Based on the data of
livestock type
production, beef cattle
contribution was about
16-19% of overall meat
production in the
country. Beef cattle is
the second largest
source of meat after
the broiler.

O ver view
in eight provinces that have
potential with a population
of 75-778 thousand heads
and a population growth of
2.8 to 6.5%. The rearing of
this species can be found in
East Java, Central Java and
Lampung. The other breeds
of cattle are Aceh from NAD,
Coastal cattle in West
Sumatra, Madura Cattle
from Madura Island, Sumba
Ongole (SO) in Sumba, East
Nusa Tenggara Province.
The production volume of
beef cattle in Indonesia is
still far to meet the
consumers needs. The
Improvement of living
standards and society
economic levels, has
increased the demand for
meat. This is certainly an
opportunity for beef cattle
fattening business in
Indonesia. On the other
hand, the government
through the Directorate
General of Livestock Services
has launched the SelfSufficiency Program in 2014,
in an attempt to overcome
the level of local production.
Based on the data of
livestock type production,
beef cattle contribution was
about 16-19% of overall
meat production in the
country. Beef cattle is the
second largest source of
meat after the broiler.
Indonesia has three types of
beef cattle farms. First, the
beef cattle business which
can not be separated from
the mainly agricultural fields
which can be found in Java,
Sumatra and Kalimantan.
Second, the development of
beef cattle that is not

related to agricultural
businesses. These type of
business are found in less
fertile and less water areas,
high temperatures and
sparsely populated like
Sulawesi and East Nusa
Tenggara. The third one is
capital-intensive and large
scale business development,
but limited just to the calves
rearing or better known as
feedlotters.
The type of cattles that was
developed for the national
cattle industry are Bali bull,
Peranakan Ongole (PO),
Aceh, Sumba Ongole (SO),
Madura, and Coastal Cattle.
Bali cattle are scattered in
almost all provinces in
Indonesia, however, there
are 11 provinces that have
potency as a source of its
seeds with an average
population over 90,000
heads and the population
growth of 2.8 to 5.9%.
Province with a highest
population of Bali cattle are
South Sulawesi, Bali, East
Nusa Tenggara, West Nusa
Tenggara, South Sumatra,
North Sulawesi, Gorontalo,
South Kalimantan, Central
Sulawesi, West Sulawesi and
Lampung. PO cattle is found

Accordingly with the high


cattle population in East Java
and Central Java, the
number of beef cattle
industry in these two
province is the largest in
Indonesia, respectively 28%
and 11%. For the outside of
Java island, the highest
number of this industry is
located in South Sulawesi
(8%), followed by East Nusa
Tenggara (7%) and Bali (4%).
Beef production in 2009 was
recorded at 409,308 tons.
Beef production in Indonesia
is not evenly spread in all
provinces in Indonesia. Beef
production centers in
Indonesia is located in East
Java, West Java, Central
Java, Jakarta and South
Sulawesi.
Government policies that
support the development of
beef cattle farms nationwide
described through various
regulations that directly and
indirectly related with beef
cattle agribusiness, including
investment and farm layout,
business license and fees,
production and quality
control, as well as business
financing which is provided
in the Cattle Breeding
Business Credit scheme

Inside this issue:


Overview

Economic View of Beef 2


Cattle
Bali - Nusa Tenggara 3
as Economic Corridor
for Beef Cattle
Policies and Regulation

Statistics

Investment Guide

Page 2

Beef Cattle Industry at a glance

Economic View of Beef Ca ttle


Beef production in Indonesia,
including from imported feeder
cattle which is fattened in Indonesia
in 2009 was recorded at 409,308
tons. Beef production in Indonesia
is not evenly spread in all provinces.
Beef production centers in
Indonesia are located in East Java,
West Java, Central Java, Jakarta and
South Sulawesi. The spread of beef
production is influenced by the
consumer location, usually in big
cities with better slaughter house
facilities (RPH). However, since 2007
up to 2009, the growth of local
meat production supply is lower
than the consumption rate. This
deficiencies are met by importing
meat from abroad, mainly from
Australia and New Zealand.

With the assumption


of interest rates at
14.00%, it can be
concluded that the
project is quite
feasible to be
implemented.

To find whether an area can be


developed for livestock business,
especially beef cattle farm, it would
require analysis for its business carrying
capacity. Some factors which colerated
with cattle business are marketing,
production infrastructure and business
management. When all of carrying
capacity is evaluated whether it is
feasible or not, then the investment
fund can be given. Factors that
determine beef cattle farm is the cost of
feed. This is because of feed cost is the
largest component of overall production
costs.
Cattle breeding performed by the
Government is implemented through
the Technical Implementation Unit (Unit
Pelaksana Teknis/UPT). Seed production
is being organized by three UPT, namely
Livestock Embryo Center (Balai Embrio
Ternak/BET) in Cipelang, Center for
Artificial Insemination (Balai Besar
Inseminasi Buatan/BBIB) in Singosari,
and Artificial Insemination Center (Balai
Inseminasi Buatan/BIB) in Lembang,
which is supported by several local BIB.
Currently there are fourteen local BIB,
which is located in West Sumatra,
Central Java, Bali, North Sumatra, Jambi,
South Sumatra, Bengkulu, Lampung,
Yogyakarta, South Kalimantan, West
Nusa Tenggara, South Sulawesi,
Southeast Sulawesi and East Kalimantan.
Cattle breading can also performed by
private nurseries by nursery companies.
Any nursery companies should have
principle approval, business licenses and
permit of livestock expansion. The
nursery company also should have more
than 100 heads of beef cattle, the
business does not conflict with local
RUTR / RDTR regulation to avoid social
conflicts in the future, and able to carry
its operations in accordance with Good
breeding Practices (GBP).
Investment Scheme
Beef cattle fattening business outline
can be divided into small-scale or
households business ( 100 heads),
medium scale (100-500 heads) and large
-scale (>500 heads). The example of
financial analysis calculation is carried
out for medium-scale cattle fattening,
which has population of 400 heads. The
business implementation is performed
by purchasing 100 heads each month. It
require 115 days for feedlot and 5 days
for adaptation per each fattening period,

so in total it would take 120 days. Death


or mortality rate at 1 percent. The
number of workers is adjusted to the
needs of technical management during
fattening process. The feed contain 6 kg
of concentrate and 25 kg of forage for
each cattle per day, with tis feeding rate,
the increase rate of cattle body weight
would achieve 1.1 kg per day. This
enterprise development requires a total
investment cost for about Rp 1 billion for
facilities and Rp 2.35 billion to purchase
the cattle. The monthly working capital
needed is about Rp 182.54 million per
month. This effort is assumed by 100%
self funding.
The analysis results of overall project
shows that the investments can be
refunded within 40.12 months and
created net present value (NPV) of Rp
321.36 million, equivalent to internal
rate of return (IRR) of 17.90%. The
project will catch break even point after
the selling of 5.430 cattles. With the
assumption of interest rates at 14.00%,
it can be concluded that the project is
quite feasible to be implemented.
Some things should be considered for
beef cattle fattening business is as
follows:

The consumption rate of beef has a


tendency to increase, while
production, so far can not be able to
meet domestic consumption needs.

Government's policy towards the


import of beef and calfes should be
concidered, as this would have
implications for the national beef
cattle fattening business.

The development of cattle and beef


prices are likely to increase in
accordance with the increase of
community income, this show that
beef cattle business still has good
prospects.

This good prospects should also be


supported by the availability of
forege for the cattle feed.

Agribusiness Update

Page 3

Ba liNusa Tenggara as Ec onomic Corr idor for Beef Ca ttle


The main economic activities of animal
husbandry contribute approximately
16 percent to the GDP of the food and
agriculture sector for the Bali - Nusa
Tenggara Economic Corridor. Most of
the cattle population in this corridor is
consumed locally, only a small amount
is marketed to other provinces.
The type of animal husbandry with the
most potential for development in the
Bali Nusa Tenggara Economic
Corridor is beef cattle. Cattle can be
developed to produce seven types of
gold, i.e. red gold (meat), white gold
(milk), white bullion gold (bone),
yellow gold (urine), brown gold (skin),
blue gold and green gold (manure).
Cow urine can be used as organic
fertilizer, while its feces can be used as
green manure and biogas energy.
The growth of cattle population in
West Nusa Tenggara rose rapidly from
2009 until 2010 but did not grow
rapidly in Bali and East Nusa Tenggara.
In contrary, production growth in Bali
and West Nusa Tenggara decreased in
2008, with West Nusa Tenggara
experiencing a steep decline. This
production decline is due to the
rampant slaughter of productive
female cattle, cattle smuggling, as well

as reduction in the seed quality for animal


husbandry. The biggest challenges in the
development of farm activities include the
limited infrastructure that can support the
distribution of cattle products, lack of
venture capital and weak human resources
and animal husbandry institutions.
Currently, there are purification and
breeding centers in each province, which
are generally managed on an individual
basis. With the high number of house
holds involved in animal husbandry
activities, development is expected to be
able to support the acceleration of
economic development in the Bali-Nusa
Tenggara Economic Corridor in the future.
Connectivity (Infrastructure)

distribution of cattle products to other


regions, particularly to Jakarta and
Surabaya. The Marapokot seaport in
the Nagekeo Regency will be
developed to distribute animal
husbandry and fishery products;

Strengthen the Mbai Airport (also


known as Surabaya Airport II) to allow
it to transport animal husbandry and
fishery products;

Construct new power plants to


increase the availability of electricity,
especially for the region of Nusa
Tenggara;

Provision of clean water to ensure the


availability during the dry season in
Nusa Tenggara.

Infrastructure must improve connectivity


to support animal husbandry
production, which can be accomplished
through:

Provision of infrastructure to support


farming activities through Public Private
Partnership (PPP);

Strengthen roads to transport farm


products from the center of the meat
and non-meat processing industry for
distribution to the nearest local port;

Strengthen local ports to increase

The main economic activities for animal


husbandry development in the Bali Nusa
Tenggara Corridor will be focused on the
development of agri-business activities
with beef processing (animal food
industry) as the main industrial activity,
and supporting industries such as bone
flour, leather, organic fertilizer, and biogas
industries. Animal husbandry products are
not only consumed locally, but also
distributed to consumers in other regions.

Page 4

Beef Cattle Industry at a glance

Polic ies a nd Regula tion


In order to implement the development
strategy of the main economic activities
for animal husbandry, regulatory and
policy support required are as follows:

Increase downstream industries by


increasing the value-added activities,
such as diversifying products that utilize
the skin, bone, blood, faeces, and urine
through the strengthening of small
industries;

Provide protection of animal husbandry


enterprises with policy intended to
gradually reduce imports of meat and
introduce meat price control policies;

Provide ASUH (Safe, Healthy, Intact, and


Halal) quality me at;

Develop policy on sustainable ricelivestock integrated system by


optimizing the principles of Low
External Input Sustainable Agriculture
(LEISA) and zero waste approaches that

produce 4F (Food, Feed, Fertilizer &


Fuel);

Import duty holiday or reduction

Provide spatial security for farm land


and livestock grazing land;

Facilitate financing access for farmers

by strengthening the savings and loan


cooperatives;

Apply strict sanctions to those who have


been caught slaughtering of productive
female cattle.
Facilities and Incentives
For investors, there are several facilities
and incentives that can be granted to
investors pursuant to prevailing laws and
regulations, as defines below:
1. According to Law Number 25 of 2007
regarding Investment, facilities that be
given may be in form of :
Income tax reduction up to certain
level of investment made within
certain period;

for imported capital goods,


machinery, or equipment
domesticaly unavailable for
production;
Import duty holiday or reduction
for raw materials or support
materials for production within
certain period and with certain
condition;
Value added tax holiday or
postponement for imported
capital goods or machinery or
equipment domestically
unavailable for production within
certain period;
Accelerated depreciatiton or
amortization; and
Property tax reduction, especially
for certain business sectors in
certain region or area or zone.

2. According to Regulation of the


Minister of Finance No. 176/
PMK.011/2009, there is an exemption
from import duty on capital goods and
raw materials for production for 2
(two) years that can be granted to a
new company.
3. According to Government Regulation
of the Republic Indonesia number 52
of 2011 concerning second
amandement to the government
regulation number 1 of 2007
concerning income tax facility for
investment in certain business fields
and/or certain regions, the income tax
facilities that can be given may be in
form of :
net income reduction by 30%
(thirty percent) of total
investments, are charged for 6
(six) years each at 5% (five
percent) per year;
depreciation and amortization;
the imposition of income tax on
devidends paid to foreign tax
subject to 10% (ten percent) or a
lower rate according to the
Avoidance of Double Taxation
Agreement taht prevail; and
compensation for losses for more
than 5 (five) years but not more
than 10 (ten) years.

Agribusiness Update

Page 5

S ta tis tics

Cow Population by Province (thousand


heads), 2010
Source: Statistics Indonesia, 2011

Others
35%
Bali, East
Nusa
Tenggara,
West Nusa
Tenggara
14%

East
Java
28%

Aceh
5%

Central
South Java
Sulawesi 12%
6%

The highest population of cow in 2010 is in East Java. It is around 3816 thousand heads, continued by Central Java with 1616 thousand heads.
Bali, East Nusa Tenggara, and West Nusa Tenggara is another provinces with high population of cow. It is about 1965 thousand heads. Total
population of cow in Indonesia in 2010 is 13633 thousand heads.

Cow Population by Province (thousand heads),


2009-2010
Source: Statistics Indonesia, 2011
2009

2010
4530,8

3816,2
3458,9
1616,8
1525,3

East Java

773,7
729,1

Central Java South Sulawesi

701,7

4758,9

1965,8
1845,9

670
Aceh

Bali, East Nusa


Tenggara, West
Nusa Tenggara

Others

Meat Cow Production (ton),


Source: Statistics Indonesia, 2011
2009-2010

Tahun 2010

Tahun 2009

435299

409308

Beef Cattle Industry at a glance

Page 6

Investment Realization for Livestock Cattle and Buffalo (KBLI 0141) by


Foreign Direct Investment, 2007-2011 (source: BKPM, 2011)
2007

2009

2010

Project

Investment
Thousand US$

Project

Investment
Thousand US$

Project

Investment
Thousand US$

Project

Investment
Thousand US$

Sumatera

2933

6758,3

Java

Bali and Nusa Tenggara

180

Total

2933

180

6758,3

Province

2011

Investment Realization for Livestock Cattle and Buffalo (KBLI 0141) by


Domestic Direct Investment, 2006-2011 (source: BKPM, 2011)
Province

2006
Investment
Project
Million Rp

2010
Investment
Project
Million Rp

2011
Investment
Project
Million Rp

Sumatera

8096

Jawa

300

Bali and Nusa Tenggara

Kalimantan

26593,7

26593,7

Papua

72962,4

Total

26593,7

215904

The data above are for


livestock cattle and
buffalo sector (KBLI
0141). This sector
include: nursery and
farming for ox, cow, and
buffalo; milk production
of dairy cattle, and ox;
and production of
bovine sperm.

Agribusiness Update

Page 7

In ves tment Guide

Permit License Mechanism


Attachments required to be submitted
with applications :
1. Letter of recommendation from the
related country or letter which is
issued by the Embassy/
Representative Office of the related
country in Indonesia if the applicant
is The Government of another
country;
2. Copy of valid passport if the
applicant is a foreign individual;
3. Copy of Articles of Association of
the company in English or its
translations in Bahasa from sworn
translator if the applicant is a
foreign company;
4. Copy of valid Identity Card (KTP) if
the applicant is an Indonesian
individual;
5. Copy of Articles of Establishment of
the company and any amendment
(s) and approval from the Minister
of Law and Human Rights if the
applicant is incorporated under the
law of Republic of Indonesia;
6. Copy of Tax Registration Code
Number (NPWP) for the applicant,
either for Indonesian individual or

7.

company which is incorporated


under the law of the Republic of
Indonesia;
This application should be properly
and duly signed with sufficient
stamp duty by all applicants (if the
company is not yet incorporated) or
by the company's Board of
Directors (if the company is already
incorporated) attached with Power
of Attorney with sufficient stamp
duty from whom signs and/or
submits the application if the
applicant is represented by another
party (provisions concerning the
Power of Attorney is strictly
regulated in this regulation (article
63).

One Stop Shop


Based on Presidential Decree 27/2009
and as part of its 100-day program,
BKPM is implementing a one-stop-shop
system (PTSP), to cut bureaucratic
redtape and allow investors to process
business licenses faster. Its goal is to
streamline and consolidate the number
of steps and places an investor must go
for business permit issuances.

The program requires the consent of


some 16 ministries relevant to the
investment approval process, to
delegate its authority to BKPM in
granting licensing and non-licensing
services. As of February 5, 2009, all
relevant ministries have signed off on
the various decrees necessary, and
BKPM is moving forward with the
implementation process at both the
central and regional level.
National Single Window for Investment
(NSWI)
In order to facilitate PTSP even further,
the National Single Window for
Investment (NSWi) was created. NSWi is
an electronic platform for investments
that enables investors to apply for
license and non-license services
online. The ability to fully automate the
investment license process would
significantly enhance the efficiency of
licensing services. The system was first
launched in January 2010 in the Free
Trade Zone and Free Port of Batam.

Contact Us:

Directorate of Planning for Agribusiness


and Other Natural Resources
Deputy of Investment Planning
Jalan Jendral Gatot Subroto No. 44
Jakarta 12190
Phone: +62 21 522 5837
Fax: +62 21 522 5837
E-mail: info@bkpm.go.id
Website: www.bkpm.go.id