INDONESIA UPDATE

1

2019

Faried W. Rachman

Trade AttacheIndonesian Embassy to Tokyo, Japan

1. JAPAN’s TRADE with WORLD

Unit: (thousand USD) Source: ITC (processed by KBRI Tokyo)

Japan Export-Import is seen to grow.・Its balance of trade in 2018 is booked deficit of US$ 10.17 billion(in 2017 was having a surplus with US$ 26,28 billion).

the development of Japan import and export for the worldperiod 2014 - 2018

・The increase in import value of its oil & gas from world was at 26% that caused the deficit in 2018.

2. JAPAN’s EXPORT to WORLD

Source: ITC (processed by KBRI Tokyo)

Ten of Japan's main export products to the world (2018)

Japan main export destination countries to the world (2018)

Japan’s Export to World is seen to increase at 5,7% in 2018 compared with 2017.

・Export value is seen to increase from its 10 primary export products to its 10 export destination countries except to South Korea and Hongkong.

・Export value is booked to increase for 10 primary products except HS 8443/Printing machinery.

3. JAPAN’s IMPORT FROM WORLD

Ten major Japanese imported products from the world (2018)

Ten major exporting countries to Japan(2018)

Japan’s import from world increased in 2018 compared with the year before.

・Its import values from 10 primary sourcing countries was seen to increase in 2018 compared with year 2017.

・Import values of oil & gas products with HS codes 2709, HS 2710, HS 2711 was seen to increase more than 20%. Its coal import of HS 2701 was also a little

over 10%.

(Source: ITC (processed by KBRI Tokyo)

4. EXPORT-IMPORT JAPAN-INDONESIA

the development of Japanese exports with Indonesia(2014-2018)

Total trade Japan-Indonesia was booked to increase at 12,4%.・Japan’s balance of trade was having a deficit with Indonesia in 2018 at US$ 5,8 billion, whereby the gap of deficit was seen lesser then 2017 of 10,4%.・Japan’s deficit was seen to be smaller in 2018 compared with 2017 due to its export (17,7%) to Indonesia was larger than its import in the non-oil & gas sector (12,9%).

Unit: (thousand USD) Source: ITC (processed by KBRI Tokyo)

5. JAPAN’s EXPORT To INDONESIA

(Satuan: ribu USD) Sumber: ITC (diolah)

Japanese export products to Indonesia

Total Export Japan to Indonesia increased 17,9%.・Export value of 10 primary export products of Japan to Indonesia increased in2018 if compared with 2017. ・Out of 97 HS codes that Japan exports to World in 2 (two) digit format, there are 92 HS codes that Japan exports to Indonesia in 2018.

6. JAPAN’s IMPORT from INDONESIA

(Satuan: ribu USD) Sumber: ITC (diolah)

PRODUK IMPOR JEPANG DARI INDONESIA

Total import of Japan from Indonesia increased at 8,7%.

• Almost all of the import value of 10 major Japanese imported products from Indonesia (except HS 27 and HS 40) There was increase in 2018.

• Out of Japan total exports to World in 2 (two) digit format, there are 92 HS codes that Japan exports to Indonesia in 2018.

7. Indonesian products have the potential to increase exports to Japan

HS 1511 Palm oil and its fractions

・The HS 23 product is also used as fuel for biomass power plants.

・Derivatives from HS 1511 products have the potential to increase exports to Japan which is very high because they are used as fuel for biomass power plants.

HS 23 residue/industrial waste

・HS 23 used as animal feed have the potential to increase exports to Japan due to the large number of pets and livestocks in Japan.

・Banana has the potential to increase export to Japan, because it is the most consumed fruit in Japan.

HS 0803 Banana

8. Fruit consumption in Japan

・The volume of cosumption of banana products in 2017 is estimated at 18,5kg per household with 2 or more people.

Consumption volume of fruit products in Japan per household with 2 or more people (in 2017)

Based on data released by the Ministry of Internal Affairs and Communications, bananas are the most consumed fruit products in Japan

(unit: kg)

・Bananas that are widely consumed in Japan are cavendish bananas.

9. Import of Japanese bananas from the world

(unit: thousand USD) (unit: tonne) Sumber: ITC (processed)

The value impor HS 0803 Japan from the world 2014-2018

The value impor HS 0803 Japan from the world

The value and volume of Japanese banana imports in 2018 increased compared to the previous year

• Philippine products control more than 80% of the market share in Japan.

• Ecuador is the largest exporter of banana products in the world. However, it has been seen that the volume of imports of Japanese banana products from Ecuador has decreased since 2017, because the volume of imports from the Philippines has increased.

• The value of Japanese imports from Indonesia is smaller than the value of imports from Vietnam and Thailand. However, the volume of Japanese imports from Indonesia is still greater than the volume of imports from Vietnam and Thailand.

10. PROSPECT OF INCREASING EXPORT INDONESIANBANANA PRODUCTS TO JAPAN

Indonesia is very likely to increase the export of banana products to the Japanese market especially from the geographical location that is superior to that of Japanese origin countries such as Ecuador, Mexico, Guatemala and Peru, so that mapping of sustainable cooperation as well as investment and business calculations needs to be taken into more consideration weather in thel level of G to G or B to B, so that it can encourage the importation of Japanese banana products from Indonesia.

Indonesia has a large quota of 1,000 tons per fiscal year (April to March) for banana products (HS 0803.30 and HS 0803.90). Increased in quota needs to be pursued through Indonesian General Review - Japan EPA.

Imports of banana products from Indonesia that do not use the existing quota will be subjected to an import duty of 10%.

11. THE IMPORT PRODUCTS HS 1511 JAPAN FROM THE WORLD

(unit: thousand USD) (unit: tonne) Sumber: ITC (processed)

The value imported HS 1511 Japan from the world (2014-2018)

The Volume imported HS 1511 Japan from the worldlv

The value and volume of imports of Japanese HS 1511 products in 2018 increased compared to the previous year.

・More than 99% of the market share in Japan is controlled by Malaysia and Indonesia.

・The value and volume of Japanese imports from Malaysia were seen to decline in 2018 compared to the previous year

・The value and volume of Japanese imports from Indonesia are seen to increase in 2018.

・Japan HS 1511 product demand is expected to increase dramatically in the next few years because palm oil products are now utilised as fuel for biomass power plants in Japan.

12. ENERGY SUPPLY IN JAPAN

Source: Japan's Energy 2017, METI (processed)

COMPOSITION OF ENERGY SUPPLY IN JAPAN

Japan aims to reduce its dependence on fossil fuels to 56% in fiscal 2030.

・Before the 2011 tsunami disaster (fiscal 2010), 81.2% of energy supply in Japan depended on fossil fuels.

Oil, etc. 40.3%

LNG 18.2%

Coal 22.7%

Nuclear Power 11.2%

Renewable Energy 7.6%

Oil, etc. 39.7%

LNG 23.8%

Coal 25.4%

Nuclear Power 0.8%

FY 2016FY 2010

FY 2030

Renewable Energy 10.3% Oil, etc. 3%

LNG 27%

Coal 26%

Nuclear Power 20%-22%

Renewable Energy 22%-24%

・In fiscal 2016, dependence on fossil fuels became 88.9%.

・To reduce dependence on fossil fuels, the Japanese government seeks to increase energy supply through renewable energy.

13. FEED IN TARIFF POLICY IN JAPAN

・The feed in tariff (FIT) policy in Japan has been started since July 2012 forincreasing energy supply with renewable energy.

GENERAL MECHANISM OF FIT POLICY IN JAPAN

・Initially, investment focused on building a power plantsolar (PLTS) because at the start of this FIT policy, the value of FIT forPLTS with a capacity of 10 kW and above reaches JPY 40 per kWh.

・Investment in electricity generationrenewable power which isuse energy sourcesthe others are increasing,after the FIT value for this PLTSdownhill.

・Based on data releasedby METI, since its inceptionthis FIT policy, total capacitybiomass power plant that has beenget the FIT contract untilby March 2018 has reached

10.7 GW, and around 2.46 GWusing liquid biomass fuel(including palm oil products) asfuel.

14. PROSPECT OF PALM OIL PRODUCTS IN JAPANIf it is assumed that a number of 2.46 GW biomass power plant usespalm oil products (CPO and Palm Stearin RBD), the total demand for the productPalm oil in Japan for fuel needs will reach 4.92 million MTper year.• For the record, the volume of imported HS 1511 Japanese products from the world

in the year 2018 was recorded at 754.4 thousand MT.

Obstacles• The latest revision of "Business Plan Development Guidelines for Biomass Power

Plant "which has been issued by METI in April 2018 requires Sustainable Palm Oil (RSPO) Round Table certification for product use palm oil as fuel from the biomass power plant that uses it FIT contracts over a period of 20 years.

On-going Efforts• In the next 2 years the ISPO must be able to adjust to the criteria RSPO related to the

points of assessment of environmental and social impact, and labor; confirmationby third party certification and; completely separated supply chain of certified andnon-certified fuels. , so that ISPO can be accepted by the government Japan as arequirement for the use of palm oil products as ingredients fuel from biomass powerplants that use FIT contracts.

15. IMPORT OF HS 23 RESIDUE / INDUSTRIAL FOOD WASTE PRODUCTS FROM THE WORLD

(unit: thousand USD)

IMPORT VALUE OF HS 23 JAPAN FROM THE WORLD(2014-2018)

VALUE OF IMPORT HS 23 JAPANESE PRODUCTS FROM THE WORLD

The import value of Japanese HS 23 products in 2018 increased compared to the previous year.• Import value of derivative products

HS 23 (except HS 2305) Japan on 2018 increases compared to the previous year.

• In 2018, Indonesia has entered into the top 5 major exporters to Japan for this HS 23 product because of the increase use of HS 23 derivative products, especially palm kernel shell products (PKS), which is included in HS 2306.60,000 Oil-cake and othersolid residues, resulting from theextraction of palm nuts oil or kernel oil, as fuel for power plants electricity Japan.

(unit: thousand USD)

16. PKS PRODUCT PROSPECT IN JAPANESE MARKET

VALUE OF IMPORT HS 2306.60,000 JAPANESE WORLD

IMPORT VOLUME OF HS 2306.60,000 JAPANESE WORLD

(Satuan: ribu USD) (Satuan: ton) Sumber: ITC (diolah)

The value and volume of imports of HS 2306.60,000 Japanese products in 2018 increased above 10%.・The driving force for the trend of increasing use of PKS products is increasing numbers steam power plants with coal fuel in Japan use VFD as a mixture of fuel.

・PLTU that uses PKS as fuel will also increase.For example, EREX Co., Ltd. (FY turnover 2017: JPY 46.9 billion) currentlymanaging PLTU with PKS fuel in Kochi Pref. (20MW) and Oita Pref.(50MW) will start operating 2 new PLTU (Fukuoka Pref., 75MW andIwate Pref., 75MW) in January 2020.

Obstacles: PKS prices are unstable, while power plant managers in Japan wantbuy PKS at a fixed price for the long term period.

17. HS 2301 PRODUCT PROSPECT IN JAPANESE MARKET

VALUE OF IMPORT HS 2301 JAPAN FROM THE WORLD (2014-2018)

(Satuan: ribu USD)

Import value of product HS 2301 Flours, meals and pellets, of meat or meat offal, of fish or of crustaceans, molluscs or aquatic invertebrates, unfit for human consumption; Japan's greaves in 2018 increased by 15.1%.・Japanese imports for HS 2301 products are focused on 2301.20,010 HS products

Flour, meal & pellet of fish, crust, mol / other aqua invert, unfit human cons:Flours, meals and pellets, of fish, with a value of US $ 273 million, up 15.2% compared to the previous year.

・ An approach with Indonesian entrepreneurs / exporters needs to be done forknowing the problems experienced by Indonesian businessmen so that they occurthe decline in the value of exports to Japan in 2018 compared to the previous year.

・ In terms of logistics, it appears thatIndonesia is very likelyincrease market share inJapan and compete with Peru,Chile, United States and Ecuador.

18. PRODUCT PROSPECT OF HS 2309 IN JAPANESE MARKET

VALUE OF IMPORT HS 2309 JAPAN FROM THE WORLD (2014-2018)

(Unit: thousand USD)

Japan has an import market share of HS 2309 products which is quite large. Preparations of a used in animal feeding, which reached more than JPY 1 billion.

・The factor that supports the size of the HS 2309 product market in Japan isthe large number of pets in Japan.2017 data (Japan Pet Food Association):- The number of pet dogs in Japan is estimated at 8.92 million.- The number of pet cats reaches 9.5 million.- Volume of pet food products (local products and imported products)- for dogs: 281.08 thousand tons; for cats: 285.79 thousand tons.

• Indonesia is very likely increasing exports of HS 2309 products to the Japanese market especially from the location Geographically superior compared from the country of origin of Japanese imports like United States, France and Australia so that mapping of cooperation sustainable as in business investment and calculations

need to continue initiated, so that it can push importation of this product in Japan from Indonesia.

19. EXPORT PROMOTIONPeople to People Contact:Exhibition, seminar & gathering business, follow-up inquiry, buying mission, company visits and introductions in the accreditation areaPromotional EventsInstallation of digital banners through weblinks and e-mail blasts, business associations / institutions: CCI, Jetro, Asean Japan Center, SMBC, Facebook; TV shopping; Online Shopping; Collaborative retail fill-in with Department Stores