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Bhs Igris...................

The document outlines several challenges facing the Indonesian agribusiness sector. First, the sector will need to adjust to increasing globalization and changes in trade terms. This will likely lead to larger exporting corporations with international ownership. Second, the sector must position and differentiate products to build sustainable markets, which involves factors like quality, meeting market requirements, supply reliability, and branding. Third, the sector must reduce costs through measures like streamlining border costs and adopting new technologies. Government support can help with market identification, removing restrictive regulations, and facilitating discussion.

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Akbar Rafsanjani
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128 views1 page

Bhs Igris...................

The document outlines several challenges facing the Indonesian agribusiness sector. First, the sector will need to adjust to increasing globalization and changes in trade terms. This will likely lead to larger exporting corporations with international ownership. Second, the sector must position and differentiate products to build sustainable markets, which involves factors like quality, meeting market requirements, supply reliability, and branding. Third, the sector must reduce costs through measures like streamlining border costs and adopting new technologies. Government support can help with market identification, removing restrictive regulations, and facilitating discussion.

Uploaded by

Akbar Rafsanjani
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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5. The Challesnges For Agribusiness.

The two pressures for change discussed so far, globalisation and terms of trade effects, are likely to cause changes in the structure of Indonesian agribusiness and the way that business is 'done'. In particular, there is likely to be a continuation of the trend towards large exporting corporations with strong international links, including foreign ownership, and well diversified trading bases. The traditional Indonesian exporting firms, emphasising family ownership, financial involvement with government and 'special relationships' with trading partners, is likely to change. There are a number of reasons for This. First, increasing acceptance of World Trade Organisation (WTO) principles and rules, second, a likely increase in power of the WTO after the 1999 WTO GATT (previously GATT) round of negotiations (Howard, 1999) and, third, evidence from the crisis that 'tightly knit' trading groups may not have much flexibility when markets turn against them. If the Indonesian agribusiness sector is to adjust, then it faces a number of challenges. The first of these has arguably already been undertaken. That is,recognition that the Indonesian comparative advantage lies in agricultural raw materials and unskilled labour and that agriculture will be a major factor in development in the foreseeable future. The love affair with secondary industrial development, embedded deeply in the economic psyche during the Soeharto regime, seems to have been dropped from the political rhetoric and seems likely to be abandoned. In terms of facilitating expansion from within the agribusiness sector, there are practical challenges outlined below and discussed in Trewin (1999) and Trewin and Johnston (1999). Interestingly, while these are direct challenges for the private sector, most of them involve government in one form or another. Identification of Key Markets The role of government is likely to be central in the identification and penetration of new markets for Indonesian agribusiness. Government can sponsor business forums, facilitate discussion on trade and industry, remove unnecessarily restrictive

regulations, use bilateral government arrangements where necessary in foreign markets and be a source of information on regulatory regimes of other countries. Positioning and Differentiating the Product To set tip sustainable, long-term market structures, products have to be differentiated. This involves consideration and understanding of the following factors: product, quality, meeting market requirements, reliable supply, credit arrangements for specific trades, promotion, retail training and brand identification and product presentation. Reducing Costs A large part of competition in markets consists of vigilance in keeping costs as low as possible. This means that companies need clear goals and guidelines in the containment of costs. Areas that are particularly relevant in an era of trade liberalisation are streamlining border crossing costs, streamlining of domestic institutional arrangements andLadoptionpi, new cost-saving technologies. Joint Ventures and Investment Trade liberalisation means that Indonesian companies will be interacting with an even broader range of cultures than they do presently. Partners from customer or inputsupplying countries not only facilitate communication across the 'culture gap' but also allow complementarities. Comparative advantages in things like labour costs and technical knowledge can often be better exploited when firms from different countries co-operate. There is also scope for sharing of technologies and Improved controls on quality, presentation and distribution. Understanding the Market Market intelligence, market evaluation and identification of key players are central to planning in any commercial sector. Agribusiness systems can be extremely complicated, hence 'understanding the market' is a major challenge for successful ventures.

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