Not just surfing: why do Russian entrepreneurs need Indonesia?

Indonesia is usually considered an ideal (albeit expensive) tourist destination in Russia. But the ocean, surfing, rice fields, and friendly people are not all that Indonesia is famous for. This country is actively solving its agricultural problems and developing agrotech. Moreover, Indonesians are open to exchanging technologies with Russian companies.

A closed meeting of Russians and Indonesians was recently held at Skolkovo on the initiative of Rosselkhozbank, where cooperation in the agro-industrial complex was discussed.

About agriculture in Indonesia

Indonesia is the fourth largest country in the world in terms of population, the largest economy in Southeast Asia and the largest equatorial country. Average GDP growth over the past 60 years has been over 5% per year in terms of purchasing power parity. According to forecasts, Indonesia will become the sixth largest economy in the world by 2035. The country is a major agro-industrial power, it ranks first in the world in palm oil production. Rubber, coconut oil, tea, coffee, cocoa, and spices are also produced here.

On the demand for agrotech in the country

Indonesia is one of the largest producers of food products, but the country does not fully provide itself with food products and imports them in the amount of more than $24.5 billion. Agrotech is among the top 5 areas in terms of demand for new technologies in the country. For a population of 280 million people, only about 150 technology companies in the agro-industrial complex work in the industry that employs the largest number of people. In terms of areas, local companies are interested in everything related to productivity, logistics (there are about 17,000 islands in Indonesia) and fintech solutions for the needs of the agro-industrial complex (there are more than 25 million farmers in the country, but no more than 18% of the population have access to digital financial products).

On cooperation between the two countries

Despite the challenges faced by the global economy, by the end of 2022, the turnover of agricultural products between Russia and Indonesia increased by 10% compared to 2021 and reached $1.8 billion. Contacts are maintained at the highest level, it was possible to approve a draft memorandum of understanding between the ministries of the Russian Federation and Indonesia, which, in particular, provides for the exchange of information technology, scientific cooperation in the agro-industrial complex and support for various types of agricultural start-ups.

Indonesia is faced with the problem of ever-growing domestic demand for food, due to population growth and an increase in its purchasing power, as a result, increasing productivity becomes the main strategy for increasing food production. This goal can be achieved, among other things, by improving farmers' access to modern information technologies.

In 2020, the focus was more on the areas of robotics and automation of agricultural operations, as well as on the creation of systems for monitoring and analyzing data obtained from the fields. Remote Internet of Things systems have become in demand, there has been an increase in online sales of agricultural products, and the number of startups selling products on marketplaces has grown.

Russia is interested in strengthening cooperation with the Indonesian side. The Russian Ministry of Agriculture is considering the possibility of organizing a business mission of Russian exporting enterprises. Preliminary date for purchasing power parity: June 2023. The Russian side will be represented by the management of industry associations and major Russian agricultural producers.

On what cooperation between Russia and Indonesia looks like today

One of the important tasks for Indonesia was to gain complete independence in terms of strategic food supplies for the population (rice, vegetables, fruits, livestock products), and this goal was successfully achieved. At the same time, there remains a high dependence on fertilizers, and Russia has historically been one of the largest suppliers of mineral fertilizers to the Indonesian market. Cooperation continues on the topic of humates, humins and other types of organic fertilizers.

Indonesia is a very promising market for Russian technologies in the field of linear accelerators for processing agricultural and seafood products. This will allow goods to be stored longer with higher resistance to pathogens. Russian technologies make it possible to optimize seed selection, thereby reducing Indonesia's dependence on seed imports. Collaboration in the field of halal certification is also ongoing.

On the problems on the island of Bali

The island of Bali needs to develop organic agricultural production. This program is actively supported by the provincial governor, as well as at the federal and regional levels. At the moment, many difficulties have arisen due to the fact that the use of large quantities of chemical fertilizers on plantations leads to significant pollution of four large lakes, so there is a need to switch to organic fertilizers. One of the solutions is, for example, a program for the use of large volumes of earthworms, which are an effective natural solution for improving the quality of the soil and increasing its overall fertility.

About local farmers

Currently, the average age of Indonesian farmers is quite high: the industry is not popular among young entrepreneurs. Also, a large part of the sector is made up of small farms that have problems distributing their products and reaching large buyers. As a result, producers are often forced to sell products on unfavorable terms for them. Since Indonesia is a country with a high volume of Internet users and online platforms, the development of marketplaces is a promising direction.