Cold Chain in Philippines and Indonesia

Emerging Markets Program Assessment Summary

April 2017

Date: April 2017

Title: Cold Chain in the Philippines and Indonesia: Emerging Markets
Program Assessments
Target Market: Philippines and Indonesia
Target Commodities: Poultry, Pork, Frozen Potatoes, and Fresh Fruit
Lead Author: Kent Sisson and Amanda Brondy
Emerging Market Agreement: #2016-09
Activity Code: E15MXEMP01

1
TABLE OF CONTENTS
LIST OF TABLES...................................................................................................................................... 3
LIST OF FIGURES.................................................................................................................................... 4
LIST OF ABBREVIATIONS AND DEFINITIONS .......................................................................................... 5
Emerging markets program Assessment: Cold Chain in Philippines and indonesia................................ 6
EXECUTIVE SUMMARY .......................................................................................................................... 8
Market Assessment: Philippines.......................................................................................................... 12
Economy........................................................................................................................................................... 12
Trade ................................................................................................................................................................ 15
Potential for US products................................................................................................................................. 17
Opportunities for Global Cold Chain Alliance and U.S. Companies ................................................................. 17
SWOT Analysis of the Philippines Cold Chain Sector ....................................................................................... 19
Market Assessment: Indonesia ........................................................................................................... 19
Economy........................................................................................................................................................... 19
Trade ................................................................................................................................................................ 22
Potential for US products................................................................................................................................. 24
Opportunities for Global Cold Chain Alliance and U.S. Companies ................................................................. 25
SWOT Analysis of Indonesia Cold Chain Sector ............................................................................................... 25
Final Recommendations...................................................................................................................... 27
Philippines ........................................................................................................................................................ 27
Indonesia .......................................................................................................................................................... 28
Project Performance Measurement and Goals ................................................................................... 29
Team................................................................................................................................................... 30

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LIST OF TABLES
TABLE 1: PHILIPPINE ANNUAL MACRO ECONOMIC INDICATORS ..................................................................................................... 10
TABLE 2: EASE OF DOING BUSINESS WORLD BANK RANKINGS FOR PHILIPPINES WITH COMPARISONS.................................................... 13
TABLE 3: CY 2016 U.S. EXPORTS OF SELECTED CHILLED AND FROZEN PRODUCTS TO THE PHILIPPINES.................................................. 14
TABLE 4: MARKET SHARE AND RANKING OF TOP SUPPLIERS OF SELECTED PRODUCTS IMPORTED INTO THE PHILIPPINES ............................ 14
TABLE 5: INDONESIAN MACROECONOMIC INDICATORS ................................................................................................................. 17
TABLE 6: EASE OF DOING BUSINESS WORLD BANK RANKINGS FOR INDONESIA WITH COMPARISONS ..................................................... 20
TABLE 7: CY 2016 U.S. EXPORTS OF SELECTED CHILLED AND FROZEN PRODUCTS TO INDONESIA ......................................................... 21
TABLE 8: RANKING OF TOP SUPPLIERS OF SELECTED TEMPERATURE CONTROL PRODUCTS TO INDONESIA ............................................... 21

3
LIST OF FIGURES
FIGURE 1: PHILIPPINE MONTHLY INFLATION RATES ..................................................................................................................... 11
FIGURE 2: PHILIPPINE POPULATION GROWTH............................................................................................................................. 12
FIGURE 3: PHILIPPINE EXCHANGE RATE VERSUS THE US DOLLAR .................................................................................................... 12
FIGURE 4: INDONESIAN GDP ECONOMIC GROWTH ..................................................................................................................... 18
FIGURE 5: INDONESIAN MONTHLY INFLATION RATES ................................................................................................................... 18
FIGURE 6: INDONESIAN POPULATION GROWTH .......................................................................................................................... 19
FIGURE 7: EXCHANGE RATE BETWEEN INDONESIAN RUPIAH AND US DOLLAR ................................................................................... 19

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LIST OF ABBREVIATIONS AND DEFINITIONS

3PL 3rd Party Logistics

ARPI Indonesia Cold Chain Alliance
ASEAN Association of Southeast Asian Nations
CCAP Cold Chain Association of the Philippines
CDP Cikarang Dry Port
CIA Central Intelligence Agency
CY Calendar Year
EMP Emerging Markets Program
FAS Foreign Agriculture Service
GCCA Global Cold Chain Association
GDP Gross Domestic Product
QSR Quick Service Restaurants
Rp Indonesian Rupiah
SME Small to Medium Sized Enterprise
US United States
USD US Dollar
USDA United States Department of Agriculture
WFLO World Food Logistics Organization
WFLO World Food Logistics Organization (part of GCCA)

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EMERGING MARKETS PROGRAM ASSESSMENT: COLD CHAIN IN PHILIPPINES AND
INDONESIA
Date: April 14, 2017
Title: Cold Chain Global Research, Empowerment and Analysis Project,
Southeast Asia
Target Market: Philippines and Indonesia
Lead Authors: Kent Sisson
Arne Martinson
Amanda Brondy
Emerging market agreement: #2016-09
E16MFASE1
INTRODUCTION
This Emerging Market Program (EMP) project is one of several that is undertaking the task of reaching
potential new markets. Activity E16MFASE1 is cold chain assessment for Southeast Asia (specifically, the
Philippines and Indonesia). It was led by a team of highly experienced researchers backed by the organizational
and administrative support of cold chain experts with experience in administering market development
programs. Without support from FAS’s EMP or the U.S. Department of Agriculture, the World Food Logistics
Organization (WFLO) would not be able to carry out this project.
This project is divided into three phases. Phase 1 is a market assessment of the food and rural business systems
in the Philippines and Indonesia with emphasis on gaps and constraints in the cold chain infrastructure. Phase
2 is a Cold Chain Management Education and Training Program consisting of seminars and workshops in each
country and/or regional training program that addresses some of the constraints observed during the
assessment. Phase 3 is a roundtable consisting of cold chain industry players in each country that will focus
on the future of cold chain industries and associations moving forward.
This project, led by the GCCA, assesses the Philippine and Indonesian cold chain industries, establishes the
strengths and weaknesses of the current operations, and recommends actions and activities moving forward to
better grow the markets. This report is a summary of the larger, more detailed assessment for Phase 1 of the
project. It includes information on the observations, opportunities, and recommendations for Phase 2.
Philippines
With the Philippines market for agricultural products and other products requiring temperature management
on the rise, cold chain infrastructure and operations are under pressure, but developing. The potential for
product import and export to the country is substantial, but a better understanding is needed of the current cold
chain environment to move forward. This is an in-depth assessment to understand that environment and
determine how continued cold chain and market development will occur in the Philippines.
Indonesia
Indonesia, with its huge population and economy, is in a period of strong growth mode for transportation and
logistics operators. The country is primed for potentially large infrastructure investments that will better
facilitate all transport operations. This growing market parallels the Philippines’. This regional potential for
growth and development of the cold chain prompted the other half of this in-depth assessment, analyzing and
studying the Indonesian market and determining how continued cold chain development will take place.

6
Market Assessment Checklist
 Who conducted the assessment and what makes them an expert?
The assessment was conducted by individuals with decades of experience in the cold chain industry with
extensive backgrounds in cold chain operations, and operational efficiency. The teams incorporated experts at
each link of the cold chain, with additional support from local expertise from the Indonesian and Philippines
cold chain associations. Project Team members are further detailed at the end of this document.
 How did you conduct the assessment?
Each assessment was conducted in three phases. The first phase consisted of a desktop review, prepared prior
to travel. The team reviewed available public information for the food and agriculture industry with a focus on
temperature-controlled food and the development of cold chain systems in the Philippines and Indonesia. The
in-country assessments took place during the second phase of the project. The Philippine assessment took place
from August 10-25, 2016 with visits to Manila, Cebu City, and Davao. The Indonesian assessment was
conducted from November 4-19, 2016 and included visits to Jakarta, Surabaya, and Denpasar.
After arrival in each country, the team met retailers, importers, distribution/logistics centers, government
officials, hotels, local producers, and other key stakeholders involved with temperature-control enterprises to
gather as much information as possible pertaining to the status of the cold chain with specific focus on
transportation and logistics, due to the island-based countries. The final phase began upon return to the United
States. The team evaluated all relevant information gathered and analyzed during the literature review and in-
country assessment, reviewing observations, drawing conclusions and forming recommendations to identify
the specific needs for developing the cold chain in the Philippines and Indonesia in parallel with increasing
US exports of fresh and frozen food products.
 What is the assessment of the food and rural business system needs of the target market?
The assessment of both countries revealed gaps in the food and rural business systems. Both countries face
serious issues in transportation best practices, as well as in cold storage capacity country-wide. Infrastructure
is lacking, creating issues for future cold chain development. There is need for education and technical
assistance to facilitate the development of cold chain infrastructure and operational efficiency. Details are
included below especially in the Executive Summary Table and the SWOT Analyses.
 What are the opportunities in the market?
Market opportunity in the Philippines is vast with MCC funding at $400 million for the Philippines over next
5-year compact, some of which could be used for cold chain infrastructure development. There are great
opportunities for investing in cold storage, especially in the Visayas/middle part of the country. Alternative
energy and solar have potential opportunities in country, however the payoff time needs to be shortened. The
Philippines also has a high annual population growth rate (1.6%) that will sustain demand for food.
Indonesia’s market opportunity is also very strong. In addition to the Philippines, MCC also has funding for
Indonesia over the next 5-years, some of which could potentially be used for cold chain infrastructure
development. Indonesia’s new subway/rail system is being built in Jakarta that will hopefully reduce traffic
problems there, easing transportation pressures. Potential for investments in cold storage, especially in the
islands outside of Java is very strong. With a moderate annual population growth (1.2%) will maintain strong
demand for food, as well as a strong growth in modern retail, HRI and tourism sectors that will all increase
demand for imported product. Indonesia also has an increasing culture trend for quality, safe and convenient
food which would drive cold chain demand.
 What are the recommendations or measure necessary to enhance the food and rural business system
needs that will also develop the market for U.S. agricultural products?

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WFLO recommends to immediately move toward Phase 2 and begin providing technical assistance and
training to gain from the momentum underway to embrace cold chain development in both the Philippines and
Indonesia.
These questions are addressed in greater detail, including specific economic information, challenges, actors
and other information related to the food and rural business needs, as well as the market opportunities that
exist in both countries. The Philippines and Indonesia sections both include discussions on: their respective
economies, trade, and the potential for US companies and businesses specifically relating to the cold chain.

EXECUTIVE SUMMARY
This baseline assessment examines existing cold chain infrastructure in both the Philippines and Indonesia
countries, with specific focus on identifying gaps and constraints. The cold chain assessment team studied the
movement of perishable foods inland from ports to the ultimate consumer and from points of domestic
production to postharvest, processing, and retail. Looking specifically at processing, packaging, transport, and
storage with an emphasis on the cold chain infrastructure, the assessment considered the resources available
and those needed to receive or expand US perishable imports. These resources also have implications for
Philippine and Indonesian exports and local retail distribution throughout each country.
The Philippines represents a significant opportunity for U.S. businesses and investment interests. The
Philippines’ economy has been relatively resilient to global economic shocks due to less exposure to troubled
international securities, lower dependence on exports, relatively resilient domestic consumption, large
remittances from about 10 million overseas Filipino workers and migrants, and a rapidly expanding
outsourcing industry. The current account balance has recorded consecutive surpluses since 2003, international
reserves remain at comfortable levels, and the banking system is stable.
The Philippines has been enjoying good GDP performance with an average growth rate of 6.0% per year from
2011 to 2015, compared with 4.5 percent the previous five years. With a population of 104 million people, the
Philippines is the 13th most populous country in the world. The population growth rate is relatively modest at
a steady 1.6%.
Indonesia also stands to continue to be an ideal market for U.S. agricultural exports. The Indonesian middle
class is growing, incomes are rising, and a new generation is seeking international food products. Middle class
consumers have easier access to media and internet facilities, further exposing Indonesian consumers to
various international products, activities and lifestyles.
Although the general economic situation has been positive in recent years and should remain so in the near
term, Indonesia is a challenging place to do business when measured in terms of the World Bank’s rankings
of 189 countries. Indonesia ranks at 91, with almost all challenging business categories being important in
terms of potential investments in new cold storage facilities. Corruption is also still a problem and adds cost
to doing business and in the case of food, increases the cost to consumers and stifles demand. Regulations,
such as burdensome food registration requirements also make it more difficult and costly to import food.
The project team believes there to be strong potential in both countries for future agricultural exports. With a
growing capacity and global reach, the Philippines and Indonesia have the poised environment for US
agricultural products. This environment will only be grown and utilized through the provision of training,
technical assistance and development of cold chain infrastructure. Without these activities and changes, both
countries will maintain crippling gaps in the cold chain, inhibiting further development and access for
agricultural products.
By encouraging cold chain development through capacity building and training programs, the Philippines’ and
Indonesian market for products requiring the cold chain will develop and with it, significant U.S. product
markets. Specific observations, conclusions, opportunities and recommendations are summarized below.

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Table 1: Summary of Philippine Observations, Conclusions, Opportunities and Recommendations

Observations Conclusions & Opportunities Recommendations

The US is the dominant supplier of
imported perishable food products.
It is the number one supplier of
poultry, pork, table grapes and
frozen fries; the number two
supplier of the overall fresh fruit
category, apples, and fresh
vegetables; the number three
supplier of beef after India and
Australia. 1
Approximately 61 percent of retail
sales are through the traditional
wet/local markets or Mom and Pop
outlets that have limited or no cold
storage facilities and poor hygiene
practices.
Some retailers turn off their food
chillers at night to save electricity,
negatively impacting frozen and
chilled product quality and safety.
Cold storage is substantially under
capacity in the Philippines in
general, and in the Central (Visayas)
and Southern (Mindanao) regions of
the country, in particular.
Some existing facilities are not
properly maintained and lack
adequate equipment. For example,
some compressors and other
equiment were replaced rather than
Throughout the Philippine cold
chain, assistance is needed on the
handling of perishable products,
both chilled and frozen.
Mom and Pop and wet markets have
limited capital (and/or do not see the
need) to invest in even the most
basic refrigeration equipment and
storage containers in their shops and
stalls.
The mindset is that fresh food is
better than frozen food when in fact
frozen and chilled food could be
safer, and its value can be preserved.
There is a country-wide lack of
consciousness/understanding of the
importance of cold chain to food
safety and quality.
Financing for investment in new
storage and related facilities is
difficult to obtain.
There is a lack of trained technicians
to maintain and keep cold storage
facilities and equipment in good
operating condition.
Provide technical assistance and
training focusing on domestic/local
staff and laborers, e.g., in handling of
product throughout the cold chain from
point of import, distribution and retail.
Guidance is needed in operating and
maintaining freezer and chilling
equipment in supermarkets and other
food retail outlets.
Consider providing/financing mini-
freezers for stalls and/or shared cold
storage areas at key locations in wet
markets to greatly improve shelf-life
and food safety. Perhaps these could be
funded in part under the Millenium
Challenge Corportation (MCC)
compact or other similar programs.
Provide food safety and quality
education/training for mayors, local
government officials, and retailers (and
consumers at the point of sale) on the
value of cold chain for handling and
storing food and ripening fresh fruit as
well as farmers and first handlers for
domestic products. Training must
include basic hygiene training and
education in public wet markets. 2 For
retailers and traditional wet/Mom and
Pop markets, training on in-store
handling and management of perishable
products should be in the form of videos
and photos versus written documents or
training manuals.
GCCA should take the lead with CCAP
to partner with existing stakeholders
and authorities to leverage resources,
identify and recommend facilities
financing options. 3
GCCA should take the lead in exploring
the possibility of establishing a ASEAN
regional Cold Chain Development
Team or Chapter that would focus on
identifying technical needs and then
developing technical training and

1
China is the second most important supplier, leading in market share for fresh fruit, apples, and fresh vegetables
2
Examples of food safety training include using clean water and stainless steel. TV and social media are good venues for
consumer education efforts to increase knowledge of food safety/quality and value of the cold chain.
3
The FAS office in Manila, MCC, Winrock, local Chambers of Commerce, Universities, and farmer Cooperations could
be considered as potential partners. The Danish International Development Agency or DANIDA, the Danish equivalent
of USAID, may have lessons learned for this.

9
maintained/repaired well before
expiration of typical operational life.
There is a lack of reliable eletrical
power in the country, in particular
outside the Manila Metro and
greater Luzon region.
Philippines’ major cities and their
suburbs in the regions of Visayas
and Mindanao are rapidly being
urbanized especially in the locations
where there is a concentration of
middle class consumers.
A major part of the country’s total
refrigerated imports is consumed in
the Manila/Luzon main island area.
The balance of imports is either
transhipped via Manila or delivered
by feederships directly to the main
Central and Southern Philippine
ports of Cebu, Davao, General
Santos and Cagayan de Oro for
onward distribution.
Many refrigerated product imports
are targeted for delivery to the Cebu
region, Mindanao and the Central
and Southern Philippines island
archipelago.
A few major supermarkets and retail
chains have integrated systems for
receiving containers at their main
facilities directly from the port
terminal.
The balance of imported products is
handled by independent cold
storage operators and distributor
and transport operators. Distributors
will receive and store the products
and deliver based on pick-and-pack
orders to retailers.
The majority of the regional buyers
are not in a position to accept full
There were mixed opinions on the
use of solar power to address lack of
electricity. Some companies
adopted it while others said return
on investment was too long.
Corresponding growth in the
provincial markets presents new
opportunities for US refrigerated
product imports, particularly now
with direct ship calls of international
shipping lines via a feeder network.
Congestion in Manila terminals is
caused by the city traffic that
greatly affects drayage hauls out of
and back into the terminals. The
proposed change of sending a
portion of ship calls to terminals in
Subic Bay and Batangas has
improved the situation.
Opportunities exist for receivers
and distributors to locate new
installations in strategic locations
relative to those port terminals.
These regions are significant targets
for the addition of cold storage
facilities and improved
transportation systems and thereby
provide new opportunities for US
product growth areas.
US exporters and their 3PL service
providers are in an excellent
position to provide service targeting
product quality and shelf-life.
Independent importers and
processors have limited storage
space and thus are dependent on
3PLs to store and sometimes
distribute the products. Holding
reefer container loads as storage is
expensive with container
demurrage at P4000 per day +
Chassis Demurrage of P3500/day
for a total of P7500/day
Almost all reefer cargoes shipped
internationally are in standard 40’
education modules. Training on
handling cold storage challenges during
disasters (floods, typhoons,
earthquakes, etc.) should be included.
Through CCAP, GCCA should
recommend experts on renewable
resources and energy-saving best
practices.
Focus on increasing ties between US
exporters and distributors to interiors.
This is an area where improvements in
the cold chain transport systems with
added capacity in the cold storage and
distribution areas will benefit US
exporters in terms of increasing exports.
Investments should focus on the
construction of cold storage and
distribution centers in areas that will
allow for efficient drayage from
existing and future port terminals,
targeting areas to the north in the best
proximity to both Port of Manila
terminals.
Development assistance should target
government policy changes and
subsequent private sector investments
in these regional areas.
Support the growth and services 3PLs
and freight forwarders or ocean carriers
to expedite Manila bound cargoes and
emphasize minimum port-calls before
reaching Manila.
Work with the end receivers of
products from the smaller trans-loading
contractors to monitor cross-docking
operations due to the high potential for
loss of product quality.
Focus on offering more shipments in
20 ft containers as an option to increase
10
 40 ft containers of one product.
Much of the current inter-island
transport is done through procured
20’ reefer container lots. Also, very
few of the inter-island fleet of ships
are capable of transportating 40’
containers.
Table 2: Summary of Indonesian Observations, Conclusions, Opportunities and Recommendations
Observations
The US and China are the two
dominant suppliers of perishable
food products requiring cold storage,
tranportation, and handling.
The middle class and per capita
incomes are growing strongly which
is driving growth in modern retail
outlets, hotels and restaurants as well
as the food processing sector.
However, over 80 percent of retail
sales are through traditional retailers.
One estimation was that 50-60
percent of food distribution takes
place in the Jakarta area and 20
percent of the cost of imported goods
is due to transportation and handling
from the port to the consumer.
The fisheries sector is under capacity
in terms of having sufficient
processing facilities, especially in
Eastern Indonesia where most of the
fish are located.
There is a lack of adequate cold
storage (including bonded cold
storage), but especially in Surabaya,
Bali, and some of the outer islands.
One Ministry estimated that the
4
The training should also identify and cover regulations that have a negative impact on the building and construction of
cold storage facilities and supermarkets.
5
Specific guidance is needed in operating and maintaining freezer and chilling equipment in supermarkets and other food
retail outlets and on the new warehouse management/inventory systems.
containers. It is a challenge to
locate 20’ reefer containers which
would be better suited to service the
provincial markets via the Manila
container hub port terminals.
Conclusions & Opportunities
Indonesia has recognized only four
countries (US, Canada, Australia and
New Zealand) for exporting
horticultural products to the country
directly to the port in Jakarta.
One of the stated goals of the
Indonesian Government is food
security and self-sufficiency.
Indonesian import licensing
regulations for food, including beef
and fresh fruit, and import quotas are
restricting imports. This also relates
to the Government’s goal of
increasing domestic food production
by protecting local producers from
outside competition.
Throughout the Indonesian cold
chain, assistance is needed on the
storage and handling of perishable
products, both chilled and frozen.
Fisheries and tourism are among the
Government’s top priorities for
economic development. They are
especially interested in developing
and modernizing the fisheries sector
to export fish and fish products
Locally produced cold storage
materials only provide 10-30 percent
of the needs. The rest must be
imported.
competitiveness in provinical
markets.The ultimate solution would
include efforts by US-based 3PLs to
consolidate shipments that are
compatible to be loaded together in 40
ft containers for transfer to 20 ft units.
Recommendations
Share information and contacts
between US exporters and Indonesian
importers to strengthen relationships
and increase US market share. Where
possible, support attendance at trade
shows and other international events.
FAS should consider offering
education, training, and workshops for
Indonesian Government officials and
food importers, distributors, retailers,
and processors to identify existing
trade restrictive policies and provide
forums to discuss how to change those
policies for the benefit of Indonesian
businesses and consumers. 4
Provide technical assistance and
training focusing on domestic/local
staff and laborers, e.g., in handling of
product throughout the cold chain from
point of import, distribution and retail 5.
Consider partnering with some of the
most modern and sophisticated cold
storage operators in the country to
assist with food handling and logistics
training.
Focus on the high-value fisheries
industry as a path to strengthen the cold
chain infrastructure. Ensure that
facilities have room to grow to
encompass other perishable food.
Provide information and training about
bonded warehousing and its
significance, targeting appropriate
Indonesian Government officials and
existing cold storage companies
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 country needs the capacity for
storing 20 million metric tons, but
the current capacity is only 7 million
metric tons.
Transportation is weak with the rail
distribution of perishable foods
lacking adequate infrastructure and
observed trucking practices require
substantial improvement.
Top Indonesian Government
priorities include improving the
country’s infrastructure such as
ports, transportation systems,
logistics, and production agriculture.
They are also cracking down on
undocumented fees (bribes) for
clearing containers at the ports
Offer education and training on
shipping perishable products by rail
and by truck. 6 Consider providing
training and assistance on port
management for handling containers,
especially for the smaller ports
including Medan as well as ports at
other islands such as Sulawesi,
Kalimantan and the Moluccas

There is an acute shortage of trained
refrigeration technicians in the
country. Only 5 schools in Indonesia
train refrigeration engineers and they
only graduate a combined total of
about 50 students per year.
There is a lack of infrastructure
including access to clean water and
reliable and inexpensive electricity
in most areas, especially the more
remote islands.
Cold storage construction is growing
in the country led by the fisheries
processing sector, followed by the
supermarket and mini-market retail
food sectors.
Infrastructure weaknesses impact the
cost of cold storage and food prices
making food more expensive for
consumers.
Provide training for technicians to
maintain and repair cold storage
equipment in collaboration with
Universities, combined with
information on design and construction
of cold storage facilities for private
logistics companies.
Educate government officials (e.g.,
Ministry of Industry and Ministry of
Maritime and Fisheries) on the impact
the lack of infrastructure has on the
advancement of promising industries
to encourage and support continued
and increased government investment.

MARKET ASSESSMENT: PHILIPPINES

Economy
The economy has been relatively resilient to global economic shocks due to less exposure to troubled
international securities, lower dependence on exports, relatively resilient domestic consumption, large
remittances from about 10 million overseas Filipino workers and migrants, and a rapidly expanding
outsourcing industry. The current account balance has recorded consecutive surpluses since 2003, international
reserves remain at comfortable levels, and the banking system is stable.
The Philippines has been enjoying good GDP performance with an average growth rate of 6.0% per year from
2011 to 2015, compared with 4.5 percent the previous five years. The services sector was the main growth
driver in 2015 contributing 57 percent, followed by industries at 33 percent, and agriculture at 10 percent.
GDP grew year-on-year by 7.1 percent in the third quarter of 2016. The Philippines has not sustained steady
growth in foreign direct investment, which continues to lag behind regional peers.

6
The primary company targeted for the rail training would be PT Kertea Api, the major operator of public railways in
Indonesia. It is completely owned by the government and pays track access charges to the government.

12
 Table 1: Philippine Annual Macro Economic Indicators

Macroeconomic Indicators 2013 2014 2015

Real GDP growth (%) 7.1 6.2 5.9

Real GDP per capita growth (%) 5.4 4.5 4.3

Inflation (Annual %) 3.0 4.1 1.4

Population Growth (%) 1.6 1.6 1.6

Current account balance (% GDP) 4.2 3.8 2.6

Source: World Bank

Although the economy has recently grown at a faster pace, challenges to achieving more inclusive growth
remain. The unemployment rate has declined somewhat in recent years but remains moderately high, hovering
at around 6.5%; underemployment is also high, ranging from 18% to 19% of the employed. At least 40% of
the employed work in the informal sector.
Poverty afflicts about a quarter of the population. More than 60% of the poor reside in rural areas, a challenge
to raising rural farm and non-farm incomes. The government has been working to boost expenditures for
education, health, transfers to the poor, and other social spending programs. Infrastructure remains
underfunded and the government is relying on the private sector to help with major projects under its Public-
Private Partnership program. Continued efforts are needed to improve governance, the judicial system, the
regulatory environment, and the overall ease of doing business.
Notable achievements over the past year include passage of laws that liberalized the entry of foreign banks
into the country; partially relaxed the cabotage law by allowing foreign vessels to ply import and export cargo
within the archipelago; and passage of anti-trust legislation. Substantial progress has also been made towards
passage of a Customs Tariff and Modernization Act to meet international standards and commitments.
However, the Philippine Constitution and other laws restrict foreign ownership in important activities and
sectors, such as land ownership and public utilities.
Inflation is another important indicator for the general economic outlook. As can be seen in Figure 1 below,
the monthly inflation rate has fluctuated between a high of about 5% in mid-2014 but then declined to a low
of less than 1% near the end of 2015. It started to climb back up in 2016 but remained below 3% by the end
of the year. This trend bodes well for consumers.

13
 Figure 1: Philippine Monthly Inflation Rates

Source: http://www.tradingeconomics.com/philippines/inflation-cpi as reported by Philippine Statistics Authority

With a population of 104 million people, the Philippines is the 13th most populous country in the world and
the second most in Southeast Asia after Indonesia. The population growth rate is relatively modest at a steady
1.6% where it ranks in the top 40% at number 73 (of a total 189 counties), according to the CIA World
Factbook. Only Singapore’s population growth rate of just under 1.9% is higher in the Southeast Asian region.
Figure 2: Philippine Population Growth

Source: http://www.tradingeconomics.com/philippines/population as reported by Philippine Central Bank

Although the inflation rate is modest, the Philippine Peso has weakened against the US dollar (as most
currencies have) over the past four years. At its strongest point during 2013, the rate was 41 pesos to the dollar
but most recently the rate has climbed to just over 50 pesos to the dollar. This makes imported food products
relatively more expensive vis-a-vie locally produced products.

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 Figure 3: Philippine Exchange Rate versus the US Dollar

Source: http://www.tradingeconomics.com/philippines/currency as reported by OTC Interbank

One of the conclusions from the visit and interviews is that the cold storage capacity in the Philippines is
lacking substantially and there is much need for more investment, especially outside of Luzon in both the
Visayas (Central) and Mindanao (Southern) regions of the country. However, doing business in the Philippines
is not that easy, as indicated below in Table 2. Many people mentioned a difficulty in obtaining credit.
Compared to the US and Singapore which rank 8th and 2nd in the world for the ease of doing business, the
Philippines is comparatively much more difficult with a ranking of 99, placing it squarely in the middle among
the 189 countries ranked by the World Bank.
Table 2: Ease of Doing Business World Bank Rankings for Philippines with Comparisons
(Among 189 World Economies)
Category Philippines United States Singapore
Ease of Doing Business 99 8 2
Starting a Business 171 51 6
Dealing with Construction Permits 85 39 10
Getting Electricity 22 36 10
Registering Property 112 36 19
Getting Credit 118 2 20
Protecting Minority Investors 137 41 1
Paying Texas 115 36 8
Trading Across Borders 95 35 41
Enforcing Contracts 136 20 2
Resolving Insolvency 56 5 29
Source: World Bank 2017 rankings http://www.doingbusiness.org/data/exploreeconomies/philippines

Trade
The U.S. continues to be the Philippines’ number one supplier of agricultural products, and the Philippines is
its 10th largest global market. Sales of U.S. agricultural exports to the Philippines rose by 11 percent to $2.6
billion in 2016 after a decline of 15 percent from 2014 to 2015 to $2.3 billion. The top five U.S. exports by
value were soybeans and soybean meal; wheat; dairy products; prepared food; and pork and pork products.
Consumer-oriented food and beverage products remain the best prospects for future export growth fueled by
consumer familiarity with American brands and the steady expansion of the country’s retail, foodservice and
food processing sectors. The Philippines is the largest market in Southeast Asia (and ranked 13th worldwide)

15
for U.S. consumer-oriented food and beverage (F&B) product exports and one of the fastest growing markets
in the world, importing $926 million in U.S. in 2016. The United States remains the largest supplier with a
sixteen percent market share, followed by China at 10% and Indonesia, Singapore, and New Zealand each with
a 9% share (based on imports from Jan-Aug 2016).
Pork and pork products were the single largest temperature-controlled product exported in value terms to the
Philippines in 2016 from the United States (see Table 3, below). Following close behind were poultry and
processed vegetables (mostly frozen potato products). All three of those categories are exported almost
exclusively in frozen form as is beef, the fifth largest product category. U.S. fresh fruit exports consist
primarily of table grapes, apples and citrus.
Table 3: CY 2016 U.S. Exports of Selected Chilled and Frozen Products to the Philippines

Million
Product
US$
Pork $78.8
Poultry $77.8
Processed Vegetables * $71.8
Fresh Fruit $64.8
Beef $54.1
Fresh Vegetables * $6.6
TOTAL $353.9
Source: U.S. Census Bureau Trade Data
* Mostly potatoes

Table 4 shows the market share and ranking for the key countries that supply the Philippines with selected
products that require temperature-controlled handling and storage. Clearly the United States is the dominant
supplier across the board. It is the number one supplier of poultry, pork, table grapes and frozen fries and the
number two supplier of the overall fresh fruit category, apples, and fresh vegetables. The U.S. is the number
three supplier of beef after India and Australia. China is the second most important supplier, leading in market
share for fresh fruit, apples, and fresh vegetables. Canada is an important pork, frozen fry, and poultry supplier
while European and South American countries as a group, are for the most part, residual suppliers not ever
exceeding more than 15% of the market share for any one of the selected products. A summary analysis of
the market situation for U.S. exports of the selected products in Table 4 is provided below the table.
Table 4: Market Share and Ranking of Top Suppliers of Selected Products Imported into the Philippines

Fresh Table Fresh Fresh Frozen

Country/Product Poultry Beef Pork Apples
Fruit Grapes Veggies Potatoes Fries
Argentina 4/2%
Australia 2/30% 3/4%
Belgium 2/15%
Brazil 3/11% 4/10%
Canada 4/11% 2/15% 3/12%
Chile 3/3% 2/14%
China 5/10% 1/69% 1/90% 1/82% 3/13%
France 4/12%
Germany 3/14% 2/18%
India 1/33% 3/3%
Netherlands 2/12% 4/4%
New Zealand 5/9%
United States 1/53% 3/14% 1/26% 2/19% 2/8% 1/74% 2/7% 1/63% 1/67%
Source: Global Trade Atlas import data provided by FAS Manila. Based on 5-year Average of Calendar Year US$ Import
Value from 2011-2015

16
 • Pork: Strong growth in exports of high-value pork cuts and prepared/preserved pork products to
supermarkets, hotels and restaurants are expected to continue.
• Poultry: The Philippines remains the largest market in Southeast Asia for U.S. poultry. While a
growing market for nearly all categories, the trade estimates mechanically deboned meat (MDM) for
use in the food processing industry accounted for 75% of poultry imports from the U.S. in 2015.
• Frozen Potato Products: The Philippines is the 7th largest export market in the world for U.S. frozen
potatoes (mostly fries) which accounted for 74% of total U.S. processed vegetable exports to the
country in 2016.
• Fresh Fruits: The Philippines is the 14th largest export market in the world for U.S. fresh fruits, with
table grape exports representing 70% of those exports in 2016. Apples, oranges, and lemons/limes
were the next largest in terms of value. While U.S. exports of fresh cherries and strawberries are
relatively small by comparison, shipments have been growing a good pace since 2011.
• Beef: U.S. beef exports have been robust as U.S. prime rib and other high-value cuts have become
standard menu offerings. The growth is expected to continue as incomes rise, and the number of fine
dining options proliferate throughout the country.
• Fresh Vegetables: Fresh potatoes (table stock) accounted for over 99% of U.S. fresh vegetable
exports to the Philippines in 2016. The Philippines formally opened its market to U.S. fresh celery,
lettuce, and cruciferous vegetables (e.g., broccoli and cauliflower) in 2014. As the only country with
official access to the entire Philippine market for these temperate climate vegetables (which are in
limited supply domestically), U.S. exporters are poised to take advantage of opportunities in the
booming Philippine food service and retail sectors.

Potential for US products

The Philippines provides several opportunities for US food and agriculture exporters. Over the five-year
period from 2011-2015, imports of selected temperature-controlled products (pork, poultry, beef, frozen potato
products, table grapes, apples, and fresh potatoes) from the US averaged $310 million reaching a high of $356
million in 2014. If the current trends continue, imports of these products are forecast to reach $400 million in
2020. At the same time, the current value of beef and frozen potato products (primarily frozen fries) are the
next highest value of imports but are trending upward and could surpass the value of pork and poultry imports
by 2020 if current trends are realized. Imports of table grapes, apples and fresh potatoes are also trending
upward but not as steeply as beef and frozen potato products.
The FAS office in Manila expects demand for U.S. consumer-oriented products will continue to grow for
following reasons:
 Increasing urbanization of the local population (almost 103 million)
 Growing upper and middle class (18-20 million)
 Rising number of supermarkets, hypermarkets and convenience stores
 Strong interest in western brands among Philippine consumers
 Growing awareness of the quality and health benefits of U.S. food, beverages and ingredients

Opportunities for Global Cold Chain Alliance and U.S. Companies

The Cold Chain Association of the Philippines (CCAP) is an extremely well managed organization with an
exemplary follow-up and membership from the different areas of the cold chain. For any GCCA member from
the 3PL transportation and logistics sector in the U.S. and elsewhere there should be opportunities in the
Philippines. Contacts can be made via GCCA and/or directly with CCAP.

Education and training in technical and operational functions: This is the area in which GCCA via its sub-
contractors will cover the relevant programs. The most important direction for the transportation and logistics
sector should in the logistics management functions, and training of drivers and technicians that will keep a

17
fleet of trucks and container transport units in motion. The result will be to substantially reduce the risk of
equipment failure and subsequent product spoilage. Relevant details of this subject are covered in the
Recommendations Section.
Association building: In close cooperation with CCAP, GCCA is continuously active in promoting the
benefits of membership in the association. Its international members should be contributing to develop
partnerships that will induce further growth in the Philippine’s cold chain sector. The objective is to forge a
universally strong cold chain where every product retains quality and safety via each link including cold
storage, transportation and logistics and all technical developments in the complete chain.
Logistics growth market: As mentioned in the background section, the Philippines is considered a significant
growth market for the transportation and logistics sectors. This is in line with the endeavor of the government
and private sector to pay attention to needed investments in the country’s infrastructure serving the
archipelago’s many heavily inhabited islands, thereby lowering logistics costs and improving the trade flows.
Port improvements: The primary targets for action and potential approaches would be to look at investments
to improve certain ports that could attract new and specific cold chain throughput such as working with local
processing and manufacturing industries that may be migrating from within the Philippines or from other
ASEAN countries (part of the South-East Asia Trade Block) or from overseas. The driving force behind such
activities is the fact that several of the most important down-island ports are now called directly by
internationally connected container ‘feeder’ ships from the key hub distribution ports of Singapore, Hong
Kong, Kaohsiung and others. Therefore; opportunities for establishing near-port cold storage and logistics
facilities ought to be exploited.
Refrigerated transport: Equipment in good condition is in short supply. Although this market is the focus
of Japanese, Chinese, and European manufacturers of vehicles and containers, sophisticated supplemental
equipment developed and used in the U.S. may have a market potential. Equipment needed could be of the
following categories: GPS monitoring, temperature data loggers, electronic product seal, and other products
along these lines.
Introduction of the standard U.S. semi-trailer type reefer-truck: Conventional 53’ or smaller reefer semi-
trailers are not widely used in the Philippines, but preliminary research indicates that there could be a demand
on certain longer routes and operations. Partnership opportunities with key Philippine transport operators for
certain targeted transportation routes may offer an interesting potential in an expanding market for cold chain
transportation and logistics in the country. Due to the size, the 53’ units are not usable in the Metro Manila
area, but the 53’ or shorter versions of the same semi-trailer design should be usable on the long-distance
‘down-island’ use of roads and connecting ferry routes. This would require a change in the supply chain model
for processors that presently send smaller reefer-vans to cover those markets. Consolidating loads by different
processors or their distributors could generate large enough combined loads to use the reefer truck-trailers
efficiently. The key ‘selling point’ is the fact that the U.S. style reefer trailers have very robust independently
driven diesel-powered refrigeration units.

18
 SWOT Analysis of the Philippines Cold Chain Sector
Helpful Harmful
to achieving the objective to achieving the objective
Strengths Weaknesses
• Local production of food and agriculture is adequate • Some buyers do not handle/store chilled/frozen products
for many staple food products, yet the Philippines is a correctly.
solid market for US food and agriculture imports. • Strong competition with suppliers (China, NZ and Australia).
• Significant importer of US chilled/frozen products. • Relatively long delivery time from the U.S.
(attributes of the system)

• Consumers have preference for US products largely • Distribution of imported products is concentrated in Metro
Internal origin

due to historical ties between the Philippines and US
• English speaking.
• Economic growth is strong, the middle class is
getting bigger, and per capita income is growing but
large share of population is still very poor.
• Relatively large population (13th largest in the World)
• Growing consumer demand for safe and high-quality
food is driving up demand for imported food.
• Proliferation of malls and modern retail/supermarkets
leads to more demand for imported products.
• Fast pace of modern living is leading to greater
demand for convenience foods.
Opportunities
• •
External origin
Manila and only a few other major cities.
• Some consignment buyers do not care about product going bad
because they can return to the supplier.
• Nationwide, cold storage capacity is inadequate which means
demand is high and impacts prices of stored products.
• Substantial traffic congestion in ports
• Very congested on road traffic in Manila and other major cities.
• Truck traffic is limited to specific hours in Manila Metro area.
• Ministry of Ag inspection process is inefficient and contributes
to delayed delivery and higher cost to buyers and consumers.
• Local training for labor and managers at all levels is lacking.
• Under capacity of plug-ins is a significant issue at many ports.
Threats

MCC has $400 million in funding for the Philippines Relatively high electrical costs.
•
(attributes of the

over next 5-year compact, some of which could be Financing for new cold storage investment and expansion is
environment)

used for cold chain infrastructure development
• Good opportunities for investing in cold storage,
especially in the Visayas/middle part of the country.
• Some solar panels are being used but payoff time
needs to be shortened (e.g., from 7 years to 3 years).
• High annual population growth rate (1.6%) will keep
demand for food high.
difficult to obtain and restricts growth.
• Shipping product from Luzon to Visayas and Mindanao regions
is expensive and time consuming.
• Small provincial ports may not have capability for 40’ refers.
• Solar panels produce at their peak for only about 8 months due
to cloudy weather and typhoons.
• Philippine government does not offer incentives, tax
advantages, or subsidies for Using solar power.

MARKET ASSESSMENT: INDONESIA

Economy
Based on World Bank data, Indonesia’s real GDP growth was 5.6 percent in 2013 and declined to 4.8 percent
in 2016. Gross Domestic Product per capita was $1,263 in 2005 and $3,346 ($11,058 on a purchasing power
parity basis). Based on the CIA World Factbook, Indonesia was ranked 130th in GDP per capita in 2016 among
230 world economies. The Indonesian middle class is growing, incomes are rising, and a new generation is
seeking international food products. According to the World Bank, Indonesia is the 10th largest economy in
terms of purchasing power parity. Middle class consumers have easier access to media and internet facilities,
further exposing Indonesian consumers to various international products, activities and lifestyles. The middle-
class population grew from 37 percent in 2004 to 56.7 percent in 2013 7.

7
FAS GAIN report #1642, 12/29/16

19
 Table 5: Indonesian Macroeconomic Indicators

Macroeconomic Indicators 2013 2014 2015

Real GDP growth (%) 5.6 5.0 4.8

Real GDP per capita growth (%) 4.2 3.7 3.5

Inflation (Annual %) 6.4 6.4 6.4

Population Growth (%) 1.3 1.3 1.2

Current account balance (% GDP) -3.2 -3.1 -2.1

Source: World Bank

Although the Government has been successful in reducing poverty by cutting the poverty rate to more than
half since 1999 to 11.2% in 2015, Indonesia still struggles with poverty (28 million live below the poverty
line) and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and
unequal resource distribution among its regions. The Government seeks to develop Indonesia’s maritime
resources and pursue other infrastructure development, including significantly increasing its electrical power
generation capacity. Fuel subsidies were significantly reduced in early 2015, a move which has helped the
government redirect its spending to development priorities. Indonesia, with the nine other ASEAN members,
will continue to move towards participation in the ASEAN Economic Community, though full implementation
of economic integration has not yet materialized. 8
Figure 4: Indonesian GDP Economic Growth

Source: http://www.tradingeconomics.com/indonesia/gdp-growth-annual as reported by Statistics Indonesia

Inflation is another important indicator for the general economic outlook. As indicated in the figure below,
the Indonesian inflation rate has remained below nine percent since 2012 and has declined substantially from
about eight percent in 2015 to under four percent by the end of 2016.

8
The source for this paragraph is the CIA World Factbook.

20
 Figure 5: Indonesian Monthly Inflation Rates

Source: http://www.tradingeconomics.com/indonesia/inflation-cpi as reported by Statistics Indonesia.

Indonesia is the fourth most populous nation in the world following China, India and the U.S. Population
growth has been around 1.2 percent in recent years and the population is now nearly 260 million.
Figure 6: Indonesian Population Growth

Source: http://www.tradingeconomics.com/indonesia/population as reported by Statistics Indonesia

The Indonesian Rupiah has weakened against the dollar since July 2013. Strong domestic demand and slower
exports have increased Indonesia’s trade deficit and import growth, encouraging the Government of Indonesia
(GOI) to strictly limit food imports.

21
 Figure 7: Exchange Rate Between Indonesian Rupiah and US Dollar

Source: http://www.tradingeconomics.com/indonesia/currency as reported by Statistics Indonesia.

Over the past ten years Indonesia has seen a steady decline in unemployment from a high of about 10 percent
in 2006 to now below six percent.
Although the general economic situation has been positive in recent years and should remain so in the near
term, Indonesia is a challenging place to do business when measured in terms of the World Bank’s rankings
of 189 countries. Especially when compared to developed countries such as the US and Singapore. The
relevant categories and Indonesia’s rankings are listed below with the four lowest categories in bold.
Unfortunately, those categories are important in terms of potential investments in new cold storage facilities.
Lastly, corruption is still a problem and adds cost to doing business and in the case of food, increases the cost
to consumers and stifles demand. Regulations, such as burdensome food registration requirements also make
it more difficult and costly to import food.
Table 6: Ease of Doing Business World Bank Rankings for Indonesia with Comparisons
(Among 189 World Economies)

Category Indonesia United States Singapore

Ease of Doing Business 91 8 2
Starting a Business 151 51 6
Dealing with Construction Permits 116 39 10
Getting Electricity 49 36 10
Registering Property 118 36 19
Getting Credit 62 2 20
Protecting Minority Investors 70 41 1
Paying Texas 104 36 8
Trading Across Borders 108 35 41
Enforcing Contracts 166 20 2
Resolving Insolvency 76 5 29
Source: World Bank 2017 rankings – http://www.doingbusiness.org/data/exploreeconomies/indonesia

Trade
In calendar year (CY) 2014, Indonesia was the 8th largest agricultural export market for the U.S. with sales of
over $2.9 billion (historically the highest U.S. export value to Indonesia). In 2015, Indonesia dropped from
the 8th to 13th position as export values fell to $2.19 billion. The 2015 export decline was led by a 21 percent

22
drop in consumer-oriented goods. That included a decline in the export values of dairy products, fresh fruit
and beef. 9 In CY 2016, Indonesia returned as the 8th largest export market with exports at $2.7 billion.
Indonesia was the 22nd largest market for U.S. consumer-oriented food and beverage products exports at $431
million in CY 2016. This was down by over $150 million from an historical high of $587 million in 2014.
However, U.S. consumer oriented (which include all categories requiring cold storage) exports to Indonesia
remain a strong prospect for future export growth given consumer familiarity with American brands and the
steady expansion of the country’s retail, foodservice, tourism and food processing sectors. Although prospects
are good for increased growth in imports of U.S. food and agriculture products, the product registration (ML)
requirement remains time consuming and bureaucratic, although significant progress has been made. Issues
pertaining to food labeling remain complicated and unclear.
Fresh fruit were the single largest temperature-controlled product exported in value terms to Indonesia in 2016
from the United States (see Table 7, below). Following a distant second and third were processed vegetables
(mostly frozen potato products) and beef.

Table 7: CY 2016 U.S. Exports of Selected Chilled and Frozen Products to Indonesia

Million
Product
US$
Fresh Fruit $81.5
Processed Vegetables * $40.1
Beef $39.4
Poultry $14.8
Pork $1.4
Fresh Vegetables * $1.2
TOTAL $178.4
Source: U.S. Census Bureau Trade Data * Mostly potatoes

Selected temperature-controlled food and agriculture products imported into Indonesia include fresh fruits and
vegetables, frozen fries, and beef. Some poultry and pork are also imported but not at the same level as those
previous mentioned products. An overview of import suppliers and market share follows for those products.
Table 8 shows the market share and ranking for the key countries that supply Indonesia with selected products
that require temperature-controlled handling and storage. China followed by the United States are the two
dominant suppliers across the board. China is the number one supplier of apples, pears, fresh fruit and
vegetables, and the number two supplier of pork and fresh potatoes. The U.S. is the number one supplier of
pork, table grapes and frozen fries, and number two supplier of poultry and apples. Malaysia, Australia, and
Canada are the number one suppliers of poultry, beef, and fresh potatoes, respectively. Australia (table grapes
and fresh potatoes), Canada (fresh potatoes and frozen fries), New Zealand (beef), and Thailand (fresh fruit)
are also important suppliers of some products. A summary analysis of the market situation for U.S. exports of
the selected products in Table 8 is provided below the table.

9
FAS GAIN report, Indonesia Exporter Guide, Exporter Guide Update, #ID1642, 12/29/16.

23
 Table 8: Ranking of Top Suppliers of Selected Temperature Control Products to Indonesia

Table Fresh Fresh Fresh Frozen

Country/Product Poultry Beef Pork Apples Pears
Grapes Fruit Vegetables Potatoes Fries
Australia 1/72% 2/20% 2/5% 3/20%
Canada 1/24% 2/22%
Chile 5/11%
China 2/15% 1/70% 3/18% 1/87% 1/48% 1/82% 2/21%
Germany 4/11%
India 2/5%
Malaysia 1/56% 3/13%
Netherlands 3/17%
New Zealand 2/22%
Peru 4/12%
South Africa 3/5%
Thailand 2/15%
United States 2/40% 3/6% 1/64% 2/25% 1/32% % 5/9% 1/50%
Source: Global Trade Atlas data by FAS Indonesia. Based on 5-year Average of US$ Import Value, 2011-2015.

• Fresh Fruits: Indonesia imports most of its fruit from China, Thailand and the U.S. Imported fruits from
Thailand include lychees and durians (tropical fruits). China mainly exports apples, pears, citrus fruits
and table grapes, while the United States’ top fruit exports are table grapes and apples.
• Frozen Potato Products: The vast majority of frozen vegetable imports are frozen fries for the quick
service restaurant (QSR) sector. The U.S. dominates the market with a 50% share followed by Canada
with a 22% share then the Netherlands close behind with a 17% share.
• Beef: The imported beef market is dominated by Australia which also exports live cattle to Indonesia that
are then fattened and slaughtered. Australia controls a commanding 72% of the imported beef market
followed by New Zealand at 22% and then the U.S. at only 6%.
• Poultry: Although Ministry of Trade regulation 59/2016 and the Ministry of Agriculture regulation
34/2016 allows the import of whole poultry carcasses into Indonesia, they do not issue import licenses,
resulting in a de facto ban. However, Indonesian import statistics show that some poultry meat is making
its way into the country from Malaysia (56%) and the U.S. (40%).
• Pork: Like poultry, not much pork is imported due to the predominantly Muslim population that does not
consume pork products. The U.S. controls most of the imports with a 64% market share followed by
China and Malaysia.
• Fresh Vegetables: China is by far the major supplier of fresh vegetables to Indonesia with a market share
of 82%. India supplies a small residual amount.
• Fresh Potatoes: The fresh potato import market is very competitive with no real dominant supplier.
Canada has been the number one supplier on average over the past five years with a 24% market share
followed closely by China (21%) and Australia (20%).
Potential for US products
Like the Philippines, Indonesia provides several opportunities for U.S. food and agriculture exporters. Over
the five-year period from 2011-2015, imports of selected temperature-controlled products (apples, table
grapes, beef, frozen potato products, fresh potatoes, and pork) from the U.S. together averaged just over $121
million reaching a high of $158 million in 2014. If the current trends continue, imports of these products are
forecast to reach approximately $170 million in 2020. At the same time, the current value of U.S. beef and
frozen potato (primarily frozen fries) products are the next highest value of imports with frozen potato products
trending up and beef trending down. Imports of fresh potatoes and pork are also trending slightly upward, but
the current values are relatively low.

24
 The individual commodity tables on the following pages were prepared using Global Trade Atlas annual
import data (value in US dollars) provided by the FAS office in Jakarta. The market share pie charts in each
case are based on the average value of imports over the five-year period among those major suppliers
identified. The major suppliers selected in each case accounted for between 90-95 percent of total imports
during the period.
Opportunities for Global Cold Chain Alliance and U.S. Companies
Collaboration with ARPI: The Indonesia Cold Chain Association (ARPI) has a large membership from all
areas of the cold chain. For interested GCCA members there should be opportunities for participation and
investment. In case of such interest, initial contacts may be obtained from ARPI or GCCA.
Education and training in transportation and logistics: Education and training is an area in which the
GCCA network could cover relevant programs. Lack of proper training in the transport and logistics field is a
key factor missing throughout the cold chain transportation and logistics field in Indonesia. Education should
focus on transportation and logistics, specifically logistics management function, driver training, technician
training with the intention to reduce the risk of equipment failure and subsequent product spoilage.
Growth market for transportation equipment: US refrigerated transportation equipment has a strong
market potential in Indonesia especially for GPS monitoring, temperature data loggers, and electronic product
seals. Conventional 53’ or smaller reefer semi-trailers are not widely used in Indonesia, but preliminary
research indicates that there could be a demand for certain longer routes and operations. Partnership
opportunities with key Indonesian transport operators may offer an interesting potential in an expanding market
for cold chain transportation and logistics in the country. Consolidating loads by different processors or their
distributors could generate large enough combined loads for reefer truck semi-trailers to be used efficiently,
and a selling point is the fact that the US style reefer trailers have very robust, independently-driven diesel-
powered refrigeration units. Capital is a problem for smaller to medium size road transport operators (SMEs),
and this may open the potential for introducing US partners and their lenders and/or equipment lessors to
participate in the business.
Cold storage at Cikarang Dry Port: There could be an opportunity to develop a major 3PL cold storage
within the CDP outside of Jakarta and in other future similar dry ports. CDP, a privately held company, will
entertain the concept of 3PL modern cold storage, with cross-docking, trans-loading for imports & exports.
This is a perfect model for new and different import procedures including eliminating container ‘dwell’ time
at the ports. With few 3PL cold chain storage and supply service options, the addition of a Cikarang Dry Port
Cold Storage, Logistics and Multiple services facility would set the stage for the most efficient cold chain
operations in Indonesia to accommodate the demand for high capacity high-quality facilities for handling both
import and export movements in the cold chain.
SWOT Analysis of Indonesia Cold Chain Sector
Table 3: SWOT Analysis of Indonesian Food and Agriculture System

Helpful Harmful
to achieving the objective to achieving the objective
Strengths Weaknesses
• Economic growth is strong, with a growing middle class and • A large share of population is still very poor with weak
(attributes of the system)

per capita income purchasing power for a majority.

• Very large population (4th largest in the world). • Local production is insufficient for beef, fresh fruit and
Internal origin

• Local production of food and agriculture is adequate for
some staple food products.
• Growing consumer demand for safe and high-quality food is
driving demand for imported food and supporting the
proliferation of malls and modern retail/supermarkets.
• Fast-paced modern living yields demand for convenience
foods.
• Distribution system on island of Java is improving.
vegetables, dairy products, tree nuts, and pet food.
• Infrastructure, including ports and cold storage facilities outside
of Java are poorly developed and insufficient for demand
• Some buyers do not handle/store chilled/frozen products
correctly.
• Complex and non-transparent import regulations.
• U.S. faces strong competition with other suppliers including
China, NZ and Australia with higher freight cost and longer
delivery time compared to competitors.

25
 • Rapid growth in modern retail sector with Japanese, Korean
and Western restaurant chains as well as tourism.
• Awareness exists of quality and safety of U.S. products.
• Significant importer of U.S. chilled/frozen products.
• Generally low import duties.
• Large investments are targeting improvements of the key
infrastructure in ports with one new deep-water port project
nearing completion (Tanjung Priok or Port of Kalibaru).
• Container traffic growth near 10.0 million TEU.S. today from
only 2.5 million TEU.S. in year 2000.
• Private sector port operators and service providers may enter
in-port management with FDI limits of up to 63%.
• Java KALOG double-track rail system is providing 18-hour
container unit-train transit between Surabaya and Jakarta
versus 28-36 hours via road.
• New transport and equipment potential exists
• FDI restrictions have been removed for investments in cold
storage and associated facilities.
• Strong government interest in expanding modern cold storage
facilities with tax incentives for foreign investors of cold
storage facilities
• Modern supermarkets and retailers in major cities are Using
good cold storage practices to store and distribute
• Abundance of labor
Opportunities
• MCC has funding for Indonesia over the next 5 years, some
of which could potentially be used for cold chain
infrastructure development.
• New subway/rail system is being built in Jakarta that could
reduce traffic problems there.
• Cold storage investment potential exists for islands outside
of Java with private sector opportunities in infrastructure
investment
• Moderate annual population growth (1.2%) will maintain
strong demand for food.
(attributes of the environment)
• Continued strong growth in modern retail, HRI, and
tourism sectors will increase demand for imported product.
• Construction/upgrading of out ports possible in PPP
External origin
scenarios.
• Huge population and growing economy offers a strong
growth scenario for logistics operators
• Rising consumer economy positively affecting growth in
food distribution
• Fast food franchising
• Training programs developed by GCCA provide the best
opportunity for the association to get closer relationships
across the cold chain industry.
• Expansion of cold storage facilities
• International companies can now own the following
percentage of an Indonesian business in these industries:
o Air cargo services sector – 67 percent (increased from
49 percent)
o Warehouse distribution – 67 percent (increased from 49
percent)
o Cold storage – 100 percent (increased from 33 percent)
• Education for growing cold storage market
• Distribution of imported products is concentrated in Metro
Jakarta and only a few other major cities
• Nationwide, cold storage capacity is inadequate which means
demand is high and impacts prices of stored products.
• Substantial traffic congestion near ports in Jakarta and to a lesser
extent in Surabaya, is a significant problem.
• Local training for labor and managers at all levels is lacking.
• Restrictive food registration and labeling requirements.
• Slow progress in lending and project implementation.
• FDI limited to 49% for foreign international port operators;
restricts access to better management and operational
efficiencies.
• Long container ‘dwell’ time is increasing port costs
• Rail systems on islands of Sumatera and Sulawesi function but
are primarily used for bulk cargo transport and Java construction
of a continuous toll-road system is years away
• Power is unreliable in in certain areas so cold storage facilities in
rural areas require backup generators
• Many facilities have insufficient docks and truck access
• Shortage of trained refrigeration technicians
Threats
• Relatively high electrical costs.
• Financing for new cold storage investment and expansion is
difficult to obtain and restricts growth.
• Complex import regulations and requirements likely to remain
in the short to medium term.
• Stated goal of self-sufficiency in food production could lead to
restrictive import policies and regulations.
• Restructuring of the Gov’t PELINDO port control by bringing
in private sector investments is slow in implementation
• Most ports are slow in improving navigation depths
• Domestic shipping lines compete for outlying island shipping
routes, resulting in small freight volumes and inadequate
profits
• Over-regulation, un-written rules and corruption
• Entry of ‘outside’ operators that purchase and dump reefer
trucks into the market
• Difficulty in road improvement
• Failure to use good site selection procedures
• Failure to improve dock design
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FINAL RECOMMENDATIONS

Philippines
1) The Government and the private sector should continue to improve transport and logistics infrastructure
in general, but particularly where this can aid in improving the cold chain throughout Luzon and in the
Archipelago of islands in the Philippines.
2) One program should focus on regional logistics hubs, such as the Laguna dry port facility, located in the
south industrial section of Manila. Such a facility should incorporate cold storage with an added service
facility for refrigeration unit maintenance, check-out, and PTI functions. This set-up would provide much-
needed logistical support to importers and processors in the local region by reducing truck turn-around
time and thereby accelerating container movements.
3) With ever increasing container volumes, there is also talk about re-activating a past rail-service between
MICT and Laguna, which would be considerably more efficient than the one-truck-one-container system
dominating transport today. Industry groups should launch efforts to accelerate this rail-service.
Specific Recommendations
1) Training, Education, and Technical Assistance. The following topics have all been identified:
a. General understanding of all the critical issues and concepts involved in moving perishable
products.
b. Understanding of the management of the cold chain in imports and domestic flows of products.
c. Instruction in proper loading practices for perishable products moving in and out of cold storages.
d. Effects of temperature abuse once the product has been loaded to the truck and is in transit.
e. Ability to describe the process for documenting temperature abuse for product(s) in transit.
f. Ways to maximize the efficiency and profitability in cold chain transport and logistics.
g. Ammonia Safety Training to cold storage operators and food processors.
h. Provide a Refrigeration Training Center similar to the Garden City Ammonia Program in Garden
City, Kansas.
i. Provide guidance on operating and maintaining freezer and chilling equipment to supermarkets
and other food retail outlets.
j. Provide Food Safety and Quality education/training targeting mayors, local government officials,
and retailers (and consumers at the point of sale) on the value of cold chain for handling and
storing food and ripening fresh fruit as well as farmers and first handlers for domestic products.
Training must include basic hygiene training and education in public wet markets; for example,
using clean water, and stainless steel. TV and social media are also good venues for consumer
education efforts to increase knowledge of food safety/quality and value of the cold chain. For
retailers and traditional wet/Mom and Pop markets, training on in-store handling and management
of perishable products is needed in the form of videos and photos versus written documents or
training manuals.
2) Finance and Investment.
a. CCAP should work with the PPA and government to encourage a program of coordination and
facilitate private sector investment, particularly in the development of efficient RoRo ramps and
staging areas in key locations where high density of traffic can justify such investments. The PPA
has been fast-tracking policies that allows for private sector investors to participate in the system
infrastructure development and investments. Initiative by private sector transport and logistics
companies is needed to achieve optimal results.
b. Provide soft loans for prospective cold storage facilities tied to US-made refrigeration equipment.
c. Consider providing/financing mini-freezers for stalls and/or shared cold storage areas at key
locations in wet markets to greatly improve shelf-life and food safety. Perhaps could be funded in
part under the MCC Compact or other programs.
3) Collaboration with CCAP.
a. Coordinate with CCAP to help the government in formulating the PSM and Ammonia Safety
Training as a requirement for operating a refrigeration facility.

27
 b. Assist CCAP to partner with existing stakeholders and authorities to leverage staff resources,
identify and recommend facilities financing options, and maximize training and education
coverage/scope, especially outside Luzon into Visayas and Mindanao. The FAS office in Manila,
MCC, Winrock, local Chambers of Commerce, Universities, and farmer coops should be
considered as potential partners. There may be lessons learned from the Danish program (Danish
International Development Agency or DANIDA).
c. GCCA should coordinate with CCAP to explore the possibility of establishing an ASEAN regional
Cold Chain Development Team or Chapter that would focus on identifying technical needs and
then developing technical training and capacity building education modules. Training for dealing
with cold storage challenges during disasters (floods, typhoons, earthquakes, etc.) should be
included.
Indonesia
Above all, training is needed in Indonesia to enhance the cold chain. Interview and observations revealed a
lack of understanding of the critical issues and concepts involved in moving perishable products. A better
understanding of these issues will help the owners of the facilities to maximize the efficiency and profitability
in cold chain transport and logistics, which will encourage growth in the sector.
1. Training, Education, and Technical Assistance. The topics below have been identified as training needs.
It is recommended to partner with modern and sophisticated cold storage operators in Indonesia to assist
with training design and delivery. Lotus in Bali, PT Indoguna in Jakarta, and PT Pangan Lestari in
Surabaya would be examples.
a. Education, training, and discussion workshops led by respected international economists and other
professionals to bring together appropriate Indonesian Government officials and food importers,
distributors, retailers, and processors that identifies existing trade restrictive policies and provides
forums for discussion of how to change those policies for the benefit of Indonesian businesses and
consumers. The training should also identify and cover regulations that have a negative impact on
the building and construction of cold storage facilities and supermarkets.
b. Technical assistance and training for local staff and laborers in handling of product throughout the
cold chain from point of import, distribution and retail. Guidance is needed in operating and
maintaining freezer and chilling equipment in supermarkets and other food retail outlets.
Information and training on the updated warehouse management/inventory systems is also needed.
c. Education and training on shipping perishable products by rail and by truck. The effects of
temperature abuse once the product has been loaded and is in transit should be a focus of this
training so that participants gain the ability to describe the process for documenting temperature
abuse for products in transit. PT Kertea Api, the major operator of public railways in Indonesia
that is completely owned by the government and pays track access charges to the government,
would be the primary company targeted for the rail training.
d. Training for technicians to maintain and repair cold storage equipment. Consider working with
universities to develop curriculum and degrees to increase the number of graduates that can work
in this area. Cold storage refrigeration should include refrigeration basics, components,
refrigeration process, refrigeration equipment, refrigerants, load factors, temperature monitoring,
humidity control, and other controls.
e. Training and assistance on port management for handling containers, especially for the smaller
ports including Medan as well as ports at other islands such as Sulawesi, Kalimantan and the
Moluccas.
2. Information Needs. There is lack of understanding of bonded warehouses. Information on the structure
and potential benefits should be made available to appropriate Indonesian Government officials and
existing cold storage companies. This could be a topic for discussion in an open forum.
3. Cold Storage Design. Due to the shortage of skilled design build expertise in-country, existing cold storage
warehouses would benefit from individual consultations. Where possible, when planning for new facilities,
plans should be reviewed by international experts. Member of CCAP and the GCCA have access to experts
through member resources. The design phase must explain site selection, floor plan, rack plan, material

28
 handling equipment selection, and site design. The building design must include aspects for structure,
insulation systems, the dock, concrete floors, rack systems, refrigeration, and electrical systems.
4. Transport. Due to continuing deterioration of road infrastructure from overweight trucks, it is
recommended that truck scales and efficient controlling authorities be developed. Additionally, in some
cases, large, multizone trucks should be utilized, which would allow for a variety of products to be
contracted, all kept in their appropriate temperature zones in the same shipment.

PROJECT PERFORMANCE MEASUREMENT AND GOALS

Philippine Performance Measures and Goals

Description of Performance Measures Goals Actual

10 11
Phase 1: Establishment of a baseline for U.S. exports Value Value Value
Pork $92 $110 TBD
Poultry Meat $82 $95 TBD
Processed Vegetables (primarily frozen fries) $64 $80 TBD
Fresh Fruit $58 $75 TBD
Beef $55 $75 TBD
Phase 1: Number of new stakeholder contacts 25 44
Phase II: Number of key stakeholders trained in Cold Chain Management
15 TBD
best practices
Phase III: Number of individuals/companies that express interest in
joining a regional or national cold chain association (on a fee-basis) 7 TBD

TBD = To Be Determined

Indonesian Performance Measures and Goals

Description of Performance Measures Goals Actual

Phase 1: Establishment of a baseline for U.S. exports Value 12 Value 13 Value
Fresh Fruit $70 $100 TBD
Processed Vegetables (primarily frozen fries) $36 $45 TBD
Beef $21 $40 TBD
Phase 1: Number of new stakeholder contacts 25 44
Phase II: Number of key stakeholders trained in Cold Chain
15 TBD
Management best practices
Phase III: Number of individuals/companies that express interest in
joining a regional or national cold chain association (on a fee-basis)
7 TBD

TBD = To Be Determined

10
$U.S. million five-year average (2012-2016) from Philippine BICO report in Table ##
11
$U.S. million five-year average (2017-2021) as forecast by SIAM Professionals based on trend analysis/other factors
12
$U.S. million five-year average (2012-2016) from Indonesian BICO report in Table ##
13
$U.S. million five-year average (2017-2021) as forecast by SIAM Professionals based on trend analysis/other factors

29
TEAM
Kent Sisson is a retired United States Department of Agriculture (USDA) FAS Foreign Service Officer with
a background in the marketing of US agricultural products. For 27 years, Mr. Sisson participated in USDA
programs designed to increase exports of US food and agricultural products. As founder and President of SIAM
Professionals, LLC, a private consulting company, Mr. Sisson maintains close contact with a variety of United
States agriculture trade associations (cooperators) including those supporting this assessment. He has
conducted similar assessments in Pakistan, China, and Angola and has lived in Indonesia and Malaysia while
working for the USDA.
Arne Martinsen received his education in engineering and marine transportation from his native country,
Norway. Once in the United States, he worked as the West Coast regional manager for Carrier Corporation’s
Marine division. As a consultant, his major infrastructure development assignments have included a banana
export terminal in Port of Guayaquil (Ecuador), a refrigerated terminal for export of non-traditional fruit at
Puerto Cortez (Honduras), and an automated refrigerated export terminal in Puerto de Sagunto (Valencia,
Spain). He has conducted reefer terminal feasibility studies at the Port of St. Petersburg (Russia) and in Ho
Chi Min City (Vietnam). Covering refrigerated transportation issues, Mr. Martinsen participated on a USDA
“Cold Chain Seminar Team” to South Africa and to Indonesia. He is a public member on GCCA’s Board of
Governors.
Bill Vargo is a senior vice president for AGRO Merchants Group North America, responsible for risk
management, safety, regulatory compliance, and quality. Prior to the sale of Nordic to AGRO Merchants
Group in 2015, Mr. Vargo served as the director of risk management focused on safety, resulting in dramatic
benefits to the organization. Prior to Nordic, he served in a corporate risk & logistics role and several
operations roles in the food distribution industry. In total, Mr. Vargo has had more than 30 years of experience
in the industry. He is based in Atlanta, GA, home of the company's North American headquarters.
Cesar Luis Lim completed his education in mechanical engineering in the Philippines as well as an industrial
refrigeration course in England. He received the 2009 ASHRAE Milton W. Garland Commemorative
Refrigeration Award for Project Excellence. Since 1975, Mr. Lim has worked in the Philippines for
refrigeration companies such as PHILACOR, Koppel, Atlantic Gulf & Pacific Co., J & E Hall Refrigeration
and most notably, San Miguel Corporation (the largest brewing, food, and beverage company in the
Philippines) as a consultant and process engineering design manager for 28 years. He is now an engineering
consultant for Kilojoule Consultants Int’l. Co., specializing in cold storage, breweries, CO2 recovery, food,
beverage, and commissary facilities in the Philippines. He is formerly the Refrigeration Committee chair and
consultant of ASHRAE in the US and is currently an ASHRAE Standards Committee and Nominating
Committee member. Other memberships and qualifications include ASHRAE Fellow, IIAR Member,
Philippine Society of Ventilating, Air Conditioning and Refrigerating Engineers (Vice President), External
and Philippine Green Building Initiative, GREEN Rating evaluator, accredited assessor, and accredited design
professional.
Dominador G. Castro, Jr. (Jojo) is a licensed professional mechanical engineer. He is the majority
shareholder, president and general manager of the Redcoin Trading Corporation, a marketing firm for
ventilation products, specialty freezer doors, and refrigeration equipment. He is the managing partner and
director of Kilojoule Consultants Int’l. Co. and Ceza Konsult, Inc., two consulting companies dealing in cold
storage facilities design and complete design of health care facilities. Mr. Castro is also the consultant to Castle
Industrial Systems, Inc. a specialty ventilation fabrication firm. He has been a piping designer for an American
design and QA/QR company at the Philippine Nuclear Power Plant, a senior engineer at the Metals Industry
Research and Development Center doing macro-economic sectoral studies of the Philippine mechanical
engineering sector, and a R&D supervisor, business development manager and sales manager of the largest
hardware and industrial products company in the Philippines. Mr. Castro completed a mechanical
engineering BBM/MBA degree at Pamantasan ng Lungsod ng Maynila (University of the City of Manila)
while on a scholarship.

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Marc Anthony D. Dizon is currently the General Manager of Koldstor Centre Philippines, Inc., a third-party
temperature controlled logistics provider. He is also the current CFO of Ideamorphosis, Inc., a temperature-
controlled transport service provider. His past professional affiliations include supply chain manager for
McDonald's and a senior executive for Nestle Professional. In his spare time, Mr. Dizon conducts food safety
and good warehousing workshops for the Cold Chain Association of the Philippines.
Gary Holt is a retired US Marine where he spent time in both the Far East and Middle East regions on various
assignments. In addition, Mr. Holt has 27 years of work and management experience in the food warehousing
and distribution industry. The last 17 years have been specifically in the Cold Chain industry working with
Nordic Logistics and Warehousing, now a “Proud member of the AGRO Merchants Group” where he has
held positions from warehouse manager to senior vice president of Southeastern distribution. His area of
expertise during the GCCA project was in food safety compliance through warehouse layout and operational
processes and use of warehouse management systems.
Richard Dowdell is a civil engineer with 36 years of experience in cold storage design, construction, and
maintenance. He has served as project engineer, project superintendent, project manager, and vice president
for firms that specialize in cold storage design/build construction. He was the vice president of engineering for
a large North American cold storage company for 12 years with responsibility for construction and
maintenance of facilities. Since 2012, Mr. Dowdell has provided international cold storage consulting services
in 15 countries. His experience includes both freezers and coolers that extend shelf life and preserve quality
for fruits and vegetables.
Ir. Hasanuddin Yasni completed his education in food technology engineering (major study in seafood) in
Indonesia and received a master’s degree in Management. He was the project manager, farm manager, cold
storage plant manager and director from 1991 to 2005 working for various Indonesian companies including
East Kalimantan Fertilizer Corp, Japfa Comfeed Corp, and PT Pengembangan Usaha Tani. He has taken
HACCP and leadership courses and has been the executive director of the Indonesian Cold Chain Association
since 2006. As the Executive Director, he has attended cold chain international events (in many Asian and EU
countries) and participated as a conference speaker at those conferences. He has also been involved in many
Indonesian national projects including a USAID cold chain project, national fruit logistics, animal logistics for
Indonesia/Netherlands, National Agency of Food and Medicine Surveillance, and Ministerial projects in need
of cold chain expertise. Mr. Yasni has also served as a guest and examination lecturer at Bogor Agriculture
University, Prasetya Mulya Management University, and the University of Indonesia.
Amanda Brondy did not travel with the teams but provided substantial technical and logistical support,
guidance, background materials and information before, during and after the trips. She also participated in
writing and editing this report and acted as the overall project manager and as GCCA’s point of contact with
FAS. Ms. Brondy has more than 10 years of international development experience, a substantial portion of
which was devoted to projects in Africa, including two years living in the Democratic Republic of the Congo
(DRC). As GCCA’s Director of International Projects, she oversees the implementation of cold chain activities
for a variety of donor-funded projects and writes project deliverables for assessments, feasibility studies, and
cold chain consultations while providing overall project management.

31