December 16, 2015

Interview: Franciscis ‘Franky’ Welirang - Chairman of APTINDO

Indonesia is a country of complexity - through its geography, economy and, not least, its diverse population. The root cause of this complexity is largely down to the country’s make up; of five large islands including the main one of Java that is at its centre both geographically and economically and its many thousands of smaller islands. The country has a population in excess of 250 million of which some 90 million live on Java and is proving to be one of the most challenging growth areas in South East Asia.
Franciscus ‘Franky’ Welirang is the Chairman of APTINDO, the Association of Flour Producers in Indonesia and Director of PT Indofood Sukses Makmur Tbk, better known for it division Bogasari Flour Mills which was formed in 1971 and of which at 64-year-old Mr Welirang is Director in Charge. Milling and Grain had the opportunity to meet him in Jakarta at IAOM’s 6th Annual Southeast Asia District Conference in early.
Note: Indonesia supports over 55,000 small medium enterprises (SME) processing flour base product and 200 modern big manufacturers such as biscuits, noodles and bread industries and 31 milling companies of which have flourmills  providing their own production. Future development is likely to happen earlier in the East of the country once the current economic condition improve.

To set the scene Mr Welirang, just how many flour mills does Indonesia have?
Before deregulation we had built just five flour mills from 1970. That was in the Bulog Era. In the 10 year period following deregulation in 1999, we build a further six flour mills and between 2009-2013 12 new mills. In 2014-2015 investors have built and commissioned a further eight new mills. By the end of this year we will have in total 31 mills with 26 mills on Java and 5 outside Java. Today, we are using roughly 60 percent of their combined total capacity.

Indonesia relies on wheat imports yet we hear the government is keen to focus on reducing that dependence. Can you explain the breakdown of where wheat comes from? And do you import wheat flour?
We imported a total of 7.4 million tonnes in 2014 made up of 65 percent from Australia, 21 percent from Canada and 6.6 percent from the USA. Other supply countries included the Ukraine. We also import from India, Russia and Turkey from time-to-time and today with new technologies around, such as the use of enzymes and additive pre-mixes, anything can happen in terms of where we import from. Yes, we also import flour, approximately 205,000 tonnes in 2014, with most 90 percent coming equally from Sir Lanka, India and Turkey. We are also exporting wheat flour which has seen an almost 50 percent growth in value since 2010 to US$37 million.

Was deregulation necessary in such as important food industry as flour production?
Deregulation was the best way to keep our industry growing. We have 31 large and small flour mills that had milling capacity 10-11 million tonnes of wheat for milling per year. National demand for flour-based products continues to grow and they are nutritious. We are a centre for wheat flour production in ASEAN and we can supply East Asia which will be a cheaper supply if it was available. However, our economy is a little but flat at present and therefore demands for flour is flat as well. For over 20 years we have had an average growth rate of around five percent per annum. The real question for us is when is that going to pick up again?

The government would like to believe Indonesia could become self-sufficient in wheat production. How realistic is this goal?
That’s impossible. The priority for the country is to produce rice and its second priority is for us as a country is to produce corn. We import approximately 7.4 million tonnes of wheat annually and this is quite a sensitive area for the government. We might not be able to become self-sufficient in wheat, but in some area wheat could be grown. For example, we should try to produce tropical wheat varieties. And we do hope the government moves in that direction. We have government research centres that have never been pushed. Our industry promotes an alternative at village level food, and we could plant more specialist wheat varieties.

Are multi-nationals assisting in the development of flour milling in Indonesia?
We see the industry moving outbound rather than remaining inbound. Nestle & Mondelez, for example, are here in the country and many other global industry players. In fact, they are all here and it has made us a very competitive market place; the availability of modern mills to make flour and flour-based products very competitively for the consumer is proving critical. What makes prices rise and fall in the main is the international price of wheat and the exchange rate with our Indonesian Rupiah. They have a significant effect given that raw material costs are 85 percent of our production costs.

How do you see the role of flour in nutrition?
One of the cornerstones of flour milling in Indonesia is providing nutrition for our people. Flour provides the carbohydrates people need and is only second to rice. It is very important and is specifically supplied through the variety of products consumers can buy today. Most importantly, flour provides carbohydrates at a price lower than that of rice and is higher in its protein content than rice as well. Flour fortification is a must in Indonesia. We have been fortifying since 1998 as advised by WHO and UNICEF. We fortify our flours with a range of nutritional additives including iron, folic acid and vitamins. That’s one of the main reasons why the demand for flour is increasing in Indonesia.

You have spoken previously about the importance of training? What role do you see the association playing in developing a training facility in Indonesia?
Training is very important. We have 31 major mills using new technology in Indonesia and no training or educational institute to support millers. There are some nine mills in Malaysia, 16 in The Philippines and eight in Thailand. As a region we need to upgrade our knowledge all the time on flour technology. Not necessarily on the principles of milling wheat itself, but the wheat flour technology, the use and application of pre-mixes and enzymes, etc. With this knowledge we can become a service provider for ASEAN countries themselves.
We could liberalise flour production across the region, to countries such as those that are liberated including Philippines and Vietnam and to help liberate those such as Thailand and Malaysia that are still protected.

And in five years?
We could be leading the flour milling Industry and its development across ASEAN.


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