According to a recent report by the Food and Agriculture Organization in 2011, one third of food produced for human consumption (1.3 billion tons per year) is lost or wasted globally. In a world where there is food scarcity, combined with an increasing population, rising oil prices and the effects of climate change all of which push food prices upwards, addressing such an issue is a growing concern amongst both developed and developing countries.
In the case of Indonesia and other developing countries the problem is food loss especially at the post harvest stage and processing stages. Lack of infrastructure, storage and cooling facilities, and financial, managerial and technical expertise in harvesting techniques are all factors that account for problems in food loss. A recent report by the Food and Agriculture Organization of the United Nations in 2011 suggests that over 40% of food losses in developing countries occur at post harvest and processing levels.
Supermarkets which have taken off in Indonesia especially after the liberalization in FDI in the late 1990s in Indonesia are major drivers of the food supply chain. The experience of foreign firms especially in developing advanced supply chains in the West has proved both useful and beneficial in the Indonesian context when adapted properly. The very nature of the supermarket business model relies on efficient supply chain management to deliver food at affordable prices to the consumer.
The most critical stride forward in the further development of FDI in this sector is the need to strengthen infrastructure outside of Java. A USAID study in 2007 noted that transportation from Thailand to Jakarta may be cheaper than West Sumatra to Jakarta. The quality and frequency of transportation as well as higher cost are factors that lead to the loss of food fit for human consumption. The effective implementation of the government’s new MP3EI Master Plan recently announced this year will be essential for supporting the growth of this sector in the regions. Establishing infrastructure connectivity across six economic corridors in Indonesia is one of the major aims of this new master plan. In tandem with better infrastructure, policies will also have to be encouraged to intensify investment in supply chain technologies and networks, in turn making investments in the regions more attractive.
In addition to this challenge several other obstacles have been cited as impediments to further foreign investment in the supermarket sector. A 2011 report by PwC highlighted issues such as a gauntlet of regulations as well as the ability of local governments to block construction of modern retail outlets should they be seen as threats to traditional markets. The latter was suggested as a threat to making the operating environment less transparent and subject to manipulation. Such issues are not unique to this sector and need to be further addressed by government regulations and policies to further encourage FDI.
However the challenge is not simply to minimize food losses which can play a big role for alleviating the impact of increased food demand. Governments are also obligated to ensure that growth is inclusive and that local producers along the supply chain do not suffer as a result of increased FDI driven expansion in the supermarket sector. Supermarkets often source from only the biggest suppliers to maximize efficiency who often have the ability to adhere to higher quality and safety standards. In addition with the advent of globalization they are no longer limited to developing backward linkages in the food supply chain given the ease and ability to source from other countries.
India, a country with similar concerns, is in the process of introducing a unique policy that in principle aims to address these two concerns. The policy, if fully implemented, allows foreign direct investment of up to 51% in multi-brand retail, in effect, allowing big retailers such as Wal Mart to enter the front end of the supermarket business. One of the important terms of this policy is that of the minimum 100 million US dollar investment required to enter the Indian market at least half must be directed towards the development of backward linkages. This policy has also stated that multi brand retailers must source at least 30% from small industry to encourage local value addition and manufacturing. The potential impact of a similar policy for Indonesia would be worth further exploration.
Another way to positively impact local players while driving the growth of supermarkets in Indonesia and to intensify investment is to force leading food firms to support wholesale markets systems and market infrastructure. For example, in China, the Ministry of Commerce in 2006 launched a 'Markets Upgrading Program', which targets the 100 leading wholesale markets and couples them with the 100 leading food firms. These firms will play the role of anchors in the wholesale market by improving the physical premises and the logistics of the wholesale markets to make them more efficient to the retail sector and more accessible to farmers.
From the above argument it is clear that minimizing food loss should be a significant priority for the Government of Indonesia and that this cannot be achieved without further support from the private sector. Foreign Investment is one vehicle that can provide valuable expertise and capital to achieve the goal of reducing food loss and as more firms look to shift their priorities and plans for growth in the Asian region can contribute to Asian and home economies alike.
Supermarkets and Food Security 
