By Sudari Pawiro

Updated version – First published on INFOFISH International Magazine No.6/2016  

Domestic production of pangasius products cannot keep up with demand, leading to legal and illegal imports from other countries, primarily Vietnam. There is serious concern that under the free movement terms of the ASEAN Economic Community, more imports will flood the market and wipe out the country's pangasius industry unless ways are found to improve its efficiency and competitiveness.

Introduction

Indonesia is one of the world's biggest markets for pangasius (Pangasius hypothalamus). Called patin, just like in neighbouring Malaysia, Singapore and Brunei is a popular freshwater fish. The country is the second-largest Pangasius producer behind Vietnam, harvesting around 385 000 (live weight) tonnes in 2019 (MMAF). With an average price of around IDR15,000 (US$1.15) per Kg, the market value could be as high as US$404 million. Unlike Vietnamese pangasius, which dominates the international market, however, almost all of the country's pangasius production is channelled to the domestic market.  

With the establishment of the ASEAN Economic Community, free movement of products, services and people across the borders is expected to be realised sooner or later. Therefore, there is concern that Vietnamese pangasius will flood Indonesia, affecting the local industry, which still lags behind Vietnam in terms of productivity and competitiveness. 

The growing domestic market for pangasius Booming pangasius production in Indonesia for the past decade resulted from strong government support and rising domestic demand. Farmed pangasius production has increased tenfold from around 33 000 tonnes in 2006 to a currently estimated volume of approximately 350 000 tonnes. According to official figures from the Ministry of Marine Affairs and Fisheries (MMAF), farmed pangasius reached a peak at 418 002 tonnes in 2014, then dropped to 319 967 tonnes in 2017, then up to 384,310 ton in 2019. Due to COVID 19 and declining domestic demand, harvest in 2020 is predicted to be lower than in 2019. 

Pangasius is farmed in several locations in Sumatra (North Sumatra, Jambi, Riau, South Sumatra, Lampung); Java (West and East Java); and Kalimantan (South and Central Kalimantan). Traditionally, the fish is very popular in Sumatra and Kalimantan and is mainly sold in wet markets in live form for household consumption. Since 2010, however, modern retail outlets in the country have seen increased sales of fresh and frozen fillets, mainly product imported from Vietnam. Besides being consumed at home (children in particular, like the fish), pangasius fillets are widely served in the catering sector, both in hotels and restaurants. Pangasius is also a cheap substitute for marine whitefish fillets (like red snapper) at banquet events like weddings. 

The retail price of frozen pangasius fillets is around IDR70 000 - 80 000/kg (US$5.4-6.2), while live pangasius at local wet markets is priced at IDR 25,000 - 35 000/kg (US$1.75-2.40) depending on the areas and season. In South Kalimantan and South Sumatra, live pangasius fetches higher prices, and it is the preferred fish for consumers there. On the island of Java, where other freshwater fishes such as common carp and gourami are also popular, pangasius fetches lower prices. The ex-farm price ranges from IDR13 000 - 16 000/kg; processing plants buy pangasius as raw materials (live form) at IDR14 000 - 15 000/kg factory gate, and later sell the fillets to supermarkets and hotels at around IDR50 000/kg (US$3.8). 

Smoked Pangasius produced in Riau is mainly exported. Salted product is sold in the local markets.  

Farming areas are usually far from urban markets in Java Island, and processing plants mainly located in Surabaya, Jakarta and Medan. The farm cost to produce 1 kg of pangasius is estimated at around IDR11 000- 12 000 (US$0.85-0.92) for a farming period of 7-8 months. After passing through agents and intermediaries, the raw material is priced around IDR14 500-15 500/kg (US$ 1.11-1.20), ex-processing plant gate. On average, some 30% of the fish yields fillets; hence each fillet costs IDR50 000/kg (US$3.85), excluding processing costs. In other words, processors need to sell at a level of at least IDR 55 000-60 000/kg (US$4.2-4.6) to cover the costs. A more significant profit margin could be generated from utilising by-products and raw material leftovers to produce fish balls or fish nuggets, the skin as crackers, and fish heads to be sold to local restaurants.  

In comparison to Vietnam, the raw material cost is higher in Indonesia, while the fillet yield is also considered lower (35% of the whole fish in Vietnam). Vietnamese pangasius processors, thanks to their large scale, can maximise the usage of by-products to be processed into various value-added products. No wonder, according to Indonesian importers, Vietnamese pangasius fillets can be imported at prices of only IDR45 000 - 50 000/kg (around US$ 3.5). Thus, it is no surprise that despite strict border control over imported seafood, Vietnamese pangasius fillets still illegally enter the domestic market. Reportedly, a few processors also re-pack the illegally obtained Vietnamese dory and label it as a local product. Under this scenario, industry players and APCI worry when the domestic market is opened up due to the AEC and the government is no longer able to protect the local market. Imported pangasius, particularly from Vietnam, would flood the market and wipe out the country's pangasius industry unless the industry finds ways to improves its efficiency and competitiveness.  

Another significant issue is that local pangasius meat is pinkish or yellowish, not as white as Vietnamese. Based on various research, the meat colour is influenced by the environment (water) and the feed and the processing method. Multiple efforts have been made, including introducing a new breed of pangasius called pasopati with whiter meat. However, farmers report increased production costs for pasopati because of its need for low stocking densities; hence its output is currently insignificant.  

Local processing companies produce around 350-400 tonnes of fillets/ month.

Raw material leftovers can be used more efficiently to produce items like fish balls.

Results of SMART-Fish 1 Interventions

Introduction of better and productive farming practices (SOPs) during the SECO funded of UNIDO's SMART-Fish 1 Programme ( 2014-2019) had significantly improved production and profitability of pangasius farmers in the Programme's locations. In Tulungagung, Muaro Jambi and Batanghari districts, the original sites of the programme intervention, 418 pangasius farmers have adopted SOP (>87 adoption rate), and their farming productivity improves by 5-10% resulting in an increase of their harvest to 6200 tons/harvest valued at IDR 96 billion (USD6.86 million). In addition to higher production, the quality of fish is better (whiter and no muddy odour), and production cost is lower due to improvement in feed efficiency. These have resulted in an increase of profit by 5-8%, amounting to IDR4.5 billion (USD318.000) additional profit to the farmers per harvest. The programme expansion or up-scaling successfully increases the number of farmers/companies joining the Programme to more expansive areas covered. Better quality of pangasius fillet at competitive prices supported by generic national branding development (www.indonesianpangsius.com) has opened up Indonesian pangasius opportunities to enter into international markets. First-ever exports of frozen pangasius steaks to Saudi Arabia by the Programme's partner PT. Adib was launched in May 2019. A total of 8 containers (172 tons) valued at around USD USD 345,000 were shipped to cater to Indonesian hajj pilgrimages. The first export's realisation reflects effective synergies and good collaboration between the government (MMAF and other ministries) and APCI members.

Summary

There are several challenges in Indonesia's pangasius industry that must urgently be addressed, particularly in light of the changes expected to take place in market and trade structures within the ASEAN Economic Community framework. Even without the AEC, any notion of ongoing government protection is not feasible in a globalised world. Improving productivity and hence, the pangasius value chain's competitiveness is a crucial first step in strengthening its foothold in the country. One way forward is for all stakeholders to collaborate to improve efficiency along the value chain and create a unique Indonesian pangasius brand compared to a product from other countries.