Thousands of Islands, Many Fish

APRIL 19, 2011  THE WALL STREET JOURNAL

By ERIC BELLMAN

JAKARTA, Indonesia—The world's biggest source of tin and thermal coal now wants to dominate the global market for another vital commodity: fish.

While the annual catch in this Southeast Asian archipelago of 17,000 islands already is the world's third-largest, inadequate infrastructure means Indonesia isn't among the world's top 10 exporters. The government is trying to change that by modernizing its roads, ports and processing facilities while aiming to double the country's haul of tilapia, catfish, lobster and other seafood.

"Wherever you have water, you have fish, and two-thirds of our country is water," says Fadel Muhammad, Indonesia's minister of maritime affairs and fisheries. He started the expansion program—the "Blue Revolution," he calls it—which seeks to boost Indonesia's fish exports by more than 70% over the next three years.

Fishery Zones for Indonesia

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Eric Bellman/The Wall Street Journal

A fisherman at Koto Panjang Lake in the Kampar district on the western island of Sumatra.

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Indonesia caught and farmed 6.7 million tons of fish in 2008, according to the United Nations Food and Agriculture Organization. China produced 47.5 million tons and India about 7.6 million tons.

While Indonesia's expansion largely is aimed for domestic consumption, success at expanding could shake an industry that already had been reconfigured by the rise in recent years of Thailand, Vietnam and other countries leveraging low-cost labor to undercut fishing businesses in developed countries. American fishermen have complained that Asian producers are dumping low-cost seafood on U.S. markets. Thailand and Vietnam say they merely added efficiencies to the industry.

A bigger Indonesian catch also could help boost global food supply amid fears that the world isn't producing enough to meet demand in emerging countries, such as China and India. The expansion of aquaculture production overseas has made seafood such as shrimp "more accessible and less expensive," says Gavin Gibbons, a spokesman for the National Fisheries Institute, a U.S. industry group.

As part of Mr. Muhammad's Blue Revolution, the government this year chose 24 cities to become special fishery zones called "Minapolitans," based on mina, the Sanskrit word for fish. The government plans to send thousands of experts to train local fishermen on how to increase their yield, deal with fish disease and get their haul to market.

State-run banks offer heavily subsidized loans and Indonesia is improving its network of refrigerated storage facilities and processing plants. The Maritime Affairs and Fisheries Ministry plans to spend close to $3 billion over the next five years on the sector. It has set up fish hospitals to diagnose the diseases that infect some fish farms and is inviting investors from China, Taiwan and elsewhere.

The Indonesian government is notorious for failing to follow through on some of its biggest plans, however. Meanwhile, environmentalists warn that fish farming hurts the environment if not properly regulated and say a boom in shrimp farming already has destroyed mangrove forests and ruined water quality in some parts of Indonesia.

Still, under President Susilo Bambang Yudhoyono, Indonesia in recent years has improved its track record of encouraging businesses and regulating growth.

The village of Koto Mesjid on the western island of Sumatra has adopted the slogan, "A fish pond for every home." It hasn't arrived yet, though around 95% of homes have new ponds carved into their front and back yards, officials say. One entrepreneur is using the eggs of his catfish to start a nursery to stock the new ponds. Nearby, fish are smoked and packaged while others are processed in a new factory.

Fish importers generally welcome any new source as long as it is safe and sustainable. But some in the industry warn that fish produced on Asian farms had traces of dangerous toxins and antibiotics, apparently the result of treating fish suffering from diseases created by living in overcrowded cages with dirty water. (Concerned about radiation contamination, some nations have halted imports of fish from Japan. The U.S. says it is rigorously testing seafood.)

The Catfish Institute, which represents American catfish farmers, says it hasn't investigated Indonesia's growing production of the pangasius, sometimes called Asian catfish. The group says, however, that some fish from Indonesia have been blocked from entering the U.S. because they were improperly labeled or contained unacceptably high levels of some chemicals.

"The U.S. farm-raised catfish industry supports free and fair trade in which all catfish and catfish-like species, such as pangasius, are raised to the same health and safety standards, for the benefit of U.S. consumers," says Jeff McCord, an adviser to the institute.

Indonesian officials say they have learned from mistakes made in shrimp farming at home and elsewhere in Asia and plan to monitor and restrict growth so it won't hurt the environment or trigger disease.

The Kampar district of Sumatra is one of the first areas that the government has chosen as a Minapolitan. The district recently set up a testing facility to diagnose fish illnesses and water quality.

At the district's Koto Panjang Lake, with more than 2,000 floating fish cages, farmers raise millions of tilapia, carp, catfish and whatever else they can sell. A line of trucks extends to the water's edge to pick up live fish in water-filled plastic bags for transport to city markets and abroad.

Ali Andre started with one cage 10 years ago and today has more than 200. He has done so well that his lake-side shack now has two floors, a karaoke machine and a garage for his BMW.

He started with little help from the government but now gets regular advice on disease, feed and marketing. He says he looks forward to the road and dock being built for the lake. He plans to add hundreds of cages and send fingerlings—young fish—across the country to start new farms.

"Life is good," he says, taking a drag of his clove cigarette. "The market is going to grow, even without the government's help."

—Yayu Yuniar contributed to this article.