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NEWS UPDATES Asean Affairs   10  December 2010

Nestle to invest US$100 million in Indo factory

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Nestle Indonesia has announced plans to invest $100 million to build a new factory in West Java to produce its popular Milo drink and Cerelac infant formula in response to growing demand as Indonesia's economy continues to expand.

Nestle plans to build its new factory in two phases. The first part is expected to see construction finish and operations begin in 2012, with the factory initially bringing in 300 new employees, and the second phase is expected to finish between 2013 and 2015.

The first phase will emphasize Milo and Cerelac production, with the second focusing on six other products that have yet to be determined.

"This significant investment in West Java, especially when coupled with our investment in East Java, means that Nestle will have the local capacity to strengthen our market leadership in Indonesia," Arshad Chaudhry, president director of Nestle Indonesia said, referring to Nestle's latest investment in a factory in Kejayan, Pasuruan, East Java.

Nestle finalized an expansion of its East Java factory in March, focusing on producing dairy products such as Dancow.

It invested another $100 million to double the factory's production capacity.

It also has a factory in Lampung that produces Nescafe products and another in Tangerang that produces confectionery goods.

The new factory will consume 10,000 tons of cocoa powder every year.

Nestle said it severed its palm oil supply contract with Sinar Mas Agro Resources and Technology in March after the crude palm oil producer violated Indonesian environmental laws.

Sinar Mas was accused of continuing expansion into rain forests and destroying wildlife habitats.

Milo and many other Nestle products contain palm oil, and the company has been under pressure to use palm oil only from certified renewable sources.

Indonesia's economy expanded by 5.8 percent in the third quarter this year compared to a year ago, and Bank Indonesia has forecast the economy to grow between 6.2 and 6.4 percent next year.

Private consumption currently accounts for approximately two-thirds of Indonesia's gross domestic product.

"Sometimes, a deficit means the government wants to boost economic growth in the long term."

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