August 28, 2013

 

Indonesia expresses interest in Australian cattle stations

 

 

In line with Indonesia's plans to shore-up security of beef supply, the country's Ministry of State Owned Enterprises has confirmed it is close to making investments in Australian cattle stations.

 

Wahyu Hidyat, the secretary of Indonesia's Ministry of State Owned Enterprises, told last week's IndOz beef and trade forum in Brisbane that state owned fertiliser company PT Pupuk Indonesia has been selected to oversee the purchase of Australian cattle breeding operations.

 

Hidyat said it was still too early to discuss the likely scale of the planned property acquisitions, but confirmed that due diligence studies have supported the move to invest in Australian properties.

 

Indonesia's State Owned Enterprises (SOE) Ministry oversees 141 state-owned enterprises which are tasked with driving economic development and managing supply and consumer prices across a range of commodity and product areas.

 

The 141 enterprises include some of Indonesia's largest banking, telecommunications, energy, infrastructure, and agricultural companies, and account for annual revenue of US$159 billion, or 18% of Indonesia's total Gross Domestic Product.

 

Hidyat said food security has become a key area of focus for the ministry, with several SOE's responsible for maintaining safe levels of food stock for the nation. For example one State-owned-enterprise, Bulog, is responsible for managing supplies of key staples such as rice and sugar to keep prices at affordable levels for consumers.

 

Earlier this year, with a widespread shortage of beef in Indonesia forcing consumer prices to record heights, Bulog was instructed to oversee the management of beef supplies in the market as well.

 

Under that commission, it was given additional permits to import a further 3,000 tonnes of boxed beef into Indonesia in an attempt to reduce pressure on prices during Ramadan.

 

Direct SOE involvement in Indonesia's cattle and beef supply chain includes a range of Government-owned feedlots, abattoirs, meat distribution lines and retail meat brands.

 

Fourteen SOE-owned palm oil plantations are also involved in a large-scale cattle fattening programme in partnership with partners small farmers. The partnership utilises secondary product such as the palm fronds and pasture within plantations to fatten cattle, and last year turned off 20,000 cattle in total.

 

Hidyat said the move to buy cattle stations in Australia was a further measure undertaken by the ministry to fulfil Indonesian president Susilo Bambang Yudhoyono's directives to improve security of beef supply.

 

Hidyat said due-diligence studies recently completed by PT Pupuk Indonesia confirmed that cattle farming should be conducted in Australia because it was more efficient, and cattle fattening and processing should be conducted in Indonesia, because of the efficiencies afforded by lower labour costs and because of the potential to re-export processed beef from Indonesia to other Muslim countries.

 

Under the planned formation of the ASEAN Economic Community in 2015, the 10 ASEAN member countries are set to enjoy free movement of goods and services between their borders. If and when that happens, Indonesia sees an opportunity to become an exporter of Halal-accredited beef to other Muslim countries in the trading zone, including re-exporting Australian beef imported to Indonesia as live cattle and processed in its abattoirs.

 

Hidyat said cattle grown on Indonesian-owned breeding properties in Australia would be imported to Indonesia for fattening by small and medium farmers, and processed through Government-owned abattoirs and meat distribution facilities.

 

Indonesian media has recently reported comments from State Enterprises Minister Dahlan Iskan that Indonesia plans to buy one million hectares of Australian cattle country. However, in response to questions about likely scale of purchases, Hidyat said it was too early to offer a specific figure.

 

Hidyat said the planned purchase of breeding properties was motivated by 'the excellent quality and competitive advantage' of breeding operations in Australia.