Ever since campaigning for the presidency, Joko Widodo or Jokowi has consistently pointed to nine priorities which he has touted as key to a better Indonesia. Known as Nawa Cita, the agenda includes bureaucratic reform, corruption eradication and sweeping changes to economic policy.<\/p>\n
One of these priorities on the agenda is to achieve economic independence by way of food self-sufficiency in key crops by improving irrigation channels, set up banks for farmers and small-sized industries and tighten the sale of shares by domestic banks to foreign investors. Another priority is to achieve energy sovereignty by curbing oil imports, increasing oil-gas exploration domestically and overseas, and improve the efficiency of state-owned enterprises such as oil and gas company Pertamina and electric company PLN.<\/p>\n
President Jokowi indicated towards the end of his election campaign that he intended to adhere to the principles of the existing Action Plan to achieve food security for Indonesia through self-sufficiency measures. Jokowi’s declaration that he will introduce an import-substitution policy is a move that differentiated him from the departed Yudhoyono government. This strategy aims to lessen the country\u2019s need for imports by utilising domestically sourced commodities, services, technologies and industries.<\/p>\n
However subsequent policy settings have been very uneven and not only shocked Australian industry, but caused instability in the market and reflected very poor policy making, not of a style to engender confidence. Indonesia\u2019s decision earlier this year to scrap its controversial 10 percent value-added tax (VAT) on imported cattle imported from Australia, and its fluctuating decision-making on import quotas is a perennial challenge for the live export sector and has caused major concern to everyone along the live export supply chain.<\/p>\n
There is little doubt that the proposed tax and quota cut reflects a push to domestic self-sufficiency in beef production that has been under way for several years rather than a diplomatic snub, and this is not the first time there has been an arbitrary shift like this. It shows how deeply economic nationalism is now embedded in Indonesia’s economic policymaking, even though the country is embarking on a fresh bid for foreign investment.<\/p>\n
Among some policy makers in Jakarta, there is the apparently sincere belief that self-sufficiency can be achieved simply by cutting imports. However using protection policy such as import bans as a mechanism by which it can achieve in part self-sufficiency, can have adverse social implications and arguably works against goals of food security and poverty reduction. As Indonesia has seen the price of beef skyrocket and the local abattoirs start using breeding cows and the dairy herd simply to feed the growing demand for red meat. The size of the Indonesian herd falls, and the prospect of real self-sufficiency suffers setbacks presenting the government with no choice but to go back to importing to avoid a food crisis.<\/p>\n
Indonesia will face a real food security issue if it pushes its self-sufficiency ambition too hard, only to discover that the traditional fallback of imported Australian live cattle is already committed elsewhere. Indonesia is a natural market for Australia’s northern cattle producers but they do not need Indonesia quite so much given the emergence of strong new markets in places like China and Vietnam.<\/p>\n
The problem with beef self-sufficiency is that the agriculture ministry advocates seem to be constantly subject to short-term thinking. Data from Indonesia\u2019s Trade Ministry show that Indonesia had a 237,890 tons beef deficit in 2015. This figure is equal to about 1.39 million live cattle. Indonesia only managed to supply 2.45 million animals domestically. With Indonesia\u2019s current beef demand estimated at more than 3.8 million (of live cattle) in 2016, and the announcement recently that it is to import up to 600,000 live cattle this year, implies that nearly 16 percent of domestic beef demand is imported.<\/p>\n
The Indonesian government still has a long way to go towards self-sufficiency, and perhaps needs to maintain a more strategic trade policy. Government policy should be driven by greater investment in research and development including the adoption of new technologies for farmers in order to drive productivity.<\/p>\n