Country Profiles

Indonesia COUNTRY PROFILE
Policy

Indonesia has for many decades had interventionist policy towards beef. This has been constructed and implemented through a “hierarchy” of measures illustrated in Figure 3.

Figure 3. Policy hierarchy for the Indonesian beef industry

figure3-indo

Source: Waldron et al. (2013)

At the formative levels at the top of the hierarchy, lies Indonesia’s policy approach. Since the 1960s, Indonesia has had long-standing objectives of self-sufficiency, price stability and food security, and these were heightened during the Asian Financial Crisis. Beef was introduced into Indonesia’s self-sufficiency programs in 1999 on the basis that Indonesia has high import dependency for cattle and beef, that beef is a part of a diversified diet, and that the industry comprises a large number of low income producers. The first beef self-sufficiency program aimed to achieve self-sufficiency in beef by 2005 (Ilham, 2006) and another cabinet launched a second program to achieve self-sufficiency by 2010. Interest in self-sufficiency reignited in the late 2000s with international food price spikes and international preoccupation with food security. Indonesia’s National Medium-Term Development Plan (2010-14) targeted five commodities to achieve 90% self-sufficiency by 2014 – rice, soybean, sugar, corn and beef. Self-sufficiency was thought to be “easier” to achieve for beef than other commodities because pen-feeding cattle production is not land intensive.

Thus, the third beef self-sufficiency program – the Beef Cattle and Buffalo Self-sufficiency program (PSDSK) – began in 2008, with funding of Rp10.65 trillion over 5 years, or US$156 million per year. The aim was to increase the cattle herd by 2014 to 14.23 million head and beef production to 420,200 tons, which was to restrict beef imports to 32,000 tons. Results from the bovine census (see above) were used to pronounce that the 2012 target had been achieved, the PSDSK program was on track and that the budget planned for the program could be pared back (Prabawo, 2011). As mentioned above, however, data from the Agricultural Census of 2013 suggests that the either data collected for PSDSK was over-stated, or that numbers have declined – by 23%! There was some expectation that interventionist beef policy may have been wound back under the Jokowi regime elected in 2014. However, activity in the provinces and the field suggest that the program has been continued and, indeed, in some cases, continued.

The self-sufficiency program provides a framework for a series of policies toward:

  • Slaughter and beef (slaughter bans and the “rescue” (buy-back) of productive females for redistribution)
  • Cattle marketing and trade
  • And especially toward cattle production, which receives by far the most attention. Measures include:
    • Breeding measures, including AI and village breeding centres.
    • Cattle distribution schemes where government give cows to members of farmers groups, who then return calves (from 1 to 3) back to government for redistribution.
    • Credit schemes, where banks make loans to cattle producers with interest rates subsidised by government, for either small scale fattening or larger scale cow-calf production.
    • Relationships between “nucleus” companies (importers, plantations, feedlots, abattoirs, traders) and “plasma” producers (smallholders, production groups); and

Since the colonial era the Indonesian government has restricted the domestic trade of cattle and designated particular breeds to particular regions, an approach that continues. Diseases are contained by bans on the movement of cattle from affected regions or islands, but can be allowed for immediate slaughter or transhipment. Local governments also pursue local industry development plans through export quotas (for cattle in different sex, age, weight or height categories) and the import and redistribution of breeders. Similar policy instruments are used to regulate international trade, as detailed in 11.

Industry policies such as cattle distribution, slaughter bans, credit schemes and domestic trade restrictions pose major administrative and financial demands on government. Various international studies have modelled the efficacy of different policy measures. Hadi et al. (2002) and Vanzetti et al. (2010) both find negative net welfare effects from international trade restrictions, and that the most effective policy area to benefit smallholder producers and consumers is through research and development to increase the productivity of native cattle (although this can have lagged time to impact). Vanzetti et al. found that cattle distribution and credit provision has a neutral impact. Rather than a production-side approach to industry development, Deblitz et al. (2011) argue for a whole-of-industry and market-led approach.

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