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Import permit progress hits Jakarta traffic jam

James Nason, 24/09/2013

Three weeks after Indonesia confirmed it will replace cattle and beef import quotas with a reference pricing system, progress on the implementing regulations required to underpin the policy appear to have stalled like a Jakarta traffic jam. 

While the general feeling in Australia's cattle and beef trade seems to be that the move to price-based triggers for imports will be positve, in the short term at least, for now the level of clarity surrounding how the system will work only appears to be decreasing.

Trade insiders say Indonesian officials have indicated that their desire is to get 100,000 cattle into the market as quickly as possibly to fill up feedlots and to take pressure off supply and prices.

However, before new import permits can be issued, Indonesian Government departments have to develop, and reach agreement upon, the implementing regulations that will underpin the policy.

Already there are concerns for Australia that some of the regulations developed to date 'over-reach' the minimum regulatory mechanisms required to support the policy, and in turn have created a new set of issues.

Of particular significance to Australia has been a new ministerial decree issued last week by Indonesia’s Minister for Agriculture Suswono.

The decree requires Indonesian cattle importers to provide a reference list of all Australian farms from which they may source cattle in future.

The regulation mirrors a similar requirement that has been imposed upon boxed beef importers, which obligates them to provide a list of the establishments from which they will source imported beef.

That requirement has caused less angst among beef importers because providing a list of approved export meat establishments from Australia poses far less challenges than providing a list of every farm that may one day be used to source cattle to fill an import order.

Australian trade and Government representatives are currently working with Indonesian officials to explain the significant practical difficulties that the regulation involves.

They are hoping Indonesia will instead recognise that Australia’s existing high-level systems already provide the surety that Indonesia’s proposed regulation aims to achieve.

The new reference pricing policy was announced at the start of September to satisfy a directive by Indonesian President Susilo Bambang Yudhoyono to bring down the price of beef in Indonesian wet markets.

One trade source said there is hope a resolution can be achieved.

If implemented in its current form, the regulation will make it very difficult for Australia to meet Indonesia’s supply requirements.

The reality is that Indonesia still needs beef, the price remains high and the President's directive to sort out supply and lower the price of beef has not changed.

In the immediate term, the remaining quota of 46,000 head for the fourth quarter remains valid, and those cattle are still likely to ship from Australia to Indonesia when the permits are issued, now likely to be by early October.

What remains less clear is when new import permits under the reference-pricing mechanism will be issued and the volumes they will involve. 

“You’d think there be increasing clarity but there is decreasing clarity at the moment,” was how one cattle trade source described the situation.

“Import permit applications are being blocked and everything has stalled,” said another. “To that extent it resembles a Jakarta traffic jam appropriately enough.”


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