The Indonesian government has signaled its interest in running its own cattle breeding enterprise in Australia to improve its beef supply issues.

Indonesia’s State-Owned Enterprises Minister Dahlan Iskan told the Indonesian media yesterday the government was considering the move in a bid to help meet the country's target of supplying 90pc of its beef requirements from Indonesian production by 2014.

The minister said lower costs of production were behind the plan, noting that it cost only Rp 3 million (A$297) to produce a calf in Australia, one-third of the cost of producing a calf in Indonesia.

“But the fattening is indeed best done in Indonesia. Increasing the weights of cattle in Indonesia is cheap and quick,” Dahlan said, according to the Jakarta Globe.

Indonesia has slashed its cattle and beef import quotas by 50pc and 70pc respectively in the past two years as it strives to boost domestic beef production.

However the policy has been widely criticised within Indonesia for creating a shortage that has forced beef prices to unaffordable levels for consumers, and for working against self-sufficiency aspirations by encouraging more farmers to sell breeding females for slaughter to share in the lucrative prices created by the shortage.

The government has refused to reverse its policy despite public protests by meat retailers, mounting criticism in the media and the recent arrests of leading political figures charged with accepting bribes in return for manipulating beef import quotas.

Indonesia's import policy has caused significant financial pain for Australia's northern cattle export industry which is heavily geared towards supplying the market. Exporters and producers have been working to develop alternative markets to reduce the industry's reliance on Indonesia in the wake of the drastic import cutbacks.

The Jakarta Globe said the ministry was planning to delegate the job of running an Australian cattle production operation to existing state firms such as livestock company Berdikari and agribusiness firm Rajawali Nusantara Indonesia (RNI).

During a visit to Darwin in June last year Indonesian president Susilo Bambang Yudoyhono reiterated the country's commitment to self-sufficiency and called on Australian agribusinesses to help Indonesia expand its cattle industry by investing in Indonesian breeding operations, feedlots and downstream processing operations. No major investments have been announced since the president's visit to Australia eight months ago.

There are historical precedents for Asian sovereign nations investing in cattle land in Northern Australia in order to secure food supply.

During the 1990s and early 2000s, the Sultan of Brunei's Carabao Developments built up a pastoral portfolio of about 600,000ha in size in the Northern Territory, while Desa International (Sabah provence, Malaysia) owned and operated more than 900,000ha of northern cattle land.