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Indonesia drafts self-sustainability law

James Nason, 26/11/2012

Indonesian parliamentarians are reported to be drafting new legislation which will convert long-running self-sufficiency policies into law.

International news agency Reuters has reported that a new law currently under development will create a “super body” to speed the country’s self-sufficiency push by promoting local production and curbing imports and exports of food staples.

Reuters says it has seen a copy of the draft law, which is due to be signed off by the Indonesian president within the next month. The law provides for the new body to be established within three years.

Analysts quoted by Reuters warned that the law could hinder much-needed overseas investment in Indonesian and will eventually push up prices.

The head of Indonesia’s Food Security Agency Achmad Syruana told the news agency that the law stressed “food sovereignty and autonomy”.

“Food import would be secondary or even last resort,” he said.

The law will expand the role of the state procurement agency Bulog to create a new ‘super body’ that will oversee import limits and tariffs to protect domestic farmers and will aim to help the Government achieve self-sufficiency in staples such as rice, soybeans, sugar, corn and beef.

It could also play a role in protecting domestic farmers by setting minimum prices and maximum price ceilings.

The new law places domestic output and demand and the control of imports and exports at the heart of its efforts, the report said.

However it also noted that the legislative framework leaves many details to be filled in or drafted later, making its potential impact on business practices unclear.

Analysts said the law was one of a series of policy announcements that linked to increasing economic nationalism ahead of Indonesia’s presidential elections in 2014.

Critics say the policy will ultimately drive up food prices for Indonesian consumers.

An unnamed executive at a major international agriculture firm told the news agency: “The moment you start having entities that control what can be imported and exported in what amounts, you drive up food inflation.”

Another analyst warned the law could hinder food processing industries, which have been promoted in Indonesia in recent years, as they scramble for access to the cheapest raw materials.

As reported last Friday, the Indonesian Government has recently discussed plans to bring cattle from eastern areas of the archipelago to Jakarta as a measure to relieve a beef shortage that has caused beef prices to double.

An Indonesian meat industry spokesman was quoted by the Jakarta Globe on Friday as saying that the Government had rejected industry requests to issue more import beef quotas to take the pressure off local supplies.

Jakarta Beef Committee Sarman Simanjorang said the group suggested the Government introduce 30,000 tonnes of new beef import quotas, but the proposal was refused.

“The agriculture ministry argued that Indonesia has a beef surplus of 20,000 tonnes, which business people do not believe,” Mr Simanjorang said.

He added that beef producing provinces of Indonesia were refusing to send cattle to be slaughtered in Jakarta, to ensure supplies for themselves.

Joni Liano, executive director of the Indonesian Feedlot Association (Apfindo), said beef consumption in Indonesia next year is likely to rise to 550,000 tonnes, while domestic supplies are seen at only 432,000 tonnes.

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