Indonesia’s Ministry of State Owned Enterprises has confirmed it is close to making investments in Australian cattle stations in line with Indonesian Government plans to shore-up security of beef supply. 

Wahyu Hidyat, the secretary of Indonesia’s Ministry of State Owned Enterprises, told last week’s IndOz beef and trade forum in Brisbane that state owned fertilizer company PT Pupuk Indonesia has been selected to oversee the purchase of Australian cattle breeding operations.

Mr Hidyat said it was still too early to discuss the likely scale of the planned property acquisitions, but confirmed that due diligence studies have supported the move to invest in Australian properties.

Indonesia's State Owned Enterprises Ministry oversees 141 state-owned enterprises which are tasked with driving economic development and managing supply and consumer prices across a range of commodity and product areas.

The 141 enterprises include some of Indonesia’s largest banking, telecommunications, energy, infrastructure, and agricultural companies, and account for annual revenue of US$159 billion, or 18pc of Indonesia’s total Gross Domestic Product.

Mr Hidyat said food security has become a key area of focus for the ministry, with several SOE’s responsible for maintaining safe levels of food stock for the nation.

For example one State-owned-enterprise, Bulog, is responsible for managing supplies of key staples such as rice and sugar to keep prices at affordable levels for consumers.

Earlier this year, with a widespread shortage of beef in Indonesia forcing consumer prices to record heights, Bulog was instructed to oversee the management of beef supplies in the market as well.

Under that commission, it was given additional permits to import a further 3000t of boxed beef into Indonesia in an attempt to reduce pressure on prices during Ramadan.

(At the time members of the beef trade predicted 3000t would fall a long way short of the volumes needed to meaningfully influence prices, and reports of wet market prices soaring to 120,000 Indonesia Rupiah per kilogram during the post-Ramadan feasting celebrations reinforced that view.)

Direct SOE involvement in Indonesia's cattle and beef supply chain includes a range of Government-owned feedlots, abattoirs, meat distribution lines and retail meat brands.

14 SOE-owned palm oil plantations are also involved in a large-scale cattle fattening program in partnership with partners small farmers. The partnership utilises secondary product such as the palm fronds and pasture within plantations to fatten cattle, and last year turned off 20,000 cattle in total.

Mr Hidyat said the move to buy cattle stations in Australia was a further measure undertaken by the ministry to fulfill Indonesian president Susilo Bambang Yudhoyono’s directives to improve security of beef supply.

Mr Hidyat said due-diligence studies recently completed by PT Pupuk Indonesia confirmed that cattle farming should be conducted in Australia because it was more efficient, and cattle fattening and processing should be conducted in Indonesia, because of the efficiencies afforded by lower labour costs and because of the potential to re-export processed beef from Indonesia to other muslim countries.

Under the planned formation of the ASEAN Economic Community in 2015, the 10 ASEAN member countries are set to enjoy free movement of goods and services between their borders. If and when that happens, Indonesia sees an opportunity to become an exporter of Halal-accredited beef to other muslim countries in the trading zone, including re-exporting Australian beef imported to Indonesia as live cattle and processed in its abattoirs.

“Not only are we thinking to boost the supply gap domestically, being a country that has a good image and relationship with many countries that have significant Muslim populations, we are also eyeing the possibility to expand our markets of Halal-beef abroad,” Mr Hidyat said.

He said cattle grown on Indonesian-owned breeding properties in Australia would be imported to Indonesia for fattening by small and medium farmers, and processed through Government-owned abattoirs and meat distribution facilities.

Indonesian media has recently reported comments from State Enterprises Minister Dahlan Iskan that Indoneisa plans to buy one million hectares of Australian cattle country. However, in response to questions about likely scale of purchases, Mr Hidyat said it was too early to offer a specific figure. 

Asked if cattle imported back to Indonesia from Indonesian-owned breeding properties in Australia were likely to included in annual import quotas, or considered outside quota, Mr Hidyat said that policy would ultimately be determined by Indonesia’s agricultural ministry.

Mr Hidyat said the planned purchase of breeding properties was motivated by ‘the excellent quality and competitive advantage’ of breeding operations in Australia.

“From our humble attempts at entering this sector we have learned that for us breeding is the most challenging part of the equation,” Mr Hidyat explained to last week’s forum.

“Factoring in the high difficulty we face to conduct the breeding in Indonesia, we believe it makes perfect business sense to do this especially because of market potential in Indonesia.”