Shoppers at butcher Aji Seno’s stall in east Jakarta care more about the price of his beef lungs, livers and intestines than where the offal comes from. Not so the country’s new president.
Indonesian leader Joko Widodo, who pledged to make Indonesia less reliant on food imports in last year’s presidential campaign, has banned imports of most secondary cuts of meat and will allow only state-owned enterprises to bring in the products in times of shortages. Businesses predict a supply crunch, higher prices and the risk of monopolies and a black market.
“This is Indonesia man, everyone loves offal,” said Seno, whose cuts from Australian cattle sell for 25 percent less than those from Indonesian ones. “If there’s no imported offal, then the price of local offal will rise. I won’t know how to sell it.”
The measure reinforces Widodo’s import-substitution strategy as he seeks to promote home-grown commodities, industries and technologies. Such protectionist policies risk undermining a drive to be more business friendly and revitalize Southeast Asia’s biggest economy, where growth has fallen behind those of Malaysia, the Philippines and Vietnam.
“This highlights the contradiction in the agriculture arena, between pro-investment messages on the one hand, and counter-productive goals of food self-sufficiency,” said Kevin O’Rourke, a political analyst who wrote “Reformasi: The Struggle for Power in Post-Soeharto Indonesia.” “Widodo’s economic policy platform has always been mixture of pragmatic items as well as some that are more fanciful.”
At stake is whether the president, better known as Jokowi, can convince investors he’s putting in place the right policies to spur growth, as the prospect of higher interest rates in the U.S. this year threatens to lure funds away from developing nations.
Indonesia, dubbed one of the fragile five emerging-market economies by Morgan Stanley in 2013 because its large external deficit made it vulnerable to capital outflows, has seen its currency slump more than 10 percent in the past year, the worst performer in Asia after the Japanese yen.
The country was ranked alongside fellow emerging economies Russia, China and India as countries that adopted the most number of new trade-unfriendly measures in the 13 months through June 2014, according to a report by the European Commission released in November.
That reputation won’t be helped by the ban on all offal imports except foie gras, which was announced in a December regulation by the Agriculture Ministry. The minister, Amran Sulaiman, said he’s banning the products because in exporting nations they are fed to cats and dogs and Indonesia should be better respected, according to a Kompas report.
The import curb will lead to price increases because currently 60 percent of offal products in Indonesia are imported, said Satria Hamid, head of public relations at the Indonesian arm of Carrefour SA, France’s biggest retailer.
“The agricultural minister is obsessed with trying to achieve self-sufficiency, but it’s obvious that supply is not enough to meet demand,” said Thomas Sembiring, head of the Indonesian Meat Importers Association. “Does he think raising cattle is as easy as raising rabbits?”
Offal exports from Australia to Indonesia for the January to October period increased 170 percent year-on-year to a record, according to Meat & Livestock Australia Ltd.
Innards are popular in Indonesia, where they are fried with chili and turmeric, simmered in soups and curries or processed into sausages and meat balls known as bakso, which U.S. President Barack Obama has said he recalls from his childhood years in the Southeast Asian nation.
The government said in January it would allow state-owned enterprises to import secondary cuts in the event of shortages or price increases. This risks giving state-owned firms a monopoly on the import of a basic commodity, said Sembiring and Sarman Simanjorang, chairman of the Greater Jakarta Beef Committee.
“If the government wants to import, everybody should have the rights, not only SOEs,” said Simanjorang.
Syukur Iwantoro, the director general of animal husbandry at the Agriculture Ministry, said in a mobile-phone text message that “SOEs are a government instrument to ensure stability,” when asked about the concern that monopolies will emerge. He didn’t elaborate.
Jokowi wants to achieve rice and corn self-sufficiency by 2018, and aims to reduce imports of soybeans, a staple protein source, according to a campaign policy document.
Self-sufficiency is unlikely because Indonesia, the world’s biggest archipelagic nation with more than 17,000 islands, doesn’t have enough land to grow all its own crops and animal feed or graze cattle, or the infrastructure to move food around quickly and efficiently, said John Jackson Ewing, a research fellow at the S. Rajaratnam School of International Studies in Singapore.
“It makes a lot more sense for Brazil to grow all that soya bean. It makes a lot more sense to import rice from the Mekong Basin,” he said. “Beyond the political bluster, the reality is that this is the case.”