The combination of production, consumption and price factors culminate to forge a dynamic trade sector for cattle, beef and offal. Indonesia has a large import sector relative to domestic production, and imports increased rapidly over the 2000s for both cattle and beef. However, the trade is strongly influenced by trade policy so is given some attention below.

Following broader liberalisation measures and accession to trade groups (including WTO in 1995), Indonesia adopted a liberal trade policy to cattle and beef. No tariff is applied to the very small number of breeders that are imported (but can require a certificate of pedigree). Feeder cattle are also imported duty free, subject to the requirement of the maximum weight of 350 kg (although this can be flexible and slaughter cattle are sometimes imported). A 5% tariff is imposed on imported beef and offal. Under the ASEAN, Australia, and New Zealand Free Trade Agreement tariffs on bovines, beef and beef offal are to be eliminated or phased out.

With the introduction of PSDSK in 2008. Indonesia’s trade policy became increasingly protectionist. This was accentuated when the Australian government banned the export of live cattle to Indonesia for a month in 2011 leading into the peak consumption period of Ramadan due to animal welfare concerns. A range of policy instruments are used (stricter enforcement of the 350kg limit, a 5% tariff was introduced for cattle in 2012) but by far the most important was restrictions in the allocation of quarterly quota and import permits. Rising beef prices particularly after 2012 (Figure 7), protests and lobbying from consumers and industry (butchers, feedlots and importers) and institutional dynamics (especially between the ministries of trade and agriculture) led to more relaxed but still uncertain trade policy settings. Indonesia announced that it would release quota based on beef prices relative to a “reference price” (which seems to have increased over recent years) and saw increased permit allocation, but also uncertainty such as when permits were withheld leading into Ramadan in 2015. Australia is lobbying for annual quota rather than quarterly allocations. Trade policy has forged live cattle and boxed imports volumes in volumes shown in Figure 9.

Indonesia has previously only allowed imports from countries declared free by the OIE of FMD including Australia, New Zealand and Uruguay. Reportedly to diversify supply, the Indonesian parliament introduced amendments to the Animal Health law to allow imports from disease free zones, including those in Brazil and possibly India. The amendments were rejected in 2010 but reintroduced in 2014 and press reports suggest that government may be taking measures to implement introduce the trade, including the establishment of island quarantine facilities (Nason, 2015).

Figure 9. Indonesian imports of bovine meat, offal and cattle from world / all sources, 1989-2013

Source: UnComtrade

Live cattle imports peaked at 781,000 head in 2009, bottomed out at 305,000 in 2012 and increased again to 730,000 in 2014. Virtually all live cattle imported into Indonesia are from Australia, and virtually all of these are feeder cattle rather than breeders. The average unit value of imported feeders in 2013 was US$918 for 351 kg animals or US$2.62 per kg liveweight, but increased substantially in 2015.

Imported beef followed a similar pattern with a peak of 91,000 tonnes in 2010, a minimum of 34,000 tonnes in 2012 and increased to 46,000 tonnes in 2013 (and 53,000 from Australia alone in 2015). Virtually all beef imports are from Australia and New Zealand in frozen form. The average value of imported frozen beef in 2013 was US$4.5/kg, and US$6.9 for chilled beef.

Imports of offal increased at a slower rate than beef and cattle imports in the 2000s, but were less effected by trade restrictions and increased at a rapid rate from 2011. The value also increased from US$US 2.3/kg in 2011 to US$3/kg in 2013. The vast majority of offal has come from Australia and New Zealand, but the US became a significant supplier in 2010-11.

There is an informal cattle and beef trading sector in Indonesia but it does not appear to be as large as that in China and the Mekong. It is widely known that Indonesia imports significant amounts of carabeef from India. Because of India’s FMD status, carabeef is mislabelled (as beef and without specifying country of origin) and shipped through Singapore, Malaysia or other entrepot ports. Restricted quotas and high prices have increased scope for corruption by politicians and administrators including in allocation of quota to importers and mislabelling (e.g. of fish for Australian beef).

The incentives for smuggling change with a number of variables including:

• The scarcity of quota allocation and permits (not tariffs as these are already low)
• Relatedly, the price of beef in Indonesia relative to other export destinations
• And trade policy from particular countries especially based on diseases status. E.g. informal imports of carabeef from Indonesia may reduce if the trade is formalised through FMD-free zones.

Like China, Indonesia has discussed measures to allow the import of beef and carabeef from India and Brasil.

There are also informal border trade flows for live cattle. About 5,000 head are traded from Timor Leste to West Timor which is banned largely because of the lack of capacity to meet the demands of an international protocol (see the Timor Leste report). Cattle from as far as West Timor and throughout Indonesia are increasing sent to Kalimantan – for example tens of thousands from NTT and about 13,000 from NTB in 2012. Significant volumes of cattle and beef are said to be traded over the border into Sarawak / Malaysia, where beef prices rose sharply especially in 2014.