With a narrow economic base, TL has limited non-oil exports, dominated by coffee and textiles. Cattle and buffalo exports to Indonesia were one of TLs few export commodities. Export numbers were officially reported (by MAF) when the trade was formal before 2010. Numbers declined from a peak in of 3,000 head in 2005 to 2,000 in 2007 and 900 in 2009. However these numbers are certainly under-stated as they are reported elsewhere as high as 6,000 in 2006 (MAFF Agribusiness, 2007). MAF also recorded that 76 buffalo were exported in 2009 (which is under-stated) and nearly 5,000 hides in 2009. This would account for most of the cattle and buffalo slaughtered in Dili and a proportion of bovines killed in the districts. While the hide trade remains legal, data is not available.

Pre-2010, cattle legally traded over the border was officially conducted through accompanying documents and processes⁹. In practice, processes were simplified or by-passed on both sides of the border. Indonesia was conciliatory with TL in discussion on the trade. In a special arrangement with TL, authorisations from Jakarta were not required if cattle were transported overland to West Timor. Indonesia allowed exports from TL through an Export Permit rather than a Health Certificate based on standards set out in the WTO Agreement on Sanitary and Phytosanitary Measures (WTO-SPS) for Category 1 diseases (haemorrhagic septicaemia, brucellosis, foot and mouth disease and swine fever) as well as other infectious animal diseases and ecto-parasites. In an agreement signed in Kupang in 2005, TL was given 2 years to adhere with WTO-SPS processes. When this was not forthcoming, the agreement was extended for 2 years to 2007 and then another 2 years to 2009. Indonesian and international agencies urged TL to sign the agreement, but could not fulfil all criteria (including laboratories) so the official trade was shut down at end of 2010 (Sendall and Associates, 2006).

⁹ From TL this includes MAF Inspection Certificate, Quarantine export permit and customs forms, and from Indonesia includes quarantine and inspection of 7 days and customs forms.

With growing demand for cattle in Indonesia, the informal trade continues at perhaps the same scale as the pre-2010 trade of about 5,000 head per year. Volumes declined, however, in 2015, especially with the devaluation of the Rupiah (of 34% against the US$ since January 2013 and 14% since January 2014) and disruptions and periodic crackdowns on the illegal trade. There are several trade routes.

In the northern trade route, cattle are sourced from throughout much of Bobonaro, especially the high cattle density cattle areas in the west of the district such as Maliana, Balibo and Cailico. A total of about 1,250 cattle and buffaloes might be traded through this route annually, with more in dry than wet season. Cattle from this area enter into Belu in West Timor and are sold to cattle traders in Atambua or Kupang.

The southern trade route is particularly important for cattle producers in Cova Lima where there are large numbers and densities of cattle, but poor roads and long distances to Dili. Much of the cattle trading is based in the district capital of Suai. Perhaps 1,250 head per year are traded through main crossing points (Wala and Fatumean) but there are large tracts of uninhabited land in the region where cattle are walked over by farmers and traders. The trade was interrupted by TL agencies in August 2014, which posed a significant problem for the cattle industry and producers in Cova Lima. There are reportedly border points where locals with a Transboundary Identity Card can trade up to five head for “basic needs” on Tuesdays and Thursdays. The cattle from Cova Lima enter into Malaka in the south of West Timor, and then transported to Atambua or Kupang.

In the enclave area of Oecussi, there are significant numbers of traders and/or integrated fattening operations specialised in buying, feeding and selling cattle into the Indonesian market. Most cattle are traded mainly through the south-eastern areas of Oesilo (1,200 head) and Passabe (850 head) although cattle are drawn from throughout the enclave, which may amount to as much as 2,000 head. Cattle that enter through the TTU-Oecusi border are sold to Kefamenanu or Atambua or Kupang, while cattle that enter through the Kupang-Oecussi border are sold to Kupang.

Movement in Indonesia. Once in West Timor, cattle can be slaughtered especially in Kupang but the majority are likely to be shipped to other islands. Trade routes are however not necessarily direct. Traders may have to move cattle around to utilize export quota from various districts in West Timor. There are weight limits (275kgs) on the cattle to be traded, so may require further fattening in West Timor. Traders then aggregate bulls with others from West Timor in holding and quarantine areas (7 days), before transfer to ships in the ports of Wini, Atapupu and Tenau (Kupang). For inter-island cattle trading, the main routes are shipping to Surabaya then trucking to Jakarta, or shipping to Kalimantan for slaughter there, or there is border trade with Malaysia.

Benefits of the trade. Significant numbers of households sell cattle into Indonesia. If they supplied an average of two head for the trade per year, then about 2,500 farmers might be involved. This is a relatively small proportion of the total households that raise cattle in the border districts (5,400 in Cova Lima, 7,300 Bobonaro and 6,200 Oecussi). However, the trade is likely to be particularly important for households in the western border areas of TL, a large proportion of which raise cattle.

If about 5,000 cattle are traded over the border, at an average live weight of 300kgs and an average price of $2.80 in 2014, then the trade may be worth $4.2 million. If TL charged an export duty of 5%, then this equates to just $210,000 in government revenue. Similarly, if fees were charged for customs and quarantine services (say, $5 per head), this would equate to $25,000 for each agency.

Prospects for formalisation of the trade. With numbers at levels similar to those of the pre-2010 era, and demand and prices in Indonesia high, it could be argued that there is no major imperative for TL to formalise the trade. Formalisation is demanding of the resources and capacities of state including the establishment of domestic testing systems, international certification, the effective operation of laboratories and infrastructure (quarantine and holding yards). Based on estimates above, these costs may not be met by taxes and fees of the formal trade. Formalisation of the trade also entails longer holding periods of larger lots in a limited number of holding areas – which increases costs for traders – and might mean that legal export channels are resisted or circumvented. Policy-makers too may question the investment in the live export market, when the domestic market is growing, is technically easier to service and the when the state has invested in downstream sectors that would benefit from increased cattle supply and lower competition from the export market. Policy has advocated the import replacement of beef and the export of beef rather than cattle.

There are, however, benefits from the formalisation of the trade. It may become harder in the future for authorities to turn a blind eye to illegal trading, especially if prices and trade increases. The illegal trade entails risk and costs for traders and farmers, such as fines or disruption (the case of Suai in 2014 and Suai and Bobanaro in 2015). Further or total bans may be imposed in the event of a major disease outbreak, Indonesian or NTT regulations, or the lobbying of domestic industry actors who stand to gain from capturing the flow of product to domestic markets (e.g. butchers and agencies with a stake in the Tibar abattoir).

Thus, GoTL is developing plans and a strategy to formalise the trade. The (former) Secretary of State for Livestock is supportive of measures to resume legal trade. The GoTL has as initiated at least three meetings with Indonesian counterparts about formalisation. In West Timor, the NTT provincial government (both provincial and in border districts) are supportive of resumption of the trade. NTT veterinary and quarantine officials state that there is no valid animal health grounds to ban trade – as they share the same island with the same diseases and cattle move over the administrative border every day. Spread of the main Category 1 disease from Timor – brucellosis – is contained by the ban on inter-island trade of female cattle. As cattle only have to be vaccinated once for brucellosis, it may be possible for females to be imported into West Timor if accompanied by an ear tag (as Timor Leste is doing especially in Oecussi as a condition of trade) or certificate.

The major obstacle is whether GoTL can issue health certificates compliant with the WTO-SPS Agreement, and the integration with domestic animal health and vaccination programs. Assessment of the costs, benefits and feasibility of meeting international protocols is required. However, if it does proceed, lessons from the pre-2011 era suggest that careful consideration has to be given to the logistics and infrastructure of the trade including: the location and design of holding and quarantine facilities; the minimum size of lots; and the time and costs required to fill quarantine and customs processes. Several interviewees raised the prospect of direct exports (through Dili / Com port, or Pante Macassar) to reduce transport and other costs.