The Asean-Australia-New Zealand Free Trade Agreement, to be signed this month, is unlikely to help the local dairy industry meet its long-standing goal to meet domestic demand, a senior Ministry of Industry official said.
Beny Wachyudi, director general for agrobusiness and chemical products at the ministry, said the additional milk product imports that would flow from the agreement would not be conducive to ending Indonesia’s dependency on imported processed milk and raw materials needed by the industry.
He said local dairy firms import 70 percent of raw materials and only produced 30 percent of milk products consumed domestically.
“It is true that the Asean, Australia and New Zealand FTA will bring benefits to local milk producers and milk importers [for them] to easily access imported raw materials, with tariffs even as low as zero,” Beny said. “But excessive imports are contrary to our efforts to increase the manufacturing capacity of the local dairy food industry.
“Without commitment to self-sufficiency, the country will only prolong its dependency on imported raw materials and processed products if there is a constant flow of cheap imported products in the local market.”
He added that being too dependent on imported diary products would become a problem if the prices of milk products increased in the international and domestic markets.
“This year is a challenge for local dairy producers to boost their market share by increasing their production capacity,” Benny said.
With relatively high volumes of fresh milk produced by local farmers, he said, the prospects that local manufactures would be able to increase their domestic supply this year was good.
Ministry data show that production of fresh milk increased to 658,971 tons in 2008 from 637,314 tons in 2007.
At present, there are about 127,211 dairy farmers across the country, with more than 374,000 cows producing about 1.2 million kilograms of milk every day. About 80 percent of local production is absorbed by five large dairy companies - PT Nestle Indonesia, PT Frisian Flag, PT Sari Husada, PT Ultra Jaya and PT Indolakto - which are all members of the milk processing industry group. The remaining 20 percent is absorbed by smaller milk processing companies.
Consumption of milk in Indonesia remains low, at only 7.1 kilograms per capita annually. By comparison, India consumes more than 60 kilograms of milk per capita every year.