Milk industry still enjoys strong protection
Milk industry still enjoys strong protection
JAKARTA (JP): Indonesia is allowed to maintain a requirement on compulsory domestic procurement of fresh milk by milk processing companies to protect its dairy industry for the next ten years, a senior official said.
Director General of Cattle Breeding at the Ministry of Agriculture Soehadji said Indonesia has just concluded a "consultation" on maintaining the compulsory requirement with New Zealand, Indonesia's largest milk supplier.
"They (New Zealand) agreed that we would still apply such a requirement but with the limit of ten years," Soehadji told The Jakarta Post on Saturday.
The government expects that after ten years of protection, domestic fresh milk producers are expected to be able to compete against foreign producers, Soehadji said.
The government, in this case the Ministry of Trade, requires every milk processing company to acquire a recommendation letter from the Association of Indonesian Milk Cooperatives, which confirms that the company has procured a certain portion of domestic fresh milk before importing milk powder.
The government allows milk processing companies to import two tons of milk powder for each ton of fresh milk they procure from the domestic market. The policy will be reviewed within the next six months.
Soehadji said such a recommendation letter can be traded among milk processing companies. "It doesn't matter. As long as all domestically produced fresh milk can be absorbed by the processing companies."
Indonesia last year produced 403,000 tons of fresh milk, up 5.17 percent from the previous year. Out of last year's production, 250,000 tons were consumed by the five largest milk processing companies -- Nestle procuring 104,371 tons, Frischevlag Indonesia 69,048 tons, Indomilk 43,985 tons, Ultra 18,731 tons and Sari Husada 13,185 tons.
Soehadji said New Zealand had previously requested Indonesia to change such a compulsory requirement, which is considered to be a non-tariff barrier, into a tariff barrier as mandated by the new General Agreement on Tariffs and Trade (GATT), which has been in effect since Jan. 1.
"If the tariff system is applied for diary products in place of our current requirement, the tariffs would be very high, probably up to 238 percent. And, of course, we cannot apply them anyway," Soehadji said.
In the negotiation of the new GATT, Indonesia committed to limiting the levels of its import tariffs, including those on agricultural products, at no more than 40 percent.
Such a bilateral negotiation between Indonesia and New Zealand, with an aim of settling disputes, is recognized by the World Trade Organization, which administers the new GATT. If a bilateral negotiation cannot solve disputes, the World Trade Organization Dispute Settlement Body will intervene.
New Zealand, as the largest milk supplier to Indonesia, used its initial negotiating right to press Indonesia to drop its non- tariff barrier on dairy products. The results of the negotiation, however, are applied not only to New Zealand but also to other countries which supply milk to Indonesia. (rid)