Reforms not seen hurting dairy producers

JAKARTA (JP): The government's recent decision to liberalize the import of dairy products will not pose a major problem to local producers, a senior official said.

Director General of Animal Husbandry Erwin Soetirto said Saturday local dairy products would still be able to compete with imported ones.

The rupiah's sharp fall against the U.S. dollar would make imported dairy products too expensive for most local customers, he said.

"Local milk and milk-related product factories will prefer to use local dairy products because the price of imported products will be higher than before," Erwin said.

The liberalization of the import of dairy products is part of economic measures announced by President Soeharto recently to support the US$43 billion bailout package arranged by the International Monetary Fund.

But analysts said the government's decision to liberalize the import of dairy products would pose a major blow to weak local producers, as local processed milk and milk-related producers would still prefer to use imported dairy products.

According to the previous regulation, the ratio of imported dairy products and locally made products should be 1:2, meaning that dairy producing companies were allowed only to import one liter of milk, if they used two liters of locally made milk.

The old regulation was issued because local milk and milk- related factories choose to use imported dairy products as their raw materials due to its better quality compared to local products.

Erwin acknowledged that without the sharp depreciation of the rupiah, the price of locally made dairy products would still be higher compared to imported products, due to its high production costs as a result of using imported feedmeal.

But he said that in the current situation, where the rupiah has lost more than 75 percent of its value against the U.S. dollar, local dairy products were more competitive than imported ones.

He said that Indonesia's production of dairy milk last year reached 400,000 tons, of which 350,000 tons was absorbed by local milk processing industries and the remaining 50,000 tons directly consumed by households.

The local demand for dairy products reached more than one million tons last year, most of which was provided by foreign producers. (gis)