Reforms not seen hurting dairy producers

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)