Strain ties affect Indonesia-RI trade
Strain ties affect Indonesia-RI trade
CANBERRA (Dow Jones): Tense relations between Indonesia and Australia spilled over into the trade arena Friday, with Indonesian wheat importers and millers saying they would cut back or halt their Australian wheat purchases.
Indonesia's largest wheat miller PT Bogasari Flour Mills said Friday it would cut wheat imports from Australia by 50 percent.
And Fransiscus Welirang, the president director of Bogasari, said his company would consider halting imports completely if the government asks them to stop importing wheat from Australia.
"If it becomes an official decision, we would then stop all our imports from Australia," he said.
Bogasari imports 1.5 million tons of wheat annually from Australia, or 50 percent of its total imports, with another 25 percent coming from Canada and 25 percent from the U.S. and other countries.
Wheat importer PT Sriboga Raturay also said it has halted Australian purchases, and the company's chief commissioner, Bustani Arifin, told The Jakarta Post newspaper that all Indonesian wheat importers agreed at a meeting Wednesday night to stop imports from Australia.
The move by wheat importers follows criticism from the Indonesian government of the role Australia has played in the East Timor crisis. Many Indonesians also resent what they perceive as Australia's overzealousness in sending troops to the troubled half-island.
Australia is leading the 7,000-strong U.N. peacekeeping force in the Indonesian province after a bloody rampage by pro- Indonesia militia was sparked when a large majority of East Timorese voted for independence at a U.N.-administered poll Aug. 30.
Wheat is one of Australia's main exports to Indonesia, along with cotton and base metals. Australia also imports 20 percent of its crude oil from Indonesia.
But Australian dollar traders, while concerned about violence in East Timor, weren't worried by the threat to trade with Indonesia, which ranks 10th among Australia's trading partners.
The Australian dollar actually rose to US$0.6503 by around 0607 GMT, up from US$0.6481 late Thursday, bolstered by rising global commodity prices.
Australian investment in Indonesia is also small, totaling A$1.16 billion in the year ending June 30, 1998, compared with its largest amount of investment abroad, A$84.26 billion in the U.S., followed by A$40.91 billion in the U.K. and A$11.03 billion in Japan.
Indonesian investment in Australia only amounted to A$216 million in 1997-98, according to the Australian Bureau of Statistics.
Nevertheless, wheat exporters could be hard hit, and a spokeswoman for Australia's AWB Ltd. said the monopoly wheat exporter has already begun working on a new sales strategy to sell its exports outside Indonesia after the local wheat harvest starts in October.
Friday's news seems to be a "fairly clear indication that Indonesia's out for a while," she said. "We're reading it that it looks like business isn't going ahead there."
AWB exported 2.42 million metric tons of wheat to Indonesia last marketing year ended Sept. 30, 1998, making it the biggest importing nation. Total exports of wheat from Australia that year were 15.2 million tons.
Australia's other soft spot in trade with Indonesia is cotton. Indonesia buys about 30 percent, or about one million bales, of the 3 million bales a year of the Australian crop, making it the biggest customer.
"It's a major market, so if there was any backlash it would create long-term difficulties," said Bob Bell, general manager marketing listed Namoi Cotton Cooperative Ltd.
Namoi is the largest marketer of Australian cotton, accounting for just under 1 million bales a year.
Still, while Bell said he has heard of suggestions Indonesian cotton mills won't take Australian cotton, "we haven't actually had someone say to us they'd rather not buy Australian cotton."
Indonesia is also an important source of crude oil for Australian oil refineries, as its crude is well suited for gasoline production.
But Australian refiners aren't expecting Indonesian exporters to sacrifice their hard currency earnings by banning exports to the country.
"At this stage, I'm not aware that there are long term plans to block oil imports from Indonesia," Jim Starkey, the executive director of the Australian Institute of Petroleum, told Dow Jones Newswires.
While a ban on Indonesian exports to Australia would cause some temporary difficulty for the industry, Starkey said there are alternative supplies available in the region.
One oil industry source suggested that Vietnamese crude in particular could be used to substitute Indonesian exports.
Australia's oil-refining industry is dominated by four companies, BP-Amoco PLC, Mobil Corp. Royal/Dutch Shell Group, and Caltex Australia Ltd, which is 50 percent owned by Caltex Corp., itself an equal joint venture between Chevron Corp. and Texaco Inc.
Indonesia is also a significant importer of Australian base metals.
According to the Australian Bureau of Agricultural & Resource Economics, Indonesia imports a total of 40,000 metric tons of zinc and 18,000 tons of lead metal from Australia. The zinc exports formed some 14.6 percent of Australia's total exports of 274,000 tons in the fiscal year ending June 30, 1999 and lead exports 8.9 percent of Australia's total lead exports.
Indonesia also buys some 43,000 metric tons of primary aluminum metal from Australia.
Peter Griffin, group manager of public affairs at Australian zinc and lead producer Pasminco Ltd. said there is currently no difficulty in Indonesia. "Sentiment over there is still the same. People are still buying the metal, but we are monitoring the situation closely," he said.
Australian aluminum producer Comalco Ltd. also said business to Indonesia is currently proceeding as usual, although it is continuing to monitor the situation.