We're missing the boat on agricultural ties

('The Australian' Newspaper-Weds 1st May 2013; Business Section)

As Australian cattle farmers continue to suffer from the fallout following the dreadful handling of the live cattle ban placed upon Indonesia by federal agriculture minister Joe Ludwig, the huge opportunity for both Australia and Indonesia to develop major agriculture partnerships goes untapped.

Despite Indonesia’s goal of becoming self-sufficient in cattle and meat supplies, the reality that most cattle producers in Australia and Indonesia know is that it doesn’t make sense for Indonesia to ‘go it alone’. In fact the existing supply-chain arrangement between Australia and Indonesia is ‘made in heaven’ for both countries.

It makes perfect sense for cattle to be breed in the north of Australia where there is abundant and suitable land; then be exported to Indonesia for fattening and eventual slaughter. Australia’s long dry season prohibits this process being undertaken here. Meanwhile, in Indonesia it makes no sense to allocate some of the world’s richest and most fertile agricultural land, that is perfect for the growing of food, and allocate it to breeding of cattle.

So not only should the live exports between Australia be fully restored (and there is some signs that this may eventually happen), the model should be used to substantially expand our relationship with Indonesia in the development of food-based opportunities.

As highlighted at The Global Food Forum recently, Australia talks of becoming the ‘food bowl of Asia’. Realistically, that is most unlikely. If we consider that if we could double our current levels of agriculture production in this country we would then supply around only one percent of Asia’s requirements to feed its 4.2 billion people.

Australia faces other major hurdles in its desire to ‘feed the region’ as our agricultural industry continues to shrink in size. Obstacles to reversing this trend include:

·        High Australian dollar.

·        Diminishing productivity.

·        Availability and high cost of labour.

·        The distance to markets, particularly from our north, is often too far.

·        Fear of foreign investment in food growing land and general agriculture.

·        Impact of climate and poor rainfall.

Agriculture in Indonesia on the other hand is almost four times bigger than Australia, employing over 44 million people who work on about one quarter of the land mass we use. Indonesia enjoys a number of comparative advantages:

·        Proximity to markets.

·        Abundance of cheap and experienced labour.

·        Incredibly fertile soil; amongst the best in the world.

·        Regular and widespread rainfall.

·        Large and growing domestic and regional market.

What Indonesia lacks however, is technical knowledge and expertise. Australian farmers, through our agriculture and horticulture industries, are amongst the best in the world. They’ve had to be good at their trade. Virtually no government subsidies combined with a harsh and isolated environment have meant that for our agriculture industry to succeed we have to be very good at what we do. And here lies the opportunity for Australia to diversify away from the sole reliance on resources:

Australia’s agriculture sector has world-class expertise in the areas of:

·        Technology

·        Science

·        Water and farm management

·        Marketing and branding

These are the things that Indonesia needs desperately to build capacity within their own agriculture sector. A partnership with Australian industry could see the development of significant exports to ‘third party’ countries whereby the strengths of our two countries come together to build new opportunities and dramatically expand trade.

Already we have seen Australian potato growers change tact from trying to compete with major suppliers from the USA and Europe in selling subsidised potatoes into Indonesia, to building partnerships with Indonesian potato growers whereby we provide expertise and the training combined with our world-class seed that we export, to allow Indonesia to develop its own industry. Already this approach has seen potato yields in East Java increase from 10 to 30 tonne per hectare. Our seed growers have a captive and developing market and meanwhile the Indonesian farmers love us for it!

Opportunities exist in mangoes, sugar, soybean, rice, and many other food-based products.

So why don’t we embrace such an opportunity? Sadly, the Australia-Indonesia relationship, despite all the nice words said between our political leaders, is still dominated by  ‘political irritants’ and a ‘Bali holidays’ mindset.

Indonesia will soon overtake Australia in economic size. For the first time we will have a regional neighbour that ‘dominates’ us. It will be a game-changer that will allow Australia enormous opportunities to build closer trade, business, and community ties.

By developing deeper and mutually beneficial relationships such as a major collaboration and partnerships in agriculture, combined with increased youth exchanges, language and people-to-people contacts, both countries could benefit enormously from Indonesia’s transition to a world-class nation.

 Ross B. Taylor - April 2013

Ross Taylor is the current chairman of the WA-based Indonesia Institute (Inc).

(Ross acknowledges the contribution of his colleague Michael Sheehy, who is based in Jakarta, and who undertook extensive research work on the opportunities for 'partnerships' between Australian and Indonesian companies within the agriculture sector.)