Agricultural partnerships offer huge opportunities

By Ross B. Taylor 

(with research and co-contribution from Michael Sheehy, Jakarta)

Australian cattle farmers are finally starting to recover from the fallout following the inept handling of the live cattle ban placed upon Indonesia two years ago, and the outlook is good.

Expectations are that Indonesia will be back towards importing 730,000 head of cattle from Australia this year, and only this week an announcement that a new market from China may soon become a reality with increasing demand for live cattle exports.

But as we enter The Asian Century we need to move beyond what last year I referred to as the ‘We sell; they buy’ mentality to trade in agriculture.

As highlighted at The Global Food Forum recently, Australia talks of becoming the ‘food bowl of Asia’. Realistically, that is 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:

A stubbornly high Australian dollar

Diminishing productivity and soaring input costs; particularly energy charges.

Availability and cost of labour is a major constraint to the development of food-based industries.

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 market.

What Indonesia – and a number of other large Asian nations - 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

 Administration and finance planning and management

 Supply chain

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. The cattle industry should and can be a model for the implementation of such an adding-value program.

Last week the giant Interflour Group’s CEO, Greg Harvey told The West Australian’s Brad Thompson that “..Generally food manufacturing is going to occur (near or) in the market where it is consumed, so why don’t we take our entrepreneurial expertise, our knowledge about supply chains ...and invest in the manufacturing facilities...?.”.

Already we have seen Australian potato growers change tact from trying to compete with major suppliers from the USA and Europe in selling potatoes to 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 growers have a captive and developing market and meanwhile the Indonesian farmers love us for it!

Opportunities exist in mangoes, sugar, soybean, rice, other grains and many 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 and boats’ 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 can benefit enormously despite the current ‘political bumps’ in the bi-lateral relationship.

Ross Taylor is the President of the Indonesia Institute (Inc.) & former National Vice-President of the Australia-Indonesia Business Council.

Michael Sheehy is a senior advisor in agriculture based in Jakarta, Indonesia.