Oil Report

REFILE-Indonesia watchdog aims to abolish cattle import quotas to fight cartels

(Refiles to correct headline to cattle import quotas, not beef quotas)

JAKARTA, June 29 (Reuters) - Indonesia’s anti-monopoly agency has proposed abolishing a cattle import quota system and replacing it with tariffs, in a bid to break the stranglehold of local cartels blamed for surging beef prices, its chief told Reuters.

President Joko Widodo, who came to power two years ago in large part thanks to his image as a man of the people, has come under fire after beef prices shot up ahead of the Muslim celebration to mark the end of the fasting month in early July.

Widodo had told local media that he wants fresh beef to cost around 80,000 rupiah ($6) per kg, but the current market price is up to 50 percent higher. On Wednesday, thousands of people lined up to buy government-subsidised beef at a district in North Jakarta.

Indonesia, which has the world’s biggest Muslim population, imports virtually all of its cattle from Australia - a trade that was worth nearly $600 million in the last financial year. The agriculture ministry is, however, trying to curb imports as part of a national push for domestic self-sufficiency.

“The limit on imports is causing a lack of supply because it’s not balanced with the growth of the local cattle population,” Syarkawi Rauf, the head of the Indonesian Business Competition Supervisory Commission (KPPU), said in an interview.

“The beef prices become even more excessive because there are people who take advantage of that government policy,” said Rauf, an economist who took the top position at the independent watchdog less than a year ago.

A senior government official has told Reuters that a so-called “beef mafia” has been operating for years with impunity.

In April, the KPPU imposed a total fine of 106 billion rupiah ($8.05 million) on 32 feedlotters, which it said had collectively agreed to hold back stocks. Nearly half of those businesses are challenging that ruling in court.

Rauf said the KPPU had urged the president to replace cattle import quotas with a tariff system to limit the opportunities to stockpile livestock to squeeze out greater profits.

Under the proposed system, when there is a lack of supply, the government could lower the tariff and give businesses more incentive to import cattle. On the other hand, when there is oversupply, raising the import tariffs would make locally bred cattle more competitive.

To act as a deterrent, the watchdog had also proposed an increase in the penalty for businesses found guilty of monopolistic practices: a fine of up to 30 percent of the company’s annual sales, compared with a maximum 25 billion rupiah ($1.9 million) fine currently.

Rauf hoped the proposals could be implemented this year, but said there was some resistance to the abolishment of the cattle import quota system even from within the government itself.

Nevertheless, Rauf said he would continue fighting.

“Beef is one of the main sources of protein in Indonesia. It is very important for the people, that is why we are very focused on this area.”

$1 = 13,160.00 rupiah Reporting by Eveline Danubrata and Fergus Jensen; Additional reporting by Bernadette Christina Munthe; Editing by Ed Davies