Friday, November 2, 2012

Agricultural partnerships offers a new way forward in 'The Asian Century'

As Australian cattle farmers continue to suffer from the fallout following the inept handling of the live cattle ban last year, the huge opportunity for both Australia and Indonesia to develop a major agriculture partnership 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 at around 350kgs 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 cattle.

So not only should the live exports between Australia be fully restored (and this will take a lot of hard political work) the model should be used to substantially expand our relationship with Indonesia in the development of food-based opportunities.

We often hear that Australia could become 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:

·        Labour costs are in many cases too high.

·        Diminishing productivity.

·        Availability of labour is a major constraint to the development of food-based industries in Australia.

·        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 lacks however, is technical knowledge and expertise. Australian farmers through our agriculture and horticulture industries are amongst the best in the world. They have 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 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 opportunities.

Already we have seen WA 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 WA’s 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, 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 very much focused on either, ‘political irritants’ and ‘Bali holidays’. The most common issues include asylum seekers, the live-cattle ban, Bali holidays, Indonesian children in adult jails, and drug smugglers. All very important issues but nowhere do we address the issues that really matter in a developing a deep and trusting relationship.

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, we can enjoy riding on the back of Indonesia’s transition to a world-class nation.

Ross Taylor is the chairman of the Indonesia Institute (Inc)
November 2012

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