ON the eve of the release of import permits for the second trimester, Indonesia has stunned its cattle import and feedlot sector with the announcement last Friday of Rp 107 billion (A$10.5m) in fines against 32 companies for supposed cartel behaviour in colluding to fix the price of beef in markets in the greater Jakarta area.
The Jakarta Globe newspaper reported that the Business Competition Supervisory Commission (KPPU) decided to prosecute the companies last September after beef prices rose as high as Rp 130,000/kg (A$12.75/kg) in the weeks preceding Idul Fitri (a major Indonesian festival involving beef consumption) in July 2015.
The Globe said KPPU commissioner Chandra Setiawan told a hearing on Friday that all 32 companies were found to have contravened the Law on Monopolies by colluding to fix prices and manipulate the supply of beef.
Included in the published list of those found guilty are the Australian connected Elders Indonesia and Agro Giri Perkasa (majority owned by Consolidated Pastoral Company). Large and small alike have been taken to task by KPPU ranging from major players Tanjung Unggul Mandiri and Great Giant Livestock to small operators such as Fortuna Megah Perkasa.
In the case of Tanjung who strongly refute any wrongdoing, the fine is Rp 21 billion (A$2m).
But accusations about cartels and price fixing are nothing new in Indonesia.
The topics in recent years range from garlic to motorcycles but never before has there been an outcome of such magnitude and far reaching proportions.
Permata Adoe, deputy chairman for food processing and farm business at the Indonesia Chamber of Commerce and Industry (Kadin) deplored the KPPU decision saying it would undermine legal certainty in the beef industry.
It was also more than coincidental that the day before the KPPU bombshell, Indonesia’s Director General of Livestock and Animal Health, Dr Muladno, spoke at a roadshow on Indian bovine meat held in Jakarta saying the Indonesian government is intending to open its market for Indian bovine meat by Ramadan (June) this year.
The roadshow had been organised by the Indian Embassy in Jakarta and Dr Muladno’s comments were widely reported in Indian media.
He said that an Indonesian audit team had inspected Indian abattoirs in September 2015 and confirmed that India had excellent meat processing and quarantine control mechanisms.
As a result, President Widodo had signed a decree in March this year allowing zone-based meat imports.
The Indian media reports concluded with a statement from the Indian Embassy in Indonesia saying that India expected to get a significant share of the Indonesian meat market as the bovine meat will be very competitively priced.
Australian live exporters are now thinking that the second trimester permit announcement may be a lot lower than previously anticipated.
WAS the cartel finding orchestrated to support the carabeef decision?
IN 2013 Indonesia’s National Economic Committee (KEN) alleged price fixing in key food commodities including beef.
The report gained attention because it coincided with Indonesia’s latest high-profile bribery scandal involving government contracts for imported meat.
Later the same year Indonesians were treated to months of unseemly behaviour as ministries criticized each other over policies that led to beef shortages and wildly increasing prices.
Then in August 2015, KPPU announced it had been investigating 24 companies since the price fixing allegations in 2013.
A month later on September 15, KPPU publicly announced that President Widodo’s goal to reach beef self-sufficiency by 2019 was too ambitious and that beef scarcity could become an issue.
At the same time, Indonesia’s audit team was in India conducting inspections that would allow for a presidential decree to be signed allowing Indian bovine meat into Indonesia.
On September 16, KPPU announced it was taking 32 companies to court over the price fixing allegations.
Looking at the timelines of these events it is hard to believe the Indian beef importation decision and the heavy-handed penalties for cartel behaviour are not related.
A guilty finding of price fixing against those who would oppose importation of Indian beef would diminish any chance they might have in lobbying to block it.
As well it would demonstrate a capacity for strong action from Widodo in response to high beef prices against a background of corruption, ministerial infighting and a flawed self-sufficiency program.