Jakarta, Indonesia Sentinel — Amidst Indonesia dairy farmers protests over fresh milk significant decline in demand, Minister of Cooperatives and Small and Medium Enterprises (KemenkopUKM), Budi Arie Setiadi explained major reasons. Budi explained that the current situation of significant reduction of local fresh milk absorption is largely due to the tax-free dairy product from the free trade agreement between Indonesia and New Zealand-Australia.
Speaking at a press conference on Monday (November 11, 2024), Budi pointed the impact of free trade agreements between Indonesia and the two countries, which have allowed their dairy products to enter the Indonesian market tax-free.
“New Zealand and Australia are taking advantage of their Free Trade Agreements with Indonesia, which remove import duties on dairy products, resulting in prices that are at least 5% lower than those of other global dairy exporters,” Budi said.
Falling Prices for Local Dairy Farmers
The influx of cheaper imported milk has reportedly worsened the absorption of fresh milk from local dairy farmers, with domestic milk processing industries (IPS) opting for imported skim milk powder instead. As a result, prices for fresh milk at the farmer level have dropped to around Rp7,000 (approximately $0.45) per liter, significantly below the ideal rate of Rp9,000 ($0.58) per liter.
“Skim milk, in terms of quality, is far inferior to fresh cow’s milk as it undergoes extensive ultra-processing,” Budi explained.
This situation has led to growing frustration among local dairy farmers in Indonesia, who are suffering losses due to the reduced demand for their fresh milk.
Government to Review Import Regulations
In response, the Ministry of Cooperatives plans to coordinate with the Ministry of Trade to review Indonesia current dairy import regulations and ensure that the milk production from local dairy farmers and cooperatives is better absorbed by the domestic market.
“We will work closely with dairy cooperatives and milk processing industries (IPS) to guarantee the absorption of local production,” Budi added.
Deputy Minister of Cooperatives, Ferry Jualiantono, echoed the need for a review of the import duty policy on dairy commodities. Currently, there is a 0% tariff on skim milk imports from New Zealand and Australia, which has negatively impacted the market for fresh milk from local farmers.
“The impact of a zero percent tariff needs to be re-evaluated. The Ministry of Trade should reconsider this policy, as it clearly affects the absorption of local fresh milk. If possible, the government should review this tariff to ensure it’s not set at 0%,” Ferry emphasized.
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Ferry believes that Indonesia can re-negotiate the tariff structure under the framework of the World Trade Organization (WTO). “This is something that can be pursued in WTO negotiations. We can advocate for protective measures to support our dairy farmers,” he stated.
If Indonesia’s request to reinstate import duties is not granted by the WTO, Ferry suggested that the government should provide incentives to local dairy farmers to help them compete against the influx of cheaper skim milk imports.
“If the tariff remains at 0%, then the government must offer incentives to support our dairy farmers,” Ferry concluded.
The government’s efforts to address the concerns of dairy farmers come amid ongoing debates over the impact of free trade agreements on local industries, as Indonesia seeks to balance market competition with the protection of its domestic agricultural sector.
(Raidi/Agung)
