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www.aipeg.or.id

AIPEG

Reposi'oningTradePolicyforAgriculturalCommodi'esTi$kAnasTradeAdviserAIPEG

August, 2017

www.aipeg.or.id

AIPEG AIPEG Key Messages

2

•  Indonesia’simportpolicyforagriculturalcommodi$esiscomplicatedandcostlytoadminister

•  Quotas,licensingrequirements,recommenda$onle@ersandseasonalrestric$onsappliedinaddi$ontoimporttariffs

•  Complicatedimportrestric$onsresultedinhighdomes$cprice

•  Exportsalsorestrictedwiththeobjec$veofensuringdomes$csupplyfordownstreamproducers

•  However,exportrestric$onshurtfarmers

www.aipeg.or.id

AIPEG AIPEG Key messages

3

•  Movetoalesscomplicatedtradepolicy:•  Onlyusetariffstorestrictimports

•  Reducestransac$oncosts•  Improvestransparency,efficiencyandcompe$$veness

•  Lowersprices

•  Nurturedownstreammanufacturingwithoutsacrificingprimarycommodi$esfarmers/producers

•  Eliminateexportrestric$ons•  Paya@en$ontotherootoftheproblemfordownstreammanufacturingonthesupplyside

www.aipeg.or.id

AIPEG

Reviewing Trade Policy for Agricultural Commodities

www.aipeg.or.id

AIPEG AIPEG Trade Policy for Agricultural Commodities

5

•  Bans•  Restric$ons•  Tariffs(includingseasonaltariff)• Nontariffmeasures/barriers• Quotas•  Licensingrequirements

Import

•  Bans•  ExportTaxes

Export

www.aipeg.or.id

AIPEG

Import Policy

www.aipeg.or.id

AIPEG AIPEG Many food commodities are subject to...

7

Quotas

Non-automa$clicensing(includingrecommenda$onle@ers)

Tariffs

www.aipeg.or.id

AIPEG Indonesia facing high beef prices compared to other countries and international price

8

Source:BPS,WorldBank,CEIC

0

20,000

40,000

60,000

80,000

100,000

120,000Jan-07

Jul-0

7

Jan-08

Jul-0

8

Jan-09

Jul-0

9

Jan-10

Jul-1

0

Jan-11

Jul-1

1

Jan-12

Jul-1

2

Jan-13

Jul-1

3

Jan-14

Jul-1

4

Jan-15

Jul-1

5

Jan-16

Jul-1

6

Jan-17

IDR/kg BeefPricesinIndonesiaInterna$onalPrices

BeefPricesinThailandBeefPricesinPhilippines

Regulatedbeefimportbutnotliveanimal

Regulatedanimalandanimalproductscon$nued

•  BeefpricehasbeenincreasingsignificantlyinIndonesiafromaround50,000/kginJan2007toaround110,000/kginJan2017

•  It is significantly higher the interna$onal price and neighbor countries(PhilippinesandThailand)

Regulatedanimalandanimalproductsimport(Quotaandlicensing)

Newpolicyonimportofliveca@le:1:5

www.aipeg.or.id

AIPEG Antitrust case of beef imports

9

Source PutusanPerkaraNomor10/KPPU-I/2015

Case KPPUiden$fiedsomebusinessen$$esinJabodetabekviola$ngLawNo5/1999ontheBanofMonopolis$cPrac$cesandUnfairBusinessCompe$$on.

Summary 1)  Importtakesapproximately80%ofbeefconsump$oninJakarta;65%inJabodetabek.

2)  Despitethe26enterprisessuppliedbeefthroughthegovernmentallocatedquota(startedca.Sept2011),thepoten$alaffilia$onmoveamongstthesupplierhadneverbeenan$cipated.

3)  APFINDOdecidedtheimportquotaforeachfeedloter.4)  6affiliatedgroupssupplied58%ofbeefinthemarketin2014and

thenroseto61%inQ32015.5)  Althoughtheimportedvolumeofbeefunchangedbetween2009

and2014,itspriceperkgwithintheperiodincreasedfromIDR21.5thtoIDR34.5th.Inmid-2013,itreachedIDR38.0th.

6)  Itisiden$fiedthattheequilibriumdidnotreflectsupplyanddemand:feedlotercutthesupplytomaintainhighprice.Tradedatarevealedhowtheimportrealiza$onstoodbelowtheallocatedquota(81%in2013,74%in2014).

7)  Ontheamermathofthiscase,KPPUcharged31enterprisesbetweenIDR1-25bn.

www.aipeg.or.id

AIPEG AIPEG Similarly…Indonesian consumers face high sugar prices

10

Sugar price

Source:CEIC,WorldBank

0

5,000

10,000

15,000

20,000De

c-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Dec-16

IDR/kgSugar(Indonesia) Sugar,EU Sugar,US Sugar,world

SugarpriceinIndonesiaishighandhasbeenincreasingsince2008

www.aipeg.or.id

AIPEG AIPEG Bans on corn imports had resulted in high price

11

Pemerintah Diminta Cabut LaranganPemerintah Diminta Cabut LaranganImpor JagungImpor JagungPosted on July 14, 2016 by Hendry Sihaloho in Ekonomi

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Ilustrasi jagung | ist

Duajurai .com, Bandar LampungDuajurai .com, Bandar Lampung – Kementerian Pertanian diminta mencabut PeraturanMenteri Nomor 57 Tahun 2015 tentang Pemasukan dan Pengeluaran Bahan Pakan Asal Tumbuhanke dan dari Wilayah Indonesia, jika tidak ingin harga pangan menjadi mahal.

Menurut Ekonom Universitas Indonesia (UI) Faisal Basri Aturan, aturan yang diteken MenteriPertanian Amran Sulaiman pada 25 November 2015 itu bukan cara yang tepat untuk mendorong

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Jakarta - Harga jagung yang melonjak tinggi di tengah seretnya pasokan,membuat produsen pakan ternak kelimpungan. Kondisi sulit ini semakindiperparah dengan larangan penggunaan impor jagung yang dilakukanKementerian Pertanian (Kementan).

Ketua Umum Gabungan Pengusaha Makanan Ternak (GPMT), Sudirmanmengungkapkan, kelangkaan jagung terjadi setelah panen jagung terlambatimbas dari fenomena kekeringan panjang akibat El Nino. Hal ini membuatharga jagung lokal melonjak hingga 2 kali lipat.

"Jagung di Jawa belum panen, begitu pun dengan daerah Sumatera danSulawesi Utara. Yang baru panen raya itu Sumatera Utara. Di sana hargajagungnya juga sudah Rp 5.500/kg, itu terjadi karena daerah lain terlambatpanen, jadi suplai jagung mengalir ke daerah yang belum panen," jelasnyapada detikFinance, Senin (25/1/2016).

detikFinance / Berita Ekonomi Bisnis / Detail Berita

Senin 25 Jan 2016, 07:47 WIB

Curhat Pengusaha Pakan Ternak: Jagung Lokal Mahal,Jagung Impor DitahanMuhammad Idris - detikFinance

Foto: Reuters

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Jurus Jokowi Genjot DayaSaing Infrastruktur RIKamis, 24 Agu 2017 21:24 WIB

Bakrie Incar Harta KarunEnergi di MadiunKamis, 24 Agu 2017 21:19 WIB

Bukan di Pinggir Jalan,Pedagang Ini Jualan HewanKurban via OnlineKamis, 24 Agu 2017 21:14 WIB

Harga Beras Dipatok,Pedagang: Harusnya EnggakDibatasiKamis, 24 Agu 2017 20:36 WIB

BERITA TERBARU +

Daftar detikconnect MasukCari Berita atau Alamat Daftar/MasukPilih Kanal

Mentan Berkomitmen Kendalikan Impor JagungTim VIVA »

Menteri Pertanian (Mentan) Andi Amran SulaimanPhoto :

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VIVA.co.id - Menteri Pertanian (Mentan) Amran Sulaiman bersama Bupati Tuban,

Fahtul Hudan dan Pangdam V Brawijaya, Mayjen TNI Sumardi dan Kepala dinas

provinsi jatim Wibowo Eko Putro melakukan panen jagung di Desa Sumber, Kecamatan

Merakurak, Kabupaten Tuban, Rabu 30 September 2015.

Lahan jagung yang saat ini sedang melakukan panen sebesar 517 hektare (ha) dan

lahan jagung yang akan panen sampai pada bulan Oktober sebesar 733 ha dengan

produktivitasnya 9,2 ton per hektare (ha).

Kehadiran Mentan di lokasi tersebut langsung disambut oleh kelompok Kontak Tani

dan Nelayan Andalan (KTNA) Tuban. Mentan dan rombongan langsung melakukan

panen jagung dan berdialog dengan para petani.

Ketua KTNA yang sekaligus sebagai Kepala Desa Tuwirwetan Setia Budi

menyampaikan, terjadi peningkatan produksi jagung hibrida yang cukup drastis untuk

saat ini. Sebelumnya produksi jagung hibrida hanya mencapai 7 sampai 8 ton per ha,

sedangkan sekarang mencapai 9,2 ton per ha.

Sydney (Return)Sydney (Return)Start FromStart From

PILIHAN REDAKSI

ARTIKEL TERPOPULER

1

2

3

4

BERITA BOLA HAJI⋆

SPORT OTOMOTIF DIGITAL SHOWBIZ GAYA HIDUP BLOG ANTV

Kamis, 24 Agustus 2017 Masukkan Pencarian.....

www.aipeg.or.id

AIPEG Domestic corn price is higher than international price

12

-1,0002,0003,0004,0005,0006,0007,0008,000

HargaInternasional Domes$k* HargaImpor(Value/Volume)

inRupiah

•  Theaveragecornproducerpricein2016wasRupiah3,819.84•  However,theaverageretailpriceofcornwasRp6988(MOT,EWS)•  Withimporttariffofonly5%,even0%forAEC,usersofcornshouldbeableto

getcornatthepriceofRp5000orless

Source.CEIC,MOT

Corn price

www.aipeg.or.id

AIPEG Who suffers from the high food price?

13

Forcorn:•  Consumers•  Animalfeedindustryanditsdownstreamsectors•  Othercorn-basedindustriesanditsdownstreamsectors

Forbeefandsugar:•  Consumers•  Industriesusingbeefandsugar(foodandbeveragesindustries,hotelandrestaurants)

www.aipeg.or.id

AIPEG

Export Policy

www.aipeg.or.id

AIPEG AIPEG Export ban on rattan

15

Governmentbannedrawra@anexportsin2011(Permendag35/2011)toensuresupplytodomes$cra@anfurnituremanufacturers

Now,rawra@anpriceisRp1500/kg,downfromRp20000/kgin2012

www.aipeg.or.id

AIPEG AIPEG Export Tax on Cocoa Beans

•  Cocoabeanshavebeensubjecttoanexporttaxsince2010•  Thehigherthepricethehigherexporttaxrate

•  Thera$onaleforthispolicyistoensurethesupplyofcocoabeansforthedomes$cprocessors

www.aipeg.or.id

AIPEG AIPEG Justification for Export Tax Policy

•  Conceptually, an export tax can be justified to exploit market power (market failure argument)

–  A country has a global monopoly over a commodity but it is produced competitively domestically. Under free market conditions, an export tax allows the country to generate rent from its market power

–  More generally export tax may increase terms of trade and may potentially promote domestic processing industry

•  But export taxes are only effective if a country has market

power –  Very large market share in exports and production –  Inelastic demand (price increase leads to revenue increase) –  No (almost no) substitutes (inelastic supply) –  Can be shown that price increased following export tax

www.aipeg.or.id

AIPEG AIPEG Indonesia’s exports of cocoa beans decrease

Share of Indonesia’s export declined from as high as 15% in 2002 to only 1 % in 2016. Indonesia ranks 14th in 2016 from 2nd in 2001..

11%

8%

8%10%

12%

10%11%

13% 12%

5%5%

6%

2%1%

0%

2%

4%

6%

8%

10%

12%

14%

16%CocoabeansworldexportsfromIndonesia(%)

Source:Trademap

www.aipeg.or.id

AIPEG AIPEG … and replaced by other countries

0

1000

2000

3000

4000

2001 2003 2005 2007 2009 2011 2013 2015

US$m

CocoaBeansExports:IndonesiavsTop3Exporters

Côted'Ivoire Ghana Cameroon Indonesia

In the past three years, while other larger exporters increased its exports, Indonesia’s exports continue to drop

Source:Trademap

www.aipeg.or.id

AIPEG AIPEG Increase in processed cocoa export did not significantly compensate decline in bean export

Export value of all processed cocoa after 2010 increased, but still below the export value of cocoa beans before 2010…

0

200

400

600

800

1,000

1,200

1,400

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Thou

sand

s

Cocoabeans,wholeorbroken,raworroasted

Cocoapaste,whetherornotdefa@ed

Cocoabu@er,fatandoil

Cocoapowder,notcontainingaddedsugarorothersweeteningma@er

Processedbean

www.aipeg.or.id

AIPEG AIPEG Export tax policy in 2010 disincentives cocoa bean production…

-100200300400500600700800900

2001 2003 2005 2007 2009 2011 2013 2015

inth

ousand

ton

Produc$on(Ton)PBS/Private Produc$on(Ton)PBN/Government

Produc$on(Ton)PR/Smallholder

Source:TreeCropEstateSta$s$csofIndonesia2014-2016CocoaDirectorateGeneralofEstateCrops

*2016ispreliminarydata

Indicated by the continued decline in the production of beans

www.aipeg.or.id

AIPEG AIPEG Number of cocoa farm workers and cultivation land have declined after 2010

Source:MOA,TreeCropEstateSta$s$csofIndonesia2014-2016CocoaDirectorateGeneralofEstateCrops

*2016ispreliminarydata

-

10

20

30

40

50

60

70

80

1,660

1,680

1,700

1,720

1,740

1,760

1,780

2012 2013 2014 2015 2016*)

Num

bero

ffarmworkers

Thou

sand

s

Land

(HA)

Thou

sand

s

Land(HA) NumberofFarmWorkers

www.aipeg.or.id

AIPEG AIPEG The domestic processing was growing ….at a lower rate

Annualgrowth2005-2010:52.8%-

5,000

10,000

15,000

20,000

25,000

30,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Millions

Produc'onofProcessedCocoa(tons)

Annualgrowth2010-2014:17.7%

Exportsareabout50-60%oftotalproduc6on

Source.BPS Note.ISIC15314+15431+15432

www.aipeg.or.id

AIPEG AIPEG Demand for cocoa beans in the domestic market increased overtime…

0

20

40

60

80

100

120

140

160

0

100

200

300

400

500

600

700

800

900

Thou

sand

s

Thou

sand

s

Produc$on(ton) ImportQuan$$es(Ton)

Produc$on Import

Indicated by increased in imports of beans…. Meanwhile domestic production of cocoa beans tend to decrease

www.aipeg.or.id

AIPEG AIPEG The gap between world price and Indonesia’s producers’ price was widened…

2,9093,137

2,892

2,1961,743 1,869

10%

0%

5%

10%10% 10% 10%

0%

2%

4%

6%

8%

10%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2010 2011 2012 2013 2014 2015 2016

Expo

rtTax(%

)

Price(US$/M

T)

WorldPrice(US$/tonne)*IndonesiaProducerPriceofCocoa(US$/MT)ExportTaxofCocoaBeans(US$/MT)-onaverage**

Source.ICCO,Worlbank,MOA

www.aipeg.or.id

AIPEG Conclusion and Recommendation

26

Conclusion:•  Complicated(andnontransparent)importrestric$onhad

resultedinhigherprice•  ExportRestric$onResultedinInjurytoFarmers

Recommenda'on:•  Abortexportrestric$on•  Eliminatenontariffmeasures(i.e.quotaandnon-automa$cimportlicensing)