Dairy duty: Indonesia presses businesses to find a million cows

Highlights:

• Indonesia aims to import one million dairy cows over 5 years
• Government calls on private sector to fund cow imports
• Scheme aims to more-than-quadruple Indonesia dairy herd
• Cow imports key to Prabowo school meals, self-sufficiency push

The once-empty barns of the Laras Ati milk cooperative are filled with the recent arrival of more than 200 pregnant spotted Holstein-Friesian cows from Australia under Indonesia's ambitious plan to ratchet up milk production.

The centrepiece of a programme to provide free meals to 83 million children and expectant mothers, the plan calls for importing a million dairy cows over five years, at a cost of nearly $3 billion, to lift the size of the country's dairy herd more than four-fold from 220,000 now.

With limited fiscal space, Jakarta is pressing private companies to fund the imports - an unorthodox approach causing concern amongst the business community in Southeast Asia's largest economy, according to scheme participants and documents seen by Reuters.

The spokesperson for Indonesia's Presidential Communication Office and state secretariat minister did not respond to requests for comment.

Progress has been slow since its launch in December, with just 11,375 dairy cows imported by the end of July, all from Australia thus far, against a target of 200,000 for the year, government data shows.

The slow pace has cast doubt over the expanded rollout of the free meals plan, which was the biggest pledge made to voters by President Prabowo Subianto as he swept to power in last year's election, experts said.

A lack of cattle means the world's fourth-largest country by population relies mostly on milk powder imported from Australia, New Zealand and the United States. Prabowo's policy platform also pushes for greater self-sufficiency for the archipelago.

Helmed by the agricultural ministry, the plan called for businesses - many without direct dairy experience - to pay for and import cows that are brought into the care of cooperatives such as Laras Ati in West Java.

The idea, Deputy Minister of Agriculture Sudaryono said in June, is to import live cattle to decrease the need to import milk and meat.

"It's not the government that will allocate funds to import live cattle," he said in a statement. "There is a significant demand for meat and milk, so we are opening the opportunity for many investors," he said.

PRESSURE TO PARTICIPATE

Last November, shortly after Prabowo took office, the agriculture ministry sent a communique to over 200 private businesses asking them to commit voluntarily to import cattle to support the free meals programme, industry sources said. The commitment was for 20 cows per year from 2025 through 2029.

Reviewed by Reuters, the communique was also sent to more than a dozen multinational companies.

Ministry data said 196 businesses committed to bringing in cows as of May. Sources familiar with the matter have said that most of the companies have no prior experience dealing with live cattle.

Four people involved in the programme, speaking on condition of anonymity due to concern they could face government backlash, said the companies felt compelled to participate fearing the consequences of not doing so, such as facing delays in securing import licences for their core businesses, including frozen meats and milk powder.

Documents and correspondence reviewed exclusively by Reuters illustrate such consequences for one company, whose import commitment earlier this year was below the expected 20 cow "minimum" that companies had been advised to fund.

The correspondence, via text messages, showed an official of the company inquiring with a government official about an inordinate delay in the approval of an import licence recommendation despite its commitment to import cattle.

The government official asks for the import commitment to be raised to 20 cows. The company official complies and resends the licence recommendation request, which is then approved in a matter of days.

The details of the company and ministry are being withheld to protect the company official from what they feared would be further backlash.

The Directorate General of Animal Husbandry and Animal Health at Indonesia's agriculture ministry did not reply to requests for comment.

DAIRY NEOPHYTES

Arip Setiadi, who heads the Laras Ati co-op about 250 kilometres (155 miles) southeast of Jakarta, said the agriculture ministry called investors as well as dairy cooperatives into a meeting in March.

"They told us, importers and cooperatives, to collaborate in increasing the dairy cow population and milk production," Setiadi, 42, said during a recent visit to his farm, located in a region where half the cattle population was wiped out by a foot and mouth disease outbreak in 2022.

Of the cows at Laras Ati, 160 were bought by 16 members of the Indonesian Association of Animal Protein Entrepreneurs (APPHI), with no cattle experience, which is why the herd is managed by the co-op. Another 160 bought by APPHI members were moved to the KAN Jabung cooperative in East Java.

Achmad Fachmi, head of APPHI, said that businesses are under obligation to adhere to government regulations and policies in their operations. The association represents businesses in cold chain distribution, including meat and dairy products.

He added that close discussions were held with the ministry, expressing "our hopes that by running this programme, we will be supported in terms of the licensing process" for their core businesses.

Each cow costs the buyers around 45 million rupiah ($2,800), which includes the import price as well as six months' worth of expenses for items including transport, feed, and vaccines.

Under the scheme, cattle purchasers and the cooperatives will share revenues, with the buyers expected to recoup their investment in about three-and-a-half years, APPHI figures.

Several industry experts expressed scepticism over the structure of the plan as well as the country's readiness to manage a massive influx of cattle.

"As an exporter we have responsibilities with animal welfare. The infrastructure there doesn't support all that," said Adam Petty, founder of Dairy Livestock Exports, an Australian exporter of dairy heifers that ships thousands of animals a year, including to Indonesia.

Rochadi Tawaf, an adviser with Indonesia's Cattle and Buffalo Breeders Association and a lecturer in animal husbandry at Padjadjaran University, questioned the reliance on inexperienced firms.

"If the programme is given to entrepreneurs with no track record of success in the dairy business, it won't produce results," he said.