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Indonesia Reviews Cattle Import From Australia Over Spy Spat

Nov. 22 (Bloomberg) -- Indonesia is reviewing its dependence on cattle imports from Australia, in the first sign that a dispute over phone tapping could affect trade and investment between the two neighbors.

Indonesia, which takes more than 60 percent of Australia’s live cattle exports, may revise rules to allow it to import from other countries, Trade Minister Gita Wirjawan told reporters in Jakarta today. State-owned PT Rajawali Nusantara Indonesia is putting on hold talks to buy Australian land for cattle ranches, said chief executive Ismed Hasan Putro today.

Claims that the phone of Indonesian President Susilo Bambang Yudhoyono was tapped by Australian intelligence agencies led protesters in Jakarta to burn flags yesterday and demand a break in diplomatic ties, escalating tensions between the two countries to their highest level in 14 years. Yudhoyono has called for a halt in cooperation on asylum seekers and military operations.

“If our neighbor is doing tapping that reflects that they distrust us, and I think that will affect the bilateral relationship,” said Wirjawan. “We are reviewing the policy, to not let our sovereignty be disturbed.”

Malaysia imports most of its beef from India at half the price of Australian meat, and Indonesia should act to follow that, Wirjawan said.

“As long as our domestic supply is not enough, we shouldn’t have supply from one place only,” Wirjawan said. “Of course this will take time and meanwhile we must maintain price stability.”

Cattle Stations

Wirjawan, a potential presidential candidate, last month shared a stage with Australian Prime Minister Tony Abbott at a business forum in Jakarta to joke about the two countries’ shared love of protein and to declare warmer ties. Abbott has ruled out an apology over the alleged tapping, potentially complicating his bid for a free-trade pact with Indonesia.

Two-way trade, which includes wheat, oil and dairy products, reached A$14.6 billion ($13.4 billion) last year.

Indonesia has ordered 121,000 head of Australian cattle for import this quarter and is open to further imports if needed, Bayu Krisnamurthi, the deputy trade minister, said last month after Abbott brought a trade delegation to Jakarta.

An Indonesian firm last month bought cattle farms in Australia in an effort to guarantee future supplies, as an expanding middle class in the world’s fourth most populous nation eats more beef. PT Japfa Comfeed Indonesia said it bought two cattle properties in the Northern Territory.

Defending Dignity

The government said in September it would invest as much as 2 trillion rupiah to run farms with an Australian partner to supply cattle to the Indonesian market, after efforts last year to restrict imports and develop domestic herds led to market shortages and surging beef prices.

Rajawali Nusantara, which was in the process of deciding to buy 25,000 hectares of ranch land in Australia and has a target to supply cattle by February, is now considering New Zealand as an alternative, Putro said.

“We are a state-owned enterprise, we must take part in defending government dignity,” Putro said by phone. “Business and politics are different matters, but trust is basic.”

To contact the reporter on this story: Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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