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Analysis: Bulog accused of collusion leading to high buffalo meat price
The government opened up buffalo meat imports to provide a substitute for beef, the price of which has been rising, but the effort seems to have been undermined as the buffalo meat price has followed suit and risen as well.
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Seller cuts beef at Cijantung market, Jakarta, Tuesday (6/4/2021). The Director General of Animal Husbandry and Animal Health of the Ministry of Agriculture said that 188,000 cows are ready to be slaughtered to meet the availability of beef supply for the period of April and May 2021. (JP/Yulianto Catur Nugroho)
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he government opened up buffalo meat imports to provide a substitute for beef, the price of which has been rising, but the effort seems to have been undermined as the buffalo meat price has followed suit and risen as well. Alleged collusion between the State Logistics Agency (Bulog) and several distributors is said to be the reason behind the high buffalo meat price.
Idul Fitri, when demand for meat usually rises sharply, is in less than two months but the government has been struggling to keep the price of beef under control. The price of beef in the country has reached the Rp 100,000 (US$6.53) per kilogram, exceeding the Rp 90,000 per kg price limit set by the government.
To overcome the issue, the government opened buffalo meat imports, expecting that the market would accept the cheaper meat as a substitute. However, the price of imported buffalo meat has also risen to Rp 90,000 per kg, surpassing its normal price of Rp 80,000 per kg.
Distributors in the cold chain sector complain that Bulog sold the buffalo meat it had imported only to a small number of select distributors, such as Suri Nusantara Jaya (SNJ), while the rest of them were not permitted to purchase it directly from the state-owned enterprise (SOE).
They even claimed that all the other selected distributors were actually affiliates of SNJ. If their claims are proven right, then Bulog may have potentially violated Law No. 5/1999 by giving distribution rights to only one party, which leads to high prices.
Bulog president director Budi Waseso denied the accusation that Bulog gave special treatment to select distributors. He added that Bulog now mandated distributors to pay a deposit starting from 40 to 50 percent of the price up front to avoid losses incurred from distributors canceling their orders, which Bulog had repeatedly experienced. In return, Budi said firms that accused him of bias were firms that Bulog had blacklisted for failing to pay for their orders.
Another factor which contributed to high buffalo meat prices is the fact that Bulog bought its buffalo meat from India at a higher price per kg than other Southeast Asian countries. For example, Malaysia purchased buffalo meat from India in the past year at $2.89 per kg, while Indonesia bought it at $3.13 per kg. Budi claimed that the reason for Bulog’s higher purchase price was because the SOE bought only quality meat and no offal.
According to Agriculture Ministry Regulation No. 17/2022 and Trade Ministry Regulation No. 25/2022, private sector companies are allowed to import beef and buffalo meat if they meet the requirements for an import technical recommendation, which previously was only given to SOEs.
However, despite being allowed by the regulations, the Office of the Coordinating Economic Minister in the end only authorized imports by Bulog and fellow food SOE Rajawali Nusantara Indonesia (ID Food) to import 100,000 tonnes of buffalo meat and 100,000 tonnes of beef, respectively.
What’s more
Indonesia’s recent bovine meat imports came from Brazil and India. The main reason that the government directed its agricultural SOEs to procure meat from those two countries was mainly due to the competitive pricing for both commodities from those nations in comparison with beef imported from countries that Indonesia historically relied upon to fulfill its domestic beef demand, such as Australia. The lower price could help curb bovine meat prices.
However, the imports have contributed to the outbreak of bovine foot and mouth disease (FMD). Unlike the bovine meat imported from countries which the World Organization for Animal Health (WOAH) has declared to be safe from FMD, the import of bovine meat from India and Brazil which was authorized in a zone-based manner by Law No. 41/2014 came from countries in a zone which has only been declared partially clear from FMD by the WOAH.
What we’ve heard
A number of sources said that a monopoly in buffalo meat trading actually played a part in its rising price in several markets, which has been difficult to taper down. The monopoly starts from imports to distribution channels.
For imports, Bulog has received assignments to import buffalo meat from India from the government since 2016. Then, they handed over distribution rights to PT Suri Nusantara Jaya.
Several sources also said that the, on paper, Jakarta Chamber of Cemmerce chairwoman Diana Dewi was listed as the owner of PT Suri Nusantara. However, other sources also said that there is a coal business player involved behind PT Suri Nusantara. This coal business player is said to be close to a number of government and law enforcement officials.
Another source said that Government Regulation (PP) No. 4/2016, which gave Bulog the right to importing meat, has actually been replaced by PP No. 11/2022 on the entry of animal products.
Agriculture Minister Syahrul Yasin Limpo—who on several occasions often butts heads with Bulog president director Budi Waseso—hurriedly issued an Agriculture Ministerial Regulation as the basis for providing technical recommendations for prospective buffalo importers from India.
This regulation opens opportunities for private companies to become importers of buffalo meat—including companies known to be close to Agriculture Ministry officials. "They used their own channels," said a source. The exclusivity of the new import channels gave a rent-seeking opportunity for some business actors.
Another source said that the Agriculture Ministry had long been dissatisfied with Bulog’s monopoly on the policies of importing buffalo meat from India. "With their policies at the time, Agriculture Ministry officials could not include companies that have been close to them," he said.
It is the Coordinating Economic Affairs Minister Airlangga Hartarto that had originally assigned Bulog to import Indian buffalo meat. The Coordinating Economic Affairs Minister lately has not been on friendly terms with Agriculture Minister Syahrul Limpo. "That's why in matters of buffalo meat, the Coordinating Minister tends to side with Bulog," he said.
Disclaimer
This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia’s political and business landscape. Access our latest edition to read the articles listed below:
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