Monday, February 04, 2013

Bribery and Corruption Rampant in Indonesian Beef Trade

Late last week this story hit the local headlines in Australia, with the detaining of Indonesian nationals in Jakarta apparently attempting to bribe Indonesian government officials over the beef quotas recently established.

It seems it has been around frozen beef quotas, not live cattle but, if you have done business in the country it is known that corruption and bribery have been relatively common.  Sure, attempts are made to eliminate bribery, but more recently, these anti-corruption practices  are starting to reach into relatively high places.

The ABC and the Sydney Morning Herald have run articles on the topic, and, being away overseas, I missed them.

See below is the SMH article -
AN INDONESIAN company with deep links to the Australian beef industry has been caught red-handed offering bribes to an Indonesian politician, apparently to circumvent the country's strict quota on beef imports.

A number of Australian exporters use the company, Indoguna Utama, to ship beef to Indonesia, and one company, Mulwarra Export in Sydney, is part-owned by Indoguna's founder, Elizabeth Liman.

Two directors of Indoguna, Juardi Effendi and Arya Abdi Effendi, were arrested by Indonesia's Corruption Eradication Commission at a city hotel on Wednesday with 1 billion rupiah ($101,000) in cash in the car boot.

They are alleged to have been on their way to deliver a bribe to Lutfi Hasan Ishaaq, the president of the Islamic political party PKS.
Indonesia's agriculture minister, Suswono, represents the party in President Susilo Bambang Yudhoyono's government.

Anti-corruption officers sealed the office of the head of Mr Suswono's department, the director-general of livestock and animal health, as part of the investigation.

Mr Suswono imposed strict beef import quotas in the wake of Australia's short-lived ban on live cattle exports in 2011, on the pretext that Indonesia wanted to become self-sufficient in beef.

The quota, applying to live cattle as well as boxed beef, gutted the export trade with Australia and has resulted in shortages of beef in Indonesia, soaring prices and the inclusion of pork in traditional beef meatballs.

The commission's deputy chairman, Bambang Widjojanto, said the bribe was an attempt by Indoguna Utama to get access to a larger import allowance.

The arrests raise the question whether the quota - 32,000 tonnes of boxed beef this year - has become simply a bribe-raising exercise for PKS, which is part of Indonesia's governing coalition, with two cabinet ministers, including the communications minister.

Indoguna Utama lists five Australian exporters as ''partners'', including Andrews Meat in the Barossa Valley, Jack's Creek Wagyu Beef in Queensland, and Western Meat Packers Group in Western Australia. Mulwarra Export's owner, Greg Darwell, told Fairfax Media on Thursday that Elizabeth Liman was a passive minority investor in the company. He said he knew nothing about the bribery allegations, and they surprised him. ''I personally, in the 16 years that I've been owner and runner of Mulwarra, have not directly seen any corruption,'' he said.  His company's exports to Indonesia had dropped by 20 per cent under the quota but, he said, it had picked up markets elsewhere, and was growing.

Another Australian exporter, who spoke on condition of anonymity, said it was ''common knowledge'' bribes were ''part of the trade up there, on a daily basis, quota or no quota''.  ''They're going to desperate measures to get beef into the country,'' the exporter said.

A spokesman for the Corruption Eradication Commission, Johan Budi, said its investigation would not extend to any Australian companies, and he did not yet know if the agriculture minister would be questioned.

Read more:

This is fairly serious stuff, but the implications are even more sinister with overtones that the beef quota might have been manipulated downwards in broad terms, to elicit bribes from importers, to get around the system.  That might be described as fairly serious organised high level corruption.

Most market analysts believe that Indonesia cannot produce enough beef themselves to meet market demand - by a long way, and for quite a period of time yet.  Even if production went up domestically [ rather than by feeding imported animals] sheer logistics would be inadequate to move animals from eastern areas where beef production is increasing, to the volume demand markets of west Java.

It is a sensitive issue, and local beef prices in Indonesia have risen substantially since curbs were placed on importing both live cattle and frozen beef - with particularly greater rises in low quality meat cuts, those used and favoured by many Indonesians.

This story has quite some way to go yet, I am sure.

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