'Ireland should push for a free-trade agreement with Indonesia to compete in region'
Ireland must push for a Free Trade Agreement with Indonesia if it wants to successfully compete in the South-East Asian market, Head of Dairy Industry Ireland (DII) Conor Mulvihill has urged.
Mr Mulvihill told FarmIreland during the Indonesia-Ireland dairy seminar, which was held as part of trade mission events to the region the 5pc tarrif Indonesia places on most dairy products will make it more difficult to compete with New Zealand and Australia who currently supply most dairy ingredients to the country and who have a FTA set up.
“A Free Trade Agreement (FTA) is a key piece of infrastructure. We’re already competing against New Zealand and Australia who have trade agreements with Indonesia and people will turn around and say that the tariff is only 5pc for most dairy products but we are a very low margin industry so 5pc plus the logistics and expenses really is a lot,” he said.
“Ireland need to focus on driving that free trade agreement on at a EU level.”
He pointed out that while Ireland is accustomed to selling its sustainability and grass-fed credentials as its USP in foreign markets, he said price is the main concern for Indonesian exporters at present.
“Price is the factor and is a high priority at the moment. We’ve seen that in the manufacturing plants that we’ve visited that price and taste is what they are looking for but from our experience in other export markets as middles classes grow themes such as wellness, sustainability and food safety come to the fore more in time,” he said.
Mr Mulvihill added that skim milk powder and whey milk powder offer the most potential for Irish exporters looking to supply the south-east Asian market.
Speaking at the Irish embassy residence in Jakarta Agriculture Minister Michael Creed said building awareness of brand Ireland will be a significant challenge in selling the Irish story to south-east Asia but believes it is one that the industry is well-equipped to overcome.
“I’m under no illusions here. We’re a long way from home here. We like to think that sometimes everybody knows all about us but that’s far from the case. If you walk down the main street of Jakarta levels of awareness might disappoint us, it’s an ongoing endeavour to sell and market and promote Ireland,” he said.
Thomas Darmawan of Kadin Indonesia Chamber of Commerce said that Indonesian Milk Processors Association projects that milk consumption will increase from 14 litres to 19 litres which is an opportunity for Irish processors to take advantage of
Raymond Li of Glanbia Shanghai said that this increase in demand is an aspect of trade that offers potential for the processor but said getting registration to import to Indonesia could take some time to finalise.
“Indonesia is a potential market with 260m people and we are seeing their domestic milk supply is not enough for its growing population which is good for us,” he said.
“We are facing some issues regarding registration to import to Indonesia, so we hope to get help from the government in Ireland and Indonesia to help us sort this out. Indonesia is one of the most important markets for us.”
South and east Asia is a region home to over 650m people Indonesia.
According to Bord Bia the main objective of the trade mission is to raise awareness of Ireland as a source of sustainable dairy.
Indonesia is only 40pc self-sufficient in dairy, while Malaysia is just 5pc self-sufficient. Both countries are becoming increasingly reliant on imports to keep pace with consumer demand.
In 2016, Indonesian dairy imports totalled 380,000t across skim milk powder, whey and other ingredients. New Zealand continues to be the principal import supplier.
For dairy producers in Malaysia, cheddar, mozzarella or whole milk powder provide significant opportunity for Irish exporters considering the country applies zero tariffs on those products.
To date, Ireland has been a limited supplier into these markets with combined dairy exports valued at under €50 m.
Bord Bia CEO Tara McCarthy explained at a dairy seminar with Indonesian buyers and members of the Irish dairy industry in Jakarta that Ireland can supply for the growing westernised dietary trends in both regions.
“The opportunity in these two markets is significant as Indonesian and Malaysian consumers increase the percentage of dairy-based food in their diet,” she said.
Over the five day trade mission more than 120 Indonesian buyers will meet with 80pc of Irish dairy companies taking part in the trade mission.