Indonesia May Impose 20% Wheat Flour Import Tariff

By webadmin on 02:34 pm Oct 05, 2012
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Michael Taylor

Indonesia could slap a tariff of 20 percent on imports of wheat flour within less than three months, an industry association said on Friday, as Asia’s top importer of the grain moves to protect its growing wheat mill industry.

Indonesia’s Trade Ministry is investigating whether imports of wheat flour breach international trading laws against dumping.

“The government will probably impose a duty on imported flour,” Franciscus Welirang, chairman of the Indonesian Wheat Flour Mills Association (Aptindo), told Reuters. “It is now 5 percent but 20 percent would be a good level.”

“The new mills will really be affected by these (flour) imports,” he said, adding that a decision from the government would take roughly 90 days. “It could cause irreparable damage.”

Government officials were not immediately available to comment on Welirang’s remarks.

Southeast Asia’s largest economy used more than 6 million tonnes of wheat in 2011, including imports of about 5.5 million tonnes of the grain and about 680,000 tonnes of wheat flour, Aptindo says.

Turkey is the largest exporter of wheat flour to Indonesia, accounting for about 60 percent of the country’s imports, with Sri Lanka making up around 30 percent and Belgium, Australia, Japan and Ukraine often supplying the rest.

Economic growth in the archipelago is expected to rise by more than 6 percent this year, and this wealth is changing consumer tastes towards bread and noodles.

A sign of Indonesia’s increasing demand for wheat flour is the rising number of domestic flour millers, which Welirang said numbered 20, with installed capacity of 7.9 million tonnes.

Two of the four more mills now under construction are being built by Singapore’s Wilmar International Ltd, Welirang added. Most Indonesian wheat mills are in Java, with the biggest being owned by Bogasari Flour Mills in Jakarta, with a capacity of 3 million tonnes a year.

Welirang, who is also a director of the world’s biggest noodle maker, Indofood Sukses Makmur, said Indonesian wheat demand would rise 7 percent in 2012, slightly stronger than a previous estimate.

“For the first six months consumption has already increased 11 percent, so to the end of the year there will be an increase of around 7 percent,” he added.

The country imports all its wheat, both unprocessed grains and flour, which is largely used to make noodles, bread, cakes, biscuits and convenience snacks.

Australia supplied 66 percent of Indonesia’s imports of wheat last year, with Canada and the United States accounting for around 30 percent, and Welirang sees little change in 2012.

Russia, Lithuania, Ukraine, India and Brazil are able to supply the rest, which is often used to blend with higher quality wheat imports, Welirang added.

A fall in wheat production in Australia, the world’s second largest wheat exporter, where dry weather is expected to lop 27 percent from last year’s record crop of 29.5 million tonnes, will not affect Indonesia’s imports, he added.

“It doesn’t matter,” Welirang said. “When Australian (output) went down to 16 million tonnes, the product was still flowing to Indonesia. They prioritize Indonesia for continuity.”

Australia’s government forecasts wheat production of 22.5 million tonnes in 2012/13.

Reuters