Mgb 340 - Analysis of the Australian-Indonesia Beef Trade
Autor: goude2017 • October 14, 2018 • 2,217 Words (9 Pages) • 848 Views
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2.1.3 Trade between Australia and Indonesia
Australia’s industrialized economy is large scale and capital intensive. The service sector is also sophisticated with the tourism sector showing continuous growth. Both State and Federal Government have limited control in a numbers of industries in the industrial economy. Indonesia also has a mixed economy with the private sector, like Australia, is the largest labour employer. The Indonesian government, through its five-year plans, influences the country’s economic growth. The Indonesian economy relies on agriculture, mining, oil and gas exploration, manufacturing and services such as tourism.
Australia has its trade barriers to allow economic integration through adoption of new communication technologies and cheap labour from other countries. Industries have also taken advantage of Australia’s educated work force and sound communication infrastructure to compete in the international markets. Industries are focusing increasingly on the online market which has annual growth of 13.5 percent (IBISWorld). Indonesia is taking significant steps to deregulate its financial sector making it more open to competition. The economic policy which is being improved continuously to the finance sector and policies on foreign direct investment have enhanced the globalization of the country. This has led to the reorientation of the industrialization strategy from import substitution to export-oriented manufacturing.
Indonesia has a population of 261.1 million which is ten times larger compared to Australia 24.13 million but its per capita income is much lower, 11,220 PPP dollars (2016) compared to 49,990 PPP dollars (2016). According to department of foreign affairs and trade Australia (DFAT) Australia’s direct investment in to Indonesia is l0.4 percent ($9.2b) compared to Japan 5 percent ($108.3b) and Singapore 3 percent ($61.5b). Indonesia has only Invested $1.3b into Australia.
Indonesia meat consumption is around 2.6 kilograms per capita per annum, poultry being the largest proportion of meat being consumed. Australia being the largest export market for live cattle and fifth largest for boxed beef, was down 3% in 2016, shipping 595,950 feeder cattle (MLA, 2016). Australia’s new regulations that no longer require single allocation of import permits to share each quarter or trimester, allows individual importer to apply for permits to import as many feeder steers as they would like. However, importers are required to also import breeding cattle for every feeder cattle they import. This new breeder import requirement will potentially cause reduction in demand for Australian cattle export to Indonesia, its major market for live cattle in 2017.
Indonesian government’s mission to lower beef prices for its consumers paired with the continued high price has made it difficult to sell the Australian cattle at a profit. The entrance of Indian buffalo meat has introduced new competition whose commodities are cheaper. This has increased the Indonesia's government pursuit for lower beef prices.
2.2 Political economy
Political economy is a term used for the study of production and trade and their links with the state. It analyzes how public policies are created and implemented in different social and economic systems such as capitalism, communism and socialism. It draws upon different branches of social science such as economics, sociology and political science.
2.2.1 Political economy analysis (oxford policy management)
International development programmes often fail to achieve their objective because they tend to treat development as a technocratic rational process. Failure to understand the various constraints affecting stakeholders’ actions and plans due to their knowledge and motivation. Development practice requires working with others who have entirely different competence of context and priorities and how to achieve them. Since the path to success is rarely a linear one, stackholders’ motivations, objects and power to influence outcomes often vary significantly and usually change over time having an inevitable but direct effect on other players. This proposes that development practice to be addressed through collaboration rather than amendable negotiation or short term coercion (Grint, 2005). Practitioners should find sturdy technical solutions to development problems remembering that their task is unavoidably political.
Political economy analysis enable development practitioners to understand what drives political behaviour, how this shapes policies and programmes and their implications to development strategies. It is specifically concerned with understanding interests and incentives that generate policies that may encourage or hinder development and the impact of political ideologies, religion and cultural beliefs on political behaviour.
Political economy analysis poses a risk of bias, self-censorship and suppression of findings for bilateral agencies, their political principals and accountability to taxpayers. It highlights the unpredictable and messy nature of development, going against performance incentives that favour rapid disbursement of money for achievement of measurable results. It also undermines the value placed on practitioners technical rather than political expertise. Practitioners are exposed to a level of institutional complexity that can be difficult to incorporate project frameworks and standardised programme strategies. This can be at least managed by developing a more dynamic and interactive frame work for Political economic analysis.
2.2.2 Impact of political economy
Both Australia and Indonesia aspire for closer economic and trade relations, however, they have placed different emphasis on approaches to achieve this common goal. Australia is focused on the need to reduce trade barriers for greater trade opportunities. Indonesia on the other hand, has focused on the need for improved price stability and self-sufficiency especially in the food sector.
Disruption in the boxed beef and live cattle trade between Australia and Indonesia have being affected by the differing approaches. The Indonesian Government’s goal for self-sufficiency has led to restrictions on both boxed beef and live cattle imports from Australia via the control of import permits and the application of other non-tariff barriers to trade.
Despite the changing import policy regime, market demand for Australian live cattle, beef and offal still remain significant. During 2016, Australia exported 609,985 head of live cattle (representing 54% of total live cattle
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