The political and economic unrest in Indonesia has not affected wheat trade yet, according to Canada’s largest trading partner with the country.
Indonesia was the fourth largest customer for wheat from the Canadian Wheat Board in 1996-97, buying close to 1.5 million tonnes.
Last week, president Suharto stepped down after 31 years of rule in the wake of student riots, passing the torch to his close friend B. J. Habibie.
“It (the unrest) hasn’t had an effect on our business to this point,” said wheat board spokesperson Tracey Bryksa. “But we are watching the situation to see what might develop.”
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Wheat accounts for more than 95 percent of Canadian exports to Indonesia.
No matter how the political and economic situation unfolds, there will be major impacts on Canadian exports, say two experts in trade with the country.
There has been considerable disruption to the logistics of exporting to the country, which is an archipelago of 17,000 islands, said the national chair of the Canada-Indonesia Business Council.
“People aren’t on the job because they’re demonstrating or they’re worried so they stay home and away from work, and therefore productivity drops,” said Peter Dawes, an international trade consultant in Toronto.
An economist from the University of Houston said the unrest has had far less impact on trade than the devaluation of the rupiah, which has dropped by 70 percent since last fall.
Thomas DeGregori, who has worked closely with the Indonesian minister of agriculture and other senior government officials, said the country is usually self-sufficient in rice, its staple food. But El Nino-induced drought has harmed the country’s crops. It now has to import rice, leaving even less money for buying other food products like wheat.
Indonesian people are poorer because of the currency decline, and are spending more of their income on staples like rice, explained DeGregori.
“There’s obviously going to be a decline in imports of foodstuff until the economy starts rebounding and until you get good rains and a crop following it,” he said.
While he didn’t have any specific knowledge about Canadian wheat trade with Indonesia, DeGregori said he would “fall out of his chair” if the country didn’t cut back on wheat imports.
Indonesia has been the fastest growing wheat market in the world, partly because it does not grow the crop domestically. It consumed about four million tonnes in 1996-97. Before the currency crisis, Agriculture Canada forecast the country would consume 7.7 million tonnes of wheat by 2005.
Australia has a 38 percent share of Indonesia’s wheat market, while Canada controls about 25 percent. On a Team Canada trade mission in 1996, the wheat board signed an agreement to supply one to 1.5 million tonnes of wheat per year.
The country had also started to buy limited amounts of durum from the wheat board.
Canadian companies exported canola meal, dairy products, feed peas, apples, frozen french fries, soybeans and broiler breeder chicks to Indonesia.
