The Indonesian Soybean Board is calling on the government to slap a 20 percent duty on soybean imports to protect domestic soy, which is usually more expensive than its imported counterpart.
The board, known as DKI, said the tariff would encourage farmers to grow more soybeans and ultimately reduce the country’s dependency on imported soy.
“An import duty could protect domestic soybean production, and eventually the domestic soybean producers will be able to compete with the imported beans,” Benny A. Kusbini, DKI’s chairman, said on Wednesday.
Soybeans are the main raw material for two of the nation’s favorite processed foods, tofu and tempeh.
At present, farmers sell soy to the tofu and tempeh industry for about Rp 5,500 (55 cents) a kilogram. Imported beans, on the other hand, wholesale for about Rp 5,250 a kilogram.
Benny said that domestic soybean farmers could not compete with imported beans because of the price difference.
Locally produced soybeans supply only about 20 percent of domestic demand.
Benny said that the relatively low priced imports discouraged local farmers from planting soybeans and could trap the country in a vicious circle of decreasing production, which would further force the nation to depend on imported soy.
“It’s like putting a 2-year-old child in a race with an adult,” he said. “Without strong political will from the government, farmers at present absolutely cannot compete.”
Prior to the 1997-98 Asian financial crisis, Indonesia produced nearly all of the soy that it consumed.
However, local soybean production began to decline after the government bowed to pressure from the International Monetary Fund and the World Bank, which demanded that the country open its markets in exchange for a huge bailout during the financial crisis.
Sutaryo, the head of the Indonesian Tofu and Tempeh Cooperatives’ Federation (Inkopti), said he agreed with the proposal to impose an import duty on soybeans. He added, however, that a 20 percent import duty would be too high a level to start out with.
“Ten percent would be the maximum tolerable import duty for most soy processors,” Sutaryo said.
“The higher the percentage, the more the industry will have to pay for raw materials. This would indirectly affect consumers as the price of end-products would also have to increase.”
Sutaryo said that some 70 percent of the two million tons of soybeans used by tempeh and tofu producers every year were imported, mostly from the United States and Brazil.
As a consequence, he said, the government needed to adopt a policy that would benefit soybean growers while not burdening the processing industry.
Winarto Tohir, the chairman of the Progressive Fishermen and Farmers Association (KTNA), said that an import duty alone would not be enough to encourage farmers to plant soybeans.
What was needed, he explained, was a minimum price payable to growers.
“This mechanism would demonstrate the government’s commitment to the welfare of farmers - much more than by just giving them free fertilizer or seeds,” he said.
In 1992, the nation had about 1.6 million soybean growers, producing some 1.8 million tons of soy a year. Since then, output has dropped to less than 900,000 tons per year.