Beddu seeks to close flour industry debate<\/p>\n
JAKARTA (JP): National Logistics Agency Chairman Beddu Amang,
\nin a bid to end public debate over government subsidies to the
\nflour industry, insisted yesterday that flour prices in Indonesia
\nare the lowest in the region.<\/p>\n
\"If you don't believe (that flour prices in Indonesia are
\nlower than those in other countries), you are welcome to do your
\nown importing,\" Beddu said during a hearing with the House of
\nRepresentatives' Commission VII, which oversees finance, trade,
\nfood and logistics affairs.<\/p>\n
The hearing was dominated by questions about the agency's role
\nin the flour industry and the government's pricing policy for
\nwheat procurements and flour processing and distribution.<\/p>\n
Debate over the flour industry started earlier this year after
\na research group found that the logistics agency subsidized the
\nimportation, milling and distribution of wheat and flour as much
\nas Rp 760 billion (US$334.3 million at current rate) last year by
\ncutting import prices.<\/p>\n
The research suggested that the wheat and flour industries --
\ndominated by the Salim Group, which owns upstream wheat mills and
\ndownstream noodle and biscuit factories -- received wheat grain
\nat prices far lower than imports.<\/p>\n
Beddu gave a detailed explanation yesterday of the various
\ncomponents of flour prices, including taxes, and their current
\nlevels.<\/p>\n
He said that several months ago, amid speculation of an
\nincrease in flour prices, the agency had to import up to 107,000
\ntons of flour to prevent prices on the domestic market from
\nsoaring.<\/p>\n
Deficit<\/p>\n
\"As a result, we suffered a deficit of Rp 15 billion (US$6.59
\nmillion), but we managed to keep prices stable,\" he said.<\/p>\n
He said that the fixed price of wheat grain earmarked for
\nwheat mills of Rp 141 per kilogram -- regardless of price
\nfluctuations on the international market -- is stipulated in a
\ndecree issued by the Ministry of Finance and has been in effect
\nsince 1983.<\/p>\n
The difference between import prices -- currently at Rp 399
\nper kg -- and the fixed price of Rp 141 per kg, he said, was not
\ncovered by subsidies from the agency but by a \"subsidy reserve\"
\ncollected from flour distributors.<\/p>\n
\"This way, the subsidy reserve subsidizes consumers, so they
\nare not affected by price fluctuations on the international
\nmarket,\" he said, adding that flour was one of the agricultural
\nproducts which was the least influenced by domestic price
\nfluctuations.<\/p>\n
Ex-factory prices of flour in Indonesia are currently $262 per
\nton or Rp 588 per kg. By contrast, prices are $287 per ton in
\nMalaysia, $280 in Singapore, $370 in Thailand, $375 in the
\nPhilippines, $270 in the United States, $347 in South Korea,
\n$1,090 in Japan, $455 in Australia and $460 in Hong Kong.<\/p>\n
Beddu said that over the past 10 years, accumulative subsidy
\nreserves have totaled Rp 3.46 trillion. The reserves have been
\nused to cover import prices of wheat grain when they are higher
\nthan the fixed price earmarked for flour mills, and deposited
\nwhen import prices are lower.<\/p>\n
The agency had, until fiscal year 1993-1994, collected a
\nsurplus of Rp 94.91 billion from the difference between import
\nprices and subsidy reserves. However, a deficit of Rp 191.16
\nbillion in fiscal 1994-1995 has caused a loss of Rp 96.25
\nbillion.<\/p>\n
Taking into account the government's accumulated earnings from
\ntaxes on wheat grain and flour of Rp 926.99 billion, the agency
\ncalculates that net earnings from the industry totaled Rp 830.74
\nbillion as of the end of fiscal year 1994-1995.<\/p>\n
Legislators also questioned yesterday the agency over the
\ncountry's rice stocks, which currently stand at 1.1 million tons,
\nconsisting of rice purchased from farmers and carry-over import
\nstocks from previous years.<\/p>\n
Until April, the agency stocked only 649,500 tons of rice and
\nhas so far procured 832,087 tons of rice from farmers, the lowest
\nlevel in the last 15 years.<\/p>\n
Beddu said the small level of stock was mostly due to large
\nmarket operations that the agency made last year, which resulted
\nfrom declining production in 1993-1994.<\/p>\n
Beddu also announced yesterday that starting April 1 next
\nyear, cattle feed producers will no longer be required to
\nincorporate local soybean cake in their products.<\/p>\n
Currently the government stipulates that local soybean cake,
\nwhich is a major ingredient in cattle feed, must make up at least
\n20 percent of cattle feed, with the remaining 80 percent coming
\nfrom imports.<\/p>\n
\"President Soeharto has indicated that Indonesia does not need
\nto wait until 1998, as required by the World Trade Organization,
\nto allow free trade in soybean cake,\" Beddu said.<\/p>\n
He added that the regulation would be enforced by a
\npresidential decree in the near future. (pwn)<\/p>\n
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