Bulog urged to streamline its operations<\/p>\n
By Hidayat Jati<\/p>\n
JAKARTA (JP): Amid a current crisis concerning the nation's
\nrice supply, leading analysts are calling for redefinition of the
\nrole of the National Logistics Agency (Bulog) to anticipate trade
\nliberalization and to increase efficiency.<\/p>\n
\"Bulog must soon streamline its size and operations and
\nrelease control of the trade of various commodities to increase
\nefficiency in the country's economy and meet future challenges,
\nparticularly trade liberalization,\" H.S. Dillon, a U.S.-trained
\nagriculture economist, told The Jakarta Post here Saturday.<\/p>\n
The agency fell under media scrutiny recently after last
\nyear's harsh drought slashed Indonesia's rice production by four
\npercent from 1993's production level, to 46.40 million tons of
\nunhusked rice.<\/p>\n
Indonesia, formerly the biggest rice importer in the world,
\nbecame self sufficient in 1984. Rice is the main staple diet of
\nthe Indonesian population, currently about 189 million.<\/p>\n
State Minister of Food\/Chairman of Bulog Ibrahim Hasan
\nconceded last week that the drought had diminished Bulog's rice
\nreserve to the lowest level in 15 years.<\/p>\n
Although the government has assured adequate food supply for
\nthe Moslem Idul Fitri holiday early next month, recent press
\nreports state that retail prices of rice are on the rise despite
\nBulog's market intervention.<\/p>\n
The Pos Kota daily reported Saturday that in Jakarta's markets
\nthe price of husked Cisadane I rice had increased from Rp 1,000
\n(about 45 U.S. cents) per kg to Rp 1,115, while the price of
\nhusked Cianjur rice rose to Rp 1,350 last week from Rp 1,200 in
\nthe previous week.<\/p>\n
The Kompas daily also reported similar developments in other
\ncities on Java.<\/p>\n
The government announced last October that the floor price of
\nhusked rice paid by Bulog to village cooperatives was increased
\nby 11 percent to Rp 657 per kilogram beginning in January.<\/p>\n
Analysts say that the gap between Bulog's floor price and
\nretail prices should not be higher than 30 percent.<\/p>\n
Dillon, who is a senior official at the Ministry of
\nAgriculture, conceded yesterday that the government did not
\nexpect such a severe drought last year.<\/p>\n
\"This shows that we must coordinate our efforts better in the
\nfuture. This might force us to redefine the roles of Bulog soon,\"
\nhe said.<\/p>\n
Control<\/p>\n
Bulog was set up in 1967 by the Soeharto government to control
\nthe distribution of several commodities in order to assure food
\nsecurity.<\/p>\n
The government designated the agency as the sole authority of
\nthe importation and distribution of rice and other agricultural
\nproducts such as sugar, wheat, corn and soybean.<\/p>\n
Many analysts, although frequently questioning Bulog's closed
\nfinancial management, agree that these policies were very
\nfruitful through the 1980s, evidenced by the creation of rice
\nself sufficiency.<\/p>\n
In terms of assets, Bulog is now believed to be one of the
\nrichest state enterprises, although precise figures are
\nunavailable.<\/p>\n
Hadi Soesastro, a senior economist based at the Centre of
\nStrategic and International Studies, told the Post on Saturday
\nthat Bulog must become an ordinary commercial enterprise, without
\naccess to monopoly and one which practices transparent
\nmanagement, to adapt with future trends.<\/p>\n
\"Bulog must change because we must increase the economy's
\nefficiency and fulfill our free trade commitments,\" he said.<\/p>\n
Indonesia is a signatory of the Marrakesh Treaty which marks
\nthe completion of the Uruguay Round of the General Agreement on
\nTariffs and Trade (GATT).<\/p>\n
The country, as a member of the Association of Southeast Asian
\nNations (ASEAN), also signed the Asean Free Trade Agreement in
\n1992 and implementation of the agreement started in 1993.<\/p>\n
Monopoly<\/p>\n
Bulog's monopoly on commodities, including sugar, soybeans and
\nwheat, has frequently increased domestic prices far higher than
\ninternational prices, creating serious distortions of resource
\nallocation in the economy.<\/p>\n
Analysts say the burden of monopolization tends to fall on the
\nconsumers, while the monopolization benefits a small group of
\nproducers, including sugar mills, mostly state-owned, PT Sarpindo
\n-- the one and only privately-owned soybean-crusher plant -- and
\nPT Bogasari Flour Mills, Indonesia's only operating flour plant,
\nwhich buys wheat at a price well below the import price.<\/p>\n
The World Bank, in its country report last year, was unabashed
\nin its criticism on Bulog policies on sugar, soybean and wheat.<\/p>\n
The report said: \"Trade restrictions have contributed to the
\nhigh costs and inward orientation of the Indonesian food
\nprocessing industry, although the sector is large, it exports
\ntrivial amounts of processed food products.\"<\/p>\n
The industry accounts for about 10 percent of domestic
\nproduction, but exports in 1992 were only worth US$430 million,
\nthe World Bank said.<\/p>\n
Dillon voiced his agreement with the bank's argument.<\/p>\n
\"Bulog must release its control on soybean, sugar and even
\nwheat because it is debatable whether these commodities are
\ncrucial parts of the food-security strategy,\" he said.<\/p>\n
Rice<\/p>\n
Dillon said, however, there is still a continuing need, at
\nleast for the next five years, to maintain an agency to stabilize
\nthe nation's rice supply.<\/p>\n
Indonesia has imposed a tariff of 180 percent (expected to
\ndecline to 160 percent by 2003) on rice imports and given access
\nto 70,000 tons with a tariff of 90 percent.<\/p>\n
\"In a big rice-consuming country like Indonesia, every time
\nyou try to stabilize the rice supply, the market forces will be
\nagainst you,\" he explained.<\/p>\n
He added that this phenomenon is caused by a domestic \"thin\"
\nrice market which means there is only a small portion of rice
\nbeing traded on the world market.<\/p>\n
Dillon said that as long as the market remains \"thin\", which
\nhe thinks will not last more than five years, Bulog can still
\ncontrol the rice trade in Indonesia.<\/p>\n
He warned, however, that to ensure maximum policy coordination
\nin pursuing food security goals, Bulog should be controlled by
\nthe Ministry of Agriculture.<\/p>\n
\"If necessary, perhaps the office of the state minister of
\nfood should also be relinquished to the agriculture ministry,\"
\nDillon said, adding that, in return, his office will intervene
\nless on the production side.<\/p>\n
\"Farmers are smarter these days anyway,\" he said.<\/p>\n
Hadi Soesastro also said that Indonesia should wait for other
\ncountries in the region before liberalizing the rice market.<\/p>\n
\"It's wise to wait for the Japanese and South Koreans to open
\nup their markets,\" he said.<\/p>\n
In the meantime, there is a rumor spreading that Bulog will be
\nseparated from the office of the state minister of food to
\nanticipate free trade, as reported by Republika Saturday.<\/p>\n
Minister of Agriculture Sjarifudin Baharsjah -- besides
\npromising to simultaneously abolish non-tariff protections and
\ncut tariff rates on over 1,000 commodities -- also said that the
\ngovernment will redefine Bulog as a \"state trading enterprise\" to
\navoid violating rules of GATT.<\/p>\n
Aside from these somewhat vague signals, the government has
\ngiven no concrete indication of its plans regarding the role of
\nBulog.<\/p>\n
The era of free trade, however, is approaching.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/bulog-urged-to-streamline-its-operations-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }