Policy on staple food confusing<\/p>\n
The government has decided to let prices for most of the nine
\nbasic commodities to be determined by market forces. Economist
\nKwik Kian Gie discusses how this policy sits with the 1945
\nConstitution.<\/p>\n
JAKARTA (JP): Article 33 of the 1945 Constitution states that
\n\"production branches\" (production in different sectors of the
\neconomy) which are important for the country and affect the lives
\nof the general public must be controlled by the state. Now, what
\nare defined as production branches?<\/p>\n
According to economics, production activities are not confined
\nto manufacturing or processing goods, but also include trading
\nand distribution services. The trading and distribution of
\ncommodities which affect the lives of members of the public,
\ntherefore, must also be controlled by the government.<\/p>\n
Because the nine basic commodities are vital to the public and
\nare currently in scarce supply, their trading and distribution
\nare of the utmost importance to people and must be controlled by
\nthe state to the benefit of the people. The government will be
\nacting in violation of the Constitution if it does not intervene
\nin their marketing and distribution.<\/p>\n
High prices have rendered basic commodities unaffordable for
\nthe majority of people, particularly the 70 million of the
\ncountry's 202 million souls who are now living below the poverty
\nline. That was why the International Monetary Fund's (IMF) Asia-
\nPacific director, Hubert Neiss, had to make a very difficult
\ndecision in June on whether or not to provide loans for food
\nsubsidies here.<\/p>\n
If the IMF had decided not to assist Indonesia supply
\nfoodstuffs and medicine to the greater part of its population,
\nstarvation and social unrest might have disturbed the country to
\nsuch an extent that its US$43 billion aid package would be
\nwasted. Furthermore, if the IMF had not helped to finance routine
\ngovernment expenditure, the government would have been unable to
\noperate and the fund would be left with no partner other than the
\nangry people. The IMF, therefore, was forced to abruptly decide
\nto provide Indonesia with an additional $6 billion in aid on top
\nof the $8 billion pledged by the Consultative Group on Indonesia
\n(CGI).<\/p>\n
Thus, funds for food subsidies are now available for the
\ncoming 12 months so how can the government now suddenly decide to
\nend subsidies on basic commodities, with the exception of rice
\nand cooking oil, when the people are crying out in hunger?<\/p>\n
State Minister of Food, Drugs and Horticulture A.M. Saefuddin
\nhas said the government will sell low-price rice to the poor
\nthrough market operations.<\/p>\n
But will the market operations only be conducted in
\ntraditional market places? What about market operations in remote
\nareas where there are no market places? Will the State Logistics
\nAgency (Bulog) be assigned to distribute rice in remote areas
\nwhere there are no market places? If that is the case, hasn't the
\nIMF recommended that Bulog's role in distribution be abandoned?<\/p>\n
Press reports have said that traders are mixing rice intended
\nfor market-operations with their own higher quality rice so that
\nthey can sell the blend for a higher price. This practice means
\nthat the government subsidy is not reaching the poorest elements
\nof society for whom it is intended. How will the government
\nrespond such the corrupt practice?<\/p>\n
Surely, the establishment of Bulog years ago was not meant to
\ndistort the market mechanism or facilitate corruption, collusion
\nand nepotism. That such practices have been flourishing in Bulog
\nis certainly possible, but in which government institutions are
\nthey not?<\/p>\n
I think Bulog was established in response to Article 33 of the
\n1945 Constitution. If its existence leads to market distortions,
\nthen so be it. That will be tolerable for as long as the benefits
\nenjoyed by the public are of greater value.<\/p>\n
The country's founding fathers who drafted the article
\napparently understood economics and were more sensitive to the
\nneeds of the people than those who are currently in power.<\/p>\n
That means the nation's governing elite are duller than ever.
\nOr is it just that we have the wrong man in a vital place?
\nPerhaps it is because an engineer who has just been taught how to
\ncontrol an engine is now responsible for managing trade which
\naffects the interests of the entire population.<\/p>\n
Market mechanisms are good, but that does not preclude the
\ngovernment from all intervention in the market. In the United
\nStates and Europe, there are some industrial sectors where the
\nactivities are monopolized by the government for the interests of
\nthe people.<\/p>\n
If Bulog does turn out to be a hotbed of corruption, then we
\ncan think of the agency as a warehouse of rice and the bad
\nofficials as the rats. The obvious answer, of course, is to get
\nrid of the rats. However, the government, unable to catch the
\nrats, is currently trying to set the warehouse ablaze.<\/p>\n
The strange thing is that those assigned to set the warehouse
\non fire are themselves so tainted with corruption that they are
\ngiving the rats time to escape before incinerating the building
\nand its remaining contents.<\/p>",
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