Sticky business<\/p>\n
It seems to be the National Logistics Agency's (Bulog) turn
\nnow to get its hands sticky helping the state-owned IPTN
\naerospace company. The agency has agreed to buy about 110,000
\ntons of glutinous rice while Thailand is in turn to procure two
\nCN-235 airplanes from IPTN. That means Bulog will have to spend a
\nlarge part of the subsidized loan it is getting annually from the
\ncentral bank to pay for the counter-trade deal.<\/p>\n
The counter-trade deal currently being hammered out between
\nBulog and IPTN and Thailand reminds us of the counter-purchase
\npolicy Indonesia introduced in 1982. The policy was launched when
\nthe country's balance of payments was under severe pressure. It
\nrequired foreign suppliers to buy Indonesian commodities
\nequivalent in value to the goods they were selling to government
\nand state company-funded projects. The external balance in the
\nearly 1980s had reached such a critical state that the policy was
\nfollowed in 1983 by the shelving of billions of dollars worth of
\nprojects and the devaluation of the rupiah. All these measures
\nwere designed to curb import growth and, at the same time, boost
\nexports.<\/p>\n
The counter-purchase policy was administered by the counter-
\npurchase section at the export directorate of the trade ministry
\nwhich regularly announced the export commodities available for
\npurchase by foreign bidders of government projects. Obviously,
\nthe policy angered foreign companies because most foreign bidders
\nfor government contracts had no experience in selling items such
\nas rubber, coffee, or plywood. No wonder the policy failed to
\nincrease exports much. Since the late 1980s we have heard
\nvirtually no more of counter-trade transactions.<\/p>\n
Counter-trade takes several forms: Pure counter-trades,
\ncounter-purchases, offsets, barters, switch-trading and buy-
\nbacks. But all these transactions are very complex processes
\nbecause they require arduous negotiations and involve more than
\ntwo parties. Therefore such a deal is generally struck as a last
\nresort. That is why, for example, we would not be able, even if
\nwe tried very hard, to trade in our CN-235 planes for soybean
\nfrom the United States of which we need more than 500,000 tons
\nevery year. Only countries extremely short of foreign exchange
\nwill contemplate such trades. In the 1980s, for example, counter-
\ntrades were made mostly by countries in eastern Europe.<\/p>\n
Counter-trade deal also requires sellers to offer generous
\nprice discounts to offset the additional costs of transactions.
\nhigh insurance premiums, brokerage fees etc. In view of its
\ncomplexity and high transaction costs, a counter-trade deal very
\nrarely generates repeat orders.<\/p>\n
Most manufacturers avoid selling their products through
\ncounter-trade not only because of the complexity and the costly,
\ntime-consuming negotiations involved but also due to the
\nunfavorable impression made about the merchandise involved. Goods
\nsold under such a barter-like deal are tainted with the stigma of
\nbeing unable to compete in the open market.<\/p>\n
Having pointed out the disadvantages of counter-trades, we
\nwouldn't want to suggest that the counter-trade deal which will
\ninvolve Indonesia's purchase of 110,000 tons of glutinous rice
\nfrom Thailand in return for the sales of two CN-235 planes is
\nentirely negative. But we do feel that the transaction will carry
\nadditional costs.<\/p>\n
The deal will force Bulog to order a huge amount of glutinous
\nrice -- equivalent to more than 18 months of consumption. It is
\nimportant to note that it is not glutinous rice, but ordinary
\nrice, that is the national staple and heavily weighs in the
\nconsumer price index. Glutinous rice is used mainly for cakes.
\nThough the delivery of the glutinous rice can be scheduled
\naccording to need, Bulog will eventually have to swallow all of
\nthe imported sticky rice. It doesn't have the option, for
\nexample, to replace the glutinous rice with ordinary rice in case
\nof poor harvests, for example.<\/p>\n
Yet while Bulog gets its hands sticky with glutinous rice of
\ndoubtful use, the state IPTN aerospace company is making the
\nsales it is desperate for. It is a pity that IPTN has failed to
\nlobby for export credit financing which is crucial for promoting
\nairplane sales. Hopefully, the two CN-235s will perform well
\nenough in Thailand to generate new orders; this time, hopefully
\nplaced as normal business transactions.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/sticky-business-1447899208",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}