Subsidy removal will not jack up prices: Experts<\/p>\n
JAKARTA (JP): Removal of subsidies on wheat flour, sugar and
\nsoybeans is the right move and will not significantly impact
\nconsumers because the commodities already sell at market prices,
\nexperts and businessmen said Thursday.<\/p>\n
But the associations of food and beverage entrepreneurs and
\nsugar and wheat distributors urged the government to allow the
\nState Logistics Agency (Bulog) to import the commodities -- at
\nprevailing market prices -- to prevent a possible drop in
\nsupplies.<\/p>\n
Economist Didik J. Rachbini of the Institute for Development
\nof Economics and Finance argued that the subsidy removal --
\nannounced Wednesday and effective immediately -- would not jack
\nup prices, particularly for wheat flour.<\/p>\n
\"The wheat flour price may increase, but it will not be very
\nhigh because the price after the last increase was already almost
\nas high as the international price,\" Didik told The Jakarta Post.<\/p>\n
H.S Dillon of the Center of Agriculture Policy Studies
\nconcurred, saying the market was aware of the decision since
\nApril when the government agreed with the International Monetary
\nFund (IMF) to end the subsidies.<\/p>\n
\"Since then the market price has increased, so it is not
\nlikely to go up again,\" Dillon said.<\/p>\n
Bulog increased the price of wheat flour beginning in January
\nin line with the government's program to phase out the subsidy.<\/p>\n
The price was increased by 86 percent in July and 46 percent
\nin August to Rp 3,290.<\/p>\n
According to the agency's projection, wheat flour will sell at
\nRp 4,000 (37 U.S. cents) per kilogram with the subsidy
\nelimination.<\/p>\n
The chairman of the Federation of the Association of Sugar and
\nWheat Flour Distributors, Ishadi, estimated that the wheat flour
\nprice might increase to Rp 82,000 per 25-kg sack by next week
\nafter old stocks are finished, up slightly from the current Rp
\n80,000.<\/p>\n
The chairman of Association of Food and Beverage
\nEntrepreneurs, Thomas Dharmawan, said Bulog should continue to
\nimport wheat flour, sugar and soybeans until general importers
\nwere ready to assume its role.<\/p>\n
He argued that Bulog's sudden withdrawal from the market could
\ndisrupt supplies of the commodities.<\/p>\n
\"Therefore, Bulog must still be able to import them but must
\nact purely as a trading company,\" Thomas said.<\/p>\n
Bulog's sole right to import wheat, sugar and soybean ended on
\nWednesday with the lifting of the subsidies.<\/p>\n
The agency retains the monopoly on the import of rice, which
\nis also the only subsidy retained by the government.<\/p>\n
Thomas said wheat, sugar and soybeans must be bought for
\nimport in large quantities of at least 10,000 tons.<\/p>\n
A company would need between US$3 million and $4 million for
\nthe import, he said, adding that the high transport cost would
\nserve to push prices up.<\/p>\n
Thomas said most companies would be unable to obtain the
\ncapital to import the commodities directly because the
\ngovernment's credit crunch sent interest rates soaring.<\/p>\n
To help importers and lower prices, he urged the government to
\nlift all value-added taxes on the imports of the commodities
\nafter the subsidies were lifted.<\/p>\n
Didik said the subsidies on both wheat flour and rice had put
\na burden on the government, which was left making a choice
\nbetween the two.<\/p>\n
\"Rice is more important than wheat flour for our people,\" he
\nargued.<\/p>\n
Didik said some of the country's private companies had the
\nresources to import wheat, but were probably reluctant because
\nthey had enjoyed the subsidy for a long time.<\/p>\n
He and Dillon cited PT Bogasari Flour Mill, the country's
\nbiggest wheat milling plant.<\/p>\n
\"I think Bogasari must import wheat, otherwise it will not be
\nable to continue operation,\" Didik said.<\/p>\n
PT Bogasari Flour Mills, owned by the giant Salim Group, held
\nthe right to mill wheat imported by Bulog for 25 years.<\/p>\n
The company is controlled by former president Soeharto's crony
\nLiem Sioe Liong. (das\/gis)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/subsidy-removal-will-not-jack-up-prices-experts-1447893297",
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