'Abolish subsidies to flour industry'

'Abolish subsidies to flour industry'

JAKARTA (JP): Government control of the wheatflour industry
has benefited only the Salim business group with its virtual
monopoly of the upstream and downstream factories, economists
alleged yesterday.

Didik J. Rachbini told a news conference that though the state
budget does not stipulate any subsidies for wheatflour, the flour
industry and its industrial users have been subsidized by the
government and consumers to the amount of Rp 760 billion (US$341
million) last year alone.

Rachbini and three other economists-- Maskur Ahmad, Didin S.
Damanhuri and Faisal Basri-- announced yesterday the findings of
a study made by a new economic research institute called the
Institute for Development of Economics and Finance (INDEF).

The study was the first undertaken by INDEF.

Indonesia depends entirely on imported wheat grain but the
import of grains and the distribution of flour are entirely
monopolized by the state-owned National Logistics Agency (Bulog).

Because the wheat grain milling industry has virtually been
closed to new entrants, 85 percent of Bulog's wheat grain has
always been milled by PT Bogasari (controlled by the Salim group)
and 15 percent by the Berdikari group, which is affiliated with
Bustanil.

"The problem, though, is that the noodle industry, which
accounts for 45 percent of total flour consumption, is 85 percent
controlled by PT Indofood Sukses Makmur, another subsidiary of
the Salim group," Rachbini pointed out.

Moreover, he added, PT Ubindo, one of the largest producers of
biscuits in the country, is also a joint venture between the
Salim group and the United Biscuit Co.

According to Rachbini, PT Indofood buys flour from Bulog at a
mere Rp 616 per kilogram, much lower than the Rp 853 retail price
set by Bulog.

"That means that PT Indofood, which now holds about 85 percent
of the domestic noodle market, has always been subsidized by both
the government and consumers.

If its flour inputs were not subsidized, PT Indofood's noodles
would not be competitive on the international market.

Rachbini therefore called on the government to relinquish its
control of the wheatflour industry to correct the distortions it
has caused. (04)