'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)