Analysts want govt to ease rice control

Analysts want govt to ease rice control

JAKARTA (JP): The skyrocketing prices of rice in the past two
months should be enough justification for the government to end
the State Logistics Agency's (Bulog) active role in rice trading,
experts say.

They also called on the government to end its policy of
keeping the prices of rice low through subsidies as it
discouraged production and spurred on consumption at the expense
of food diversification.

Agriculture analyst Bungaran Saragih of the Bogor Institute of
Agriculture said Bulog should be returned to its original
function as a logistics agency for the government and supply rice
only to civil servants and Armed Forces personnel.

"Bulog should quit its role as a player in rice trading and
become a referee which only supervises trading and supplies data
to market players. If the referee is also a player, we cannot
guarantee a fair game," he said yesterday.

The government would not be able to stabilize the rice price
in the short term due to a poor harvest this year, inefficient
distribution of fertilizer and seeds, and ineffective marketing
of imported rice, he said.

"There's no magic solution to lowering prices in the short
term other than increasing supply and improving distribution.
Replacing Bulog's chief will not lower the prices if the agency
is still run the same way," Bungaran told The Jakarta Post.

In a surprise move, President B.J. Habibie removed Beddu
Amang, a long-time Bulog insider, from the agency and appointed
Minister of Industry and Trade Rahardi Ramelan to run the agency,
together with Minister of Cooperatives, Small and Medium
Enterprises Adi Sasono and State Minister of Food and
Horticulture A.M. Saefuddin.

Market players suspect that Beddu's dismissal was strongly
related to Bulog's inability to arrest the increasing prices of
basic commodities, especially rice and cooking oil.

Local rice prices rose to as high as Rp 3,000 (4.1 U.S. cents)
per kilogram) over the last few days, well above the government's
target price (for low quality) of between Rp 1,750 and Rp 2,000
per kilogram. High-quality rice such as Cianjur Kepala and
Rojolele sold for almost Rp 5,000 per kilogram.

H.S. Dillon, executive director of the Center for Agriculture
Policy Studies, suggested that if Bulog was still mandated to
stabilize rice prices, it should streamline the intricate
distribution network.

"It should bypass the current distribution system because it
causes a vast disparity between the official price and the market
price.

"In addition, Bulog's market operation must be guaranteed so
that rice goes directly to consumers," Dillon told the Post.

Bulog's market operation has allowed speculators to buy
subsidized rice and retail it at higher prices, he said.

Basically, rice distribution should be very simple: farmers
sell their rice to cooperatives or distributors who sell it to
consumers.

But the current distribution system is very protracted.
Farmers sell rice to small traders who resell it to larger
traders. The larger traders sell the rice to medium-scale
distributors, who then resell it to small-scale distributors,
retailers and supermarkets before the rice finally reaches
consumers.

"There are too many players in the rice distribution system
who take a large profit margin and cause soaring prices," Dillon
said.

Dillon noted that rice smuggling to neighboring countries was
another way for people to make big profit from the price
disparity.

"That's why I don't like the subsidy system because it could
encourage people to smuggle and stockpile the subsidized
commodity," he said.

The country is projected to consume around 29 million tons of
rice this year. However, because of failed harvests in some parts
of the country, the government plans to import 4.1 million metric
tons of rice, of which about 3.6 million tons have arrived.

Saefuddin estimated that the rice price would begin to
decrease in October, but Minister of Agriculture Soleh Solahuddin
said it was likely to remain volatile until the next major
harvest in April.

Soleh argued that between 50 percent and 60 percent of annual
rice production was harvested around April. (gis)