Beddu seeks to close flour industry debate
JAKARTA (JP): National Logistics Agency Chairman Beddu Amang, in a bid to end public debate over government subsidies to the flour industry, insisted yesterday that flour prices in Indonesia are the lowest in the region.
"If you don't believe (that flour prices in Indonesia are lower than those in other countries), you are welcome to do your own importing," Beddu said during a hearing with the House of Representatives' Commission VII, which oversees finance, trade, food and logistics affairs.
The hearing was dominated by questions about the agency's role in the flour industry and the government's pricing policy for wheat procurements and flour processing and distribution.
Debate over the flour industry started earlier this year after a research group found that the logistics agency subsidized the importation, milling and distribution of wheat and flour as much as Rp 760 billion (US$334.3 million at current rate) last year by cutting import prices.
The research suggested that the wheat and flour industries -- dominated by the Salim Group, which owns upstream wheat mills and downstream noodle and biscuit factories -- received wheat grain at prices far lower than imports.
Beddu gave a detailed explanation yesterday of the various components of flour prices, including taxes, and their current levels.
He said that several months ago, amid speculation of an increase in flour prices, the agency had to import up to 107,000 tons of flour to prevent prices on the domestic market from soaring.
Deficit
"As a result, we suffered a deficit of Rp 15 billion (US$6.59 million), but we managed to keep prices stable," he said.
He said that the fixed price of wheat grain earmarked for wheat mills of Rp 141 per kilogram -- regardless of price fluctuations on the international market -- is stipulated in a decree issued by the Ministry of Finance and has been in effect since 1983.
The difference between import prices -- currently at Rp 399 per kg -- and the fixed price of Rp 141 per kg, he said, was not covered by subsidies from the agency but by a "subsidy reserve" collected from flour distributors.
"This way, the subsidy reserve subsidizes consumers, so they are not affected by price fluctuations on the international market," he said, adding that flour was one of the agricultural products which was the least influenced by domestic price fluctuations.
Ex-factory prices of flour in Indonesia are currently $262 per ton or Rp 588 per kg. By contrast, prices are $287 per ton in Malaysia, $280 in Singapore, $370 in Thailand, $375 in the Philippines, $270 in the United States, $347 in South Korea, $1,090 in Japan, $455 in Australia and $460 in Hong Kong.
Beddu said that over the past 10 years, accumulative subsidy reserves have totaled Rp 3.46 trillion. The reserves have been used to cover import prices of wheat grain when they are higher than the fixed price earmarked for flour mills, and deposited when import prices are lower.
The agency had, until fiscal year 1993-1994, collected a surplus of Rp 94.91 billion from the difference between import prices and subsidy reserves. However, a deficit of Rp 191.16 billion in fiscal 1994-1995 has caused a loss of Rp 96.25 billion.
Taking into account the government's accumulated earnings from taxes on wheat grain and flour of Rp 926.99 billion, the agency calculates that net earnings from the industry totaled Rp 830.74 billion as of the end of fiscal year 1994-1995.
Legislators also questioned yesterday the agency over the country's rice stocks, which currently stand at 1.1 million tons, consisting of rice purchased from farmers and carry-over import stocks from previous years.
Until April, the agency stocked only 649,500 tons of rice and has so far procured 832,087 tons of rice from farmers, the lowest level in the last 15 years.
Beddu said the small level of stock was mostly due to large market operations that the agency made last year, which resulted from declining production in 1993-1994.
Beddu also announced yesterday that starting April 1 next year, cattle feed producers will no longer be required to incorporate local soybean cake in their products.
Currently the government stipulates that local soybean cake, which is a major ingredient in cattle feed, must make up at least 20 percent of cattle feed, with the remaining 80 percent coming from imports.
"President Soeharto has indicated that Indonesia does not need to wait until 1998, as required by the World Trade Organization, to allow free trade in soybean cake," Beddu said.
He added that the regulation would be enforced by a presidential decree in the near future. (pwn)
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