Bulog changes status to semi profit-oriented firm

The Jakarta Post, Jakarta

The government has decided to change the status of the National Logistics Agency (Bulog) into a semi profit-oriented state-owned company, with one of the main aims being to improve the agency's financial accountability.

The decision was made during a limited Cabinet meeting on Monday chaired by President Megawati Soekarnoputri.

"Within days, the President will get the final draft so that Bulog's will have its status changed to that of a Perum," Bulog director Widjanarko Puspoyo said using the local acronym for a state-owned company with both commercial and social functions.

He added that the full details would soon be announced.

Bulog is currently a state agency reporting directly to the President.

Under its new status, Widjanarko explained, Bulog would not only be in charge of safeguarding rice stocks, thus stabilizing prices, but would also be allowed to seek profit.

"But its commercial operations will be limited to vital commodities. From now on, these commodities will be restricted to four; soybeans, corn, sugar and rice," Widjanarko added.

The government earlier said that the profits from commercial activities could be used to partly cover the government's rice subsidy program.

The change in Bulog's status would eventually improve the agency's business competitiveness. But, equally important, it would allow improved transparency in the use of the agency's resources.

Since its establishment, Bulog has been dogged by financial scandals.

In the past, Bulog was widely regarded as a cash cow for corrupt government officials and their families, most notably the cronies of former authoritarian president Soeharto.

Various reports have confirmed that unfavorable commercial contracts, irregularities and weak supervision have led to trillions of rupiah in losses.

The government plans to follow the example set by Malaysia's logistics agency Bernas, which has a similar role to Bulog but is now a publicly listed company in the neighboring country.

Founded in the late 1960s, Bulog is not only responsible for the stabilization of unhusked rice prices.

Initially, it also held a monopoly on the importation of wheat, sugar, soybeans and several other basic commodities.

However, this exclusive role was terminated in early 1998 following demands from the International Monetary Fund (IMF), which organized a multi-billion dollar bailout loan for the country.