Bulog expected to limit itself to poverty alleviation

Bulog expected to limit itself to poverty alleviation

BALI (JP): The role of the National Logistics Agency (Bulog)
is likely to decline over the next five to 10 years and it as
likely to restrict itself to managing rice stocks for poverty
alleviation purposes, an agricultural economist predicts.

Peter Timmer, a professor of development studies from Harvard
University of the United States, said here yesterday the
declining role of Bulog will mainly be caused by a gradual shift
in Indonesia's rice market.

In the near future, he said, less government intervention in
the rice market will be needed because rice will no longer be as
important to the Indonesian economy as it used to be.

"About 25 years ago, rice contributed up to 33 percent to the
cost of living index in Indonesia, but now its contribution is
only 7 percent," he said on the sidelines of a four-day
agricultural conference by the Asian Society of Agricultural
Economists.

Timmer, who has been studying the role and development of
Bulog over the last 25 years, predicted that in the next decade,
Bulog will no longer be crucial for stabilizing rice prices,
which used to have a strong influence over economic growth.

"It used to be that Bulog's activities could be justified
because every dollar you spent on Bulog, you got three dollars
back in economic growth... Now, for every dollar you're spending,
you probably only get 1.50 dollars back. Bulog is no longer one
of the fundamental contributors to the economic growth process,"
he said.

Bulog was set up by the government in 1967 to maintain the
price stability of important foodstuffs such as rice, sugar,
flour, soybean and corn, through market intervention and buffer-
stocking mechanisms.

Observers have claimed that although the agency is still
unquestionably needed to manage staple food crops such as rice,
its monopoly -- in importing, processing and distribution -- has
been questioned for less sensitive commodities such as flour.

Timmer said that apart from the situation of Indonesia's rice
market itself, external forces will also contribute to Bulog's
declining role.

"Some of the mechanisms that Bulog uses to stabilize prices
will not be allowed when the World Trade Organization agreement
is completely implemented. But since that will not be in another
five to 10 years, in the short-run, Bulog is O.K.," he told The
Jakarta Post.

He predicted that Bulog will "still be there" in the next five
to 10 years, but will focus on poverty alleviation and not be
involved in anything except rice.

"There's hardly any reason, economically, for Bulog to be
involved in anything but rice... Rice will remain important to
the poor," he said.

Timmer noted that other commodities currently overseen by
Bulog, such as soybean, soybean meal and corn, are gradually
being freed of government control.

"Rice is different, even the Japanese have an agency...just
like Bulog," he said. (pwn)