Bulog ready to compete with private companies

JAKARTA (JP): The State Logistics Agency (Bulog) is ready to compete against private firms in sugar and wheat trading after the government revoked its monopoly over imports of the commodities, agency chairman Beddu Amang said yesterday.

Beddu said the agency would remain in the sugar and wheat business although the government had revoked its monopoly over the imports and the distribution of the commodities as part of an agreement tied to a US$40 billion bailout package arranged by the International Monetary Fund (IMF).

The agreement only allows Bulog to keep its monopoly over rice imports.

"Anyway, the reform measure does not forbid Bulog to conduct business like other private firms do," Beddu said.

However, he said that as a commodities house, Bulog would not only make a profit but would also help prevent food prices from sharply fluctuating.

Bulog will lose its monopoly over sugar and wheat imports starting Feb. 1 under the agreement signed Thursday by IMF managing director Michel Camdessus and President Soeharto.

The 50-point agreement, including the elimination of Bulog's monopolies, was part of requirements for Indonesia to receive the multibillion-dollar loan package from the IMF and other international sources.

Beddu said as a government agency, Bulog was ready to support the agreement.

He said the elimination of the monopolies would force Bulog and private trading houses to work efficiently amid competition, and prices would be set by market forces.

However, he warned that some private firms could monopolize the commodities themselves and called for measures to prevent that from happening.

Beddu said the agency had never asked for financial assistance from the government, except in the current monetary crisis as the agency needed a lot of funds to stabilize the increasing prices of food commodities.

He said Bulog might have to reduce its workers after it lost the monopolies, but noted the company had not recruited new workers for 11 years from 1985 and 1996. The agency has 7,300 employees.

Contract

Singapore traders said they expected Bulog to follow through on existing purchases which may total 800,000 tons this year.

"The vast majority of sugar has already been contracted," said the general manager of a sugar trading house. Contracts would most likely "be honored", one trader told Reuters.

Bangkok trade sources said this week Indonesia had already bought 700,000 to 800,000 tons of white sugar from Thailand, but the Thai market was depressed by a delay of 100,000 tons.

A Western commodities expert said this week that 1998 sugar imports were likely to decline 10 percent to 15 percent.

It is estimated that Indonesia imported between 1 million and 1.1 million tons of sugar in 1997, compared to about 1.2 million tons in 1996.

Some Singapore traders said sugar prices in Indonesia could rise with the disappearance of Bulog.

"Prices would need to rise for world sugar to get in there," one trader said.

"All sugar refineries there will now be subject to market forces," another trader said. "This is going to be inflationary." (jsk)