Bulog to honor deals despite end of monopolies

Bulog to honor deals despite end of monopolies

JAKARTA (JP): Minister of Industry and Trade Rahardi Ramelan
said on Saturday the State Logistics Agency (Bulog) had
completely stopped importing sugar, soybeans and wheat following
a recent removal of the government's subsidies on the
commodities.

Rahardi, also Bulog's acting chairman, said the agency
nonetheless would honor all its existing import contracts despite
the removal of its import monopoly.

"We will honor all the contracts that have been signed but we
will not make any new contracts. We will also temporarily stop
our stock buffer activities except for rice," Rahardi told
reporters.

The government lifted subsidies on wheat flour, sugar and
soybeans last week, simultaneously liberalizing their
importation.

General importers are completely free to import the
commodities and will be exempt from import duties.

Rahardi said the agency still held a substantial amount of
wheat flour stocks, though he refused to reveal the amount.

"Basically, Bulog still owns almost all of the wheat flour
stocks in the country because the agency previously monopolized
the commodity. But we don't need to disclose the amount to you."

He said private companies were allowed to buy Bulog stocks if
they were not yet ready to import the commodity themselves.

"The new wheat flour price after the abolishment of the
subsidy may be higher or even lower. I haven't decided yet," he
said.

But agricultural analyst H.S. Dillon lambasted the subsidy
abolishment as ill-timed because the measure was taken before the
food delivery system was improved.

"This once again shows how deaf and blind is the Habibie
administration to the sufferings of the people who are food
insecure," said Dillon, executive director of the Centre for
Agriculture Policy Studies.

Dillon argued that before the subsidies were abolished Rahardi
should have secured an effective food delivery system for those
who are food insecure.

"But what Rahardi and his colleagues in the cabinet have been
doing so far is experimenting with a new distribution system.
This is entirely a misguided sequencing of policies," Dillon
added.

Rahardi also said he would cut the long chain in the rice
distribution network to lower rice prices in the market. Prices
have surged to Rp 3,750 per kilogram for low quality rice and to
above Rp 4,000 per kilogram for high quality rice over the last
several weeks.

Bulog was reported to have carried out a massive market
intervention to lower the price by selling the staple in the
market at a reference price of Rp 1,750 per kilogram to Rp 2,000
per kilogram. But prices have remained high due to alleged
speculation by appointed rice distributors.

The agency, instead, raised its reference price to between Rp
2,000 per kilogram and Rp 3,500 per kilogram on Friday, depending
on the quality of the rice, to curb speculation.

He said the current rice distribution system had allowed
speculators to buy subsidized rice and sell it at higher prices.

"I will bypass the current distribution system because it
causes a vast disparity between the official price and the market
price and it has caused market distortions."

He said rice distribution should be made very simple by having
farmers sell their rice to cooperatives or distributors, who
would then sell it to consumers.

Bulog's intervention system, however, is often ineffective
because many of its distributors sell its cheap rice to
wholesalers, not directly to retailers, analysts have said.
(das/gis)