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)