Bulog 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 US$3 back in economic growth... Now, for every dollar you're spending, you probably only get $1.50 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)