Bulog's monopoly to end

JAKARTA (JP): Coordinating Minister for Economy and Finance Saleh Afiff said here yesterday the government planned to remove the National Logistics Agency's (Bulog) monopoly to allow consumers to buy commodities at market prices.

Speaking to reporters at his office, Afiff said the measure would be part of a deregulation package currently under discussion following the floating of the rupiah.

"This will be introduced, if possible, this month. But just wait another couple of months," he said.

He said importers would be able to buy any agricultural product at prevailing market prices when Bulog's monopoly over some agricultural products was removed.

"But I am not saying that Bulog sets more expensive prices."

He argued that any monopoly on certain products or sectors was not beneficial.

"In some cases, it's good, but it's better to end (Bulog's) monopoly, for example in wheat flour, garlic and soybeans," Afiff said.

The government is currently under pressure to remove several monopolies and reduce market distortions to regain investors' confidence following speculative attacks on the rupiah.

But Afiff said that Bulog's monopoly removal plan was not related to the giant Salim Group's controversial restructuring plan to inject its foodstuff producer PT Indofood Sukses Makmur into the group's tiny Singapore-based foodstuff subsidiary, QAF.

Indofood's wheat flour milling subsidiary PT Bogasari Flour Mill has a special right to mill Bulog's wheat into flour. Bogasari receives a set margin for it.

Bulog currently holds import monopolies on rice and rice flour, sugar, wheat and wheat flour, soybeans, onions, shallots, garlic, leeks and other commodities.

In its latest report, the World Bank criticized regulations which still distort prices and business opportunities, thereby increasing costs and causing losses in efficiency as resources become attracted to protected activities.

"They also raise costs to consumers, often hitting low income consumers especially hard," the World Bank said.

"For example, Bulog's monopolies over the import of rice, sugar, wheat (and associated restriction of flour imports and related domestic activities) and soybeans raises average prices and 'tax' consumers."

According to the World Bank, monopolies also raise costs to user activities, such as agro-processing, making them less competitive in export markets.

The agricultural sector is subject to government intervention such as farm price support, input subsidies, production quotas, export tax and floor prices.

These measures are applied to facilitate what the government sees as a need for food price stability, self-sufficiency and rising government revenues.

The government has so far defended the need for intervention in the agricultural sector, which is managed by Bulog, saying that commodities in this field have special characteristics which do not apply to other products like those from the manufacturing sector. (icn)

Editorial -- Page 4