Bulog's monopoly to end

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