Clove trading monopoly fails to help farmers

JAKARTA (JP): The semi-private monopoly of Indonesia's clove trade, instituted in early 1991, has neither propped up the prices of the spice nor has it ensured reasonable earnings for farmers, economists said yesterday.

"The Clove Stock Management Company (BPPC), as the monopoly is popularly known, should therefore be dissolved, as it has not served any economic objective," said economist Faisal Basri.

Faisal, of the University of Indonesia's School of Economics, said that the agency had only caused troubles from the start, not only for clove growers, but also for companies manufacturing clove cigarettes.

Faisal was one of the panelists at a seminar on the clove trade and the welfare of clove farmers held by the Saraswati Foundation and the University of Indonesia's Institute for Economic and Social Research.

Suhirman Muljodihardjo, the production director of the plantations directorate general, said that last year clove farmers received only an average Rp 2,825 per kg, down sharply from Rp 4,392 per kg in 1991.

The BPPC, chaired by Hutomo Mandala Putra, was granted the clove trading monopoly in early 1991 and, since that time, farmers have been required to sell their cloves to the agency at government-mandated prices. Clove cigarette producers, for their part, have been obliged to procure cloves only from the monopoly.

The agency conducts its operations in cooperation with the government-controlled National Federation of Village Cooperatives.

Faisal said it seemed strange that, although the agency has failed to procure cloves from the farmers at the mandated floor price of Rp 7,900/kg, the monopoly has been supported through various trade regulations and was even appointed the official clove import monopoly in 1994.

Worse still, he added, the reimbursement of Rp 1,900/kg in compulsory savings which has been withheld from farmers by the village cooperatives is now in doubt as a large number of farmers have been declared administratively unqualified to withdraw the money.

Minister of Cooperatives and Small Enterprises Subiakto Tjakrawerdaya conceded in June that only 24 percent, or Rp 38.2 billion, of the Rp 157.7 billion in farmers' compulsory savings collected in 1992 had been returned to the farmers.

Suhirman also expressed wonder about the fact that the data on clove supply and stocks gathered by the plantations directorate general differed sharply from the figures given by the BPPC.

According to the National Clove Board -- the BPPC's policy- making body -- national clove production reached 94,556 tons in 1990, rising to 117,074 tons in 1991 and 142,146 tons in 1992. Production dropped to 53,864 tons in 1993 but increased to 129,736 in 1994.

The BPPC announced earlier this year that it was holding clove stocks equal to three years of consumption.

But, according to the directorate general, national clove production fluctuated, amounting to 63,474 tons in 1990, down to 83,343 tons in 1991, to 73,894 tons in 1992, 52,247 tons in 1993 and 44,566 tons in 1994.

Suhirman said that during the same period, clove plantation areas have also been decreasing by an average of 6.26 percent per year as more clove farmers have diversified into other crops to reduce the oversupply.

"Therefore, the sharply differing figures might have resulted from imports by the BPPC. If that is the case the country might again become the world's largest importer of the spice by the year 2000," Suhirman added.

Suhirman called for the assignment of an independent agency to ascertain the real clove supply and demand.

Faisal said that the BPPC's higher figures on clove production could become a justification for the BPPC to continue its operations.

He said it was not clear why the stocks held by the BPPC had remained so large, given that last September the government issued a decree increasing the minimum clove content in each clove cigarette, and increasing the amount of cloves which must be bought by cigarette producers from the BPPC.

"The basic question now is whether the farmers and cigarette factories -- which have direct interests in the clove industry -- agree to have the BPPC as their 'traffic police'," he said.

Faisal suggested a number of solutions to the damaging impact of the monopoly.

The government should, he said, dissolve the BPPC and take over its operations. Alternatively, it could let the BPPC's stocks run out before dissolving the agency.

"But will its stocks ever run out? The BPPC can easily play around with its import monopoly," he said.

According to informed sources, cloves from Zanzibar have entered Indonesia through Singapore at Rp 1,604 per kg, far below the price received by the farmers from the BPPC.

The third possibility, Faisal said, is that the government buy out the agency's stocks at the prices that the monopoly would receive from its sales to clove cigarette producers.

According to previous reports, cigarette producers presently buy cloves from the BPPC at approximately Rp 11,000 per kg. (pwn)

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