Clove trading monopoly fails to help farmers

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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