Expert warns against rice import duty

JAKARTA (JP): The government's plan to reimpose an import duty on rice would only pamper local farmers, not solve the country's rice supply problem, an agricultural expert Bungaran Saragih said here on Wednesday.

"I don't think that an import duty on rice is necessary, even if it is only for a short-term period. Local farmers should neither be spoiled nor overprotected," Bungaran told Antara.

Bungaran was commenting on a proposal for the reintroduction of an import tariff on rice in a bid to narrow the price gap between imported and locally produced rice.

The price of imported rice has declined sharply due to the strengthening of the rupiah against the U.S. dollar. The availability of cheap imported rice has severely hurt prospects of local farmers.

Minister of Industry and Trade Yusuf Kalla recently said the government was considering imposing a 30 percent to 35 percent import duty on rice in part of its next letter of intent to the International Monetary Fund (IMF).

Kalla said the rice tax was one of several options being considered to cut the price gap between local and imported rice.

Separately, Minister of Agriculture M. Prakosa recommended the government establish an import duty on rice of between 55 percent and 78 percent.

The government lifted import tariffs last year as part of a reform package agreed with the IMF, which is providing US$40 billion in bailout funds to help Indonesia cope with the economic crisis.

Bungaran said the wide price gap between imported and local rise was not necessarily due to the influx of imported rice in the country.

He said the fact that imported rice was sold at lower prices to local rice only reflected the uncompetitiveness of local products.

He said locally produced rice was of better quality than rice imported from Thailand, Vietnam or the Philippines.

"The problem here is not the import duty, but the inability of our farmers to compete... The inefficiency of rice management by government institutions," he said.

Bungaran said in order to promote the competitiveness of local rice the government should reform the marketing and distribution of rice on the domestic market, establish a special financial agency to foster the development of the agriculture sector and boost the promotion of Indonesian agriculture products on overseas markets.

He welcomed a recent statement from IMF director for Asia Pacific Hubert Neiss, who said the IMF would increase its aid for the agriculture sector in its next Letter of Intent with Indonesia.

He said IMF assistance should be used to develop systems and facilities, such as irrigation, road access in villages, technology, financial agencies and education and marketing to boost farmers' capabilities.

Indonesia's rice imports are estimated to reach 1.5 million tons this year, far below last year's figure of 4.8 million tons.

The country imported 4.8 million tons of rice in the 1998/1999 fiscal year ending March 31 because of a series of harvest failures largely attributed to bad weather.

The country's annual rice demand is estimated to be 32 million tons, including 27 million tons for consumption, three million tons for industrial use and two million tons as a reserve for the State Logistics Agency. (cst)