Experts critisize RI's trade laws on soymeal
Experts critisize RI's trade laws on soymeal
By Hidayat Jati
JAKARTA (JP): Several analysts warned yesterday that Indonesia's complicated trade regulations on soymeal were causing unnecessarily high costs to the national logistics agency, the ministry of finance, and to the feed, poultry and livestock industries.
"The overall policies are not efficient, particularly for the livestock industries, and they benefit only the domestic firm which has the sole right to crush soybeans into soymeal and cooking oil," Jacqueline L. Pomeroy, a consultant to the Ministry of Trade, said yesterday.
Pomeroy was analyzing the impact of the regulated soymeal trade in a paper presented during the second day of a World Bank- sponsored conference on deregulation taking place at the Borobudur Hotel in Central Jakarta.
Under current regulations, only the National Logistics Agency (Bulog) is allowed to import and market soybeans. The government has appointed only one domestic firm to process the beans to produce soymeal and cooking oil at a given fee.
The soymeal is then returned to Bulog who sells the commodity to the feed and livestock industries at prices higher than the those on the world market.
Imports of soymeal are still complicated today although the regulations are more relaxed as compared to those in 1988 (see table).
The cooking oil extracted during the crushing of the soybeans is retained by the crusher who then markets that value-added commodity domestically and overseas.
"Up until 1993, Bulog sold the soybean meal produced by the domestic crusher to feedmills in Indonesia at a price around 50 percent higher than import prices," Pomeroy told The Jakarta Post during a coffee break.
Impact
The World Bank, in its 1994 Country Report on Indonesia, argued that the complicated soymeal policies had been costly for various industrial users, especially the poultry industry, which the Bank named as "one of the most dynamic sectors of the Indonesian economy with annual production growth of 25 percent recorded in the past decade".
Using the 1988 policy (see table), Pomeroy said that the crushing firm, which she declined to identify, had an annual meal output of 249,000 metric tons, while its annual capacity was about 300,000 tons.
The crusher gains about 46,000 metric tons of soybean oil per year, Pomeroy said.
Pomeroy said that the crushing fee for the domestic firm, at least up until 1991, was as high as Rp 30.41 (about 13 U.S. cents) per kilogram.
"The fee set by the Ministry of Finance is higher than that paid to crushers anywhere else in the world," she said.
She added, however, that the increase in cooking oil prices over the past two years may mean that the crushing fee has fallen to about eight rupiah per kilogram.
"But I don't know for sure since it's extremely difficult to extract information from the firm," she said.
The crushing fees paid by Bulog to the contractor are not available to the public.
Sarpindo
Although Pomeroy refused to name the firm in question, reliable sources (all of whom requested anonymity) said that the crusher was PT Sarpindo, whose mill is located near the Tanjung Priok port in the same compound with another monopoly, wheat processor PT Bogasari Flour Mill.
Pomeroy described the soybean crushing mill as having highly sophisticated technology and a fully automated crushing operation.
She estimated in her paper that the domestic firm's initial investment in plant and equipment was approximately $50 million.
Although it is not immediately clear who controls Sarpindo, the sources speculated yesterday that the company could be owned by a consortium consisting of the Salim family, timber baron Mohammad Hasan, shipping tycoon Setiawan Jody and some other politically well-connected businessmen.
None of those parties were available for comment yesterday. Similarly, no Sarpindo staff or Bulog officials were willing to comment on the claims contained in the conference paper.
"In return for the high crushing fees, the opportunity costs foregone by the government have been enormous because Sarpindo has complete control of the cooking oil...On top of that, the feed, poultry and livestock industries are also disadvantaged," said one of the sources yesterday.
Another source said yesterday that, if the local-content requirements regarding soymeal were completely abandoned and the government allowed other soybean crushers to exist, "there is no way Sarpindo could survive."