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."