Experts welcome import tariff on rice
JAKARTA (JP): Analysts hailed the government's plan on Thursday to impose an import duty on rice in bid to protect local farmers.
Sulastri Surono of the University of Indonesia's Institute for Economic and Social Research (LPEM-UI) said the government should not totally liberalize the country's rice trade.
"Adopting a free market policy during economic crisis will only benefit consumers," she said on a seminar on farming, natural resources and the social impact of Indonesia's economic problems.
She said protection is especially needed when the rupiah strengthens to less than Rp 7,500 to the U.S. dollar.
She said when the rupiah exchange rate rose to Rp 7,500 against the U.S dollar in December, the price of medium grade local rice was Rp 2,750 per kilogram, higher than Rp 2,181 for imported rice of the same quality.
Sulastri said that imposing an import tariff on rice would not embarrass the government because the World Trade Organization allows Indonesia to impose import duties of up to 180 percent until the year 2003.
"I think what we need is just a 30 percent import tariff. That will be enough to protect the local farmers," she said in the seminar.
H.S Dillon of the Center of Agriculture Policies Studies told The Jakarta Post that import duties should be a temporary solution to protect farmers from the falling domestic price of rice.
The drop in the value of rice was partly due to the sharp increase in the procurement of imported rice, he said, adding that the State Logistics Agency (Bulog), as a consequence could not make bigger purchases in the local market.
The country liberalized rice imports last year to counter the surging rice prices in the local market as part of its September agreement with the International Monetary Fund.
Starting Sept. 22, private companies were permitted to import rice with having to pay import duties.
State Minister of Food Affairs and Horticulture AM Saefuddin said on Tuesday that Indonesia and the World Bank are at odds over the size of the new import tariff, with Indonesia seeking up to 30 percent and the World Bank 5 percent.
"I think (a 5 percent import tariff) will not protect our farmers. The ideal increase would be around 20 to 30 percent," he said.
He said the planned import tariff was currently being negotiated by government ministers and the IMF and the World Bank, without giving further details.
Minister of Trade and Industry Rahardi Ramelan was quoted by Antara as saying on Wednesday that he supported the idea of an import duty on private companies.
"It should be imposed on private companies because they can flood the market with rice. Bulog (The State Logistics Agency), although will still import rice, will postpone new deliveries to protect farmers," he said.
But Peter Warr of the Australian National University said that if Bulog was exempted from the import tariff, the new policy would create a big margin for the agency within which it could manipulate the domestic prices.
Meanwhile, Bungaran Saragih of the Bogor Institute of Agriculture (IPB) said the government must do all it can to keep rice prices from falling below the official floor price so farmers are protected from unfavorable market conditions.
But he ruled out the introduction of the import tariffs in dealing with the falling prices at home, adding that Bulog has committed itself to stabilizing rice prices and this should be maintained at all costs.
"This is a promise the government must keep. There should be no excuse, such as lack of funds, for them not to do it. That's only fair," he said. (gis)