Flour price protection

It is almost certain that flour will be one of the most talked about subjects in coming days: in reaction to its price increase from Rp 681.91 to Rp 704,44 per kilo by the State Logistics Agency. Although this represents an increase of only 3 percent, the rise could trigger an increase in the price of other essential commodities.

The problem that must be studied regarding the flour trade is not just the price increase, but also the substantial disguised government subsidy. According to a recent survey by the Institute for Development of Economics and Finance, last year's flour subsidy cost Rp 760 billion.

The logistics agency is Indonesia's sole importer and distributor of flour. It sells to domestic flour processing companies. According to the survey, 85 percent of Indonesia's flour is processed by PT Bogasari -- a business group which includes PT Indofood, which produces between 80 percent and 90 percent of Indonesia's instant noodles. The remaining 15 percent is processed by PT Berdikari.

We understand the important role that the agency plays since flour is one of our nine most essential commodities. But we fear that if this monopoly -- which combines government and private enterprise -- is allowed to go too far and is maintained too long, the public's interests will be abused. After all, doesn't too much concentration of power contradict the free market spirit and principles which we so often hear about?

-- Bisnis Indonesia, Jakarta