Government says it will maintain control of rice imports

JAKARTA (JP): The government would continue to control the import of rice despite its commitment to liberalize the rice trade, Coordinating Minister for the Economy Rizal Ramli said here on Thursday.

Rizal, who still holds the post of chief of the National Logistics Agency (Bulog), said measures such as import tariffs were still necessary to prevent Indonesia from being flooded with cheap imported rice, especially at rice harvest time.

"Therefore, we will reorganize our rice market policy, by adopting a free but controlled market mechanism," Rizal told reporters after a hearing with the House of Representatives' Commission III, which, among other things, oversees agriculture and farming affairs.

He said that as part of the free but controlled market mechanism, the government was considering several market instruments such as import tariffs.

"We are currently calculating how much the increase will be," he said, but declined to comment further.

The current tariff on rice imports is 10 percent.

The government, Rizal continued, would also raise the floor price of unhusked rice.

"There will definitely be an increase in the floor price, but how much remains to be discussed," he added.

The government set the floor price for unhusked rice in 1998 at between Rp 1,400 (about 15.7 U.S. cents) and Rp 1,500 a kilogram, but a surge of cheap rice imports from Thailand and other Asian countries has been pushing prices down to between Rp 700 and Rp 900 per kilogram.

Rizal further said that as Bulog had continued buying local rice, it was also suffering from an oversupply of rice amounting to more than 2.1 million metric tons.

"Bulog has been told to keep buying, while sales have been very limited," he explained.

To help reduce its oversupply, the agency would supply the rice allowances provided to civil servants, among other measures.

In regions where the rice supply was deficient , rice allowances for civil servants, the armed forces and the police would be given in the form of rice from Bulog, he explained.

"This way, Bulog will gain more money so as to be able to continue to buy unhusked rice from farmers in order to keep its price stable," he said.

To further help stabilize rice prices, he said, the government would ban shipments of imported rice at harvest time.

"Every shipment at harvest time will cause prices to fall," he explained.

During the period leading up to harvest time when rice supplies are often deficient, the government would send rice shipments to regions with rice deficits, he said.

Rizal further said that the International Monetary Fund (IMF) had agreed to stop "interfering" in the country's agricultural affairs.

He admitted that when the government signed the first Letter of Intent (LoI) with the IMF in 1998, Indonesia made commitments to the IMF which were even greater than those demanded by the World Trade Organization (WTO).

In the LoI, Indonesia agreed to remove the tariffs rice import.

The government also bowed to the IMF's demand to dismantle Bulog's monopoly over imports of rice and other basic food staples.

Rizal said that instead of the IMF, the government would avail of technical assistance from the World Bank, which was better qualified to manage agricultural affairs.

He also said that the government planned to turn Bulog into a state-owned company sometime next year.

He said that as a state company, Bulog might engage in commercial activities that could help finance its efforts to keep rice prices stable.

Early next year, he continued, the government would appoint a new Bulog chief.(bkm)