Government sets 25% duty on sugar, 30% on rice

JAKARTA (JP): Minister of Industry and Trade Yusuf Kalla said on Tuesday that the government and the International Monetary Fund (IMF) had agreed to reimpose an import duty on sugar and rice to protect local farmers from cheap imports.

"We have decided on a 25 percent (import duty) for sugar, and about 30 percent for rice," he said following a meeting with senior economic ministers on the country's next 2000 state budget.

He said that the new duty would be contained in the next government letter of intent (LoI) to the IMF, which would be published some time this week.

Kalla did not provide further details.

Late last month, Minister of Agriculture Muhammad Prakosa said the government would review rice import tariffs once every six months.

He said a tariff team at the finance ministry would regularly review rice duties based on rice production and prices both in the domestic and international markets.

The IMF earlier opposed plans to reimpose duty on the two commodities. The duty was earlier cut to zero percent following pressure from the fund, which has been championing a free and open market.

The IMF is providing a multibillion dollar bailout to finance the country's economic programs.

But the government insisted that a zero percent duty would kill local farmers as the price of imported rice had declined sharply due to the strengthening of the rupiah to the U.S. dollar. The availability of cheap imported rice has severely hurt prospects for local farmers.

The government initially proposed a higher duty for both sugar and rice, but it was rejected by the IMF.

Several agriculture experts criticized the move to reimpose the duty on rice as it would not solve the basic problem, which is the lack of competitiveness of the local farm production system and the distribution system.

The country imported 4.8 million tons of rice in the 1998/1999 fiscal year ending March 31, because of a series of harvest failures largely attributed to bad weather.

The country's annual rice demand is estimated to be 32 million tons, including 27 million tons for consumption, three million for industrial use and two million as a reserve for the State Logistics Agency (Bulog).

Meanwhile, Bulog said in a statement on Tuesday that it planned to hold a tender this month to import rice to replenish its rice stock.

The agency also said that financing for the import of rice would use the "remaining funds" from the Islamic Development Bank to import some 100 tons from Pakistan, Thailand, Vietnam and China with a shipment schedule for March.

Bulog said that it had to resort to foreign loans because the central bank no longer provided lending facilities.

The agency also said the rice import would not hurt local farmers because the government had reimposed the 30 percent duty.

Separately, East Java Governor Imam U. Suparno was quoted by the evening Suara Pembaruan daily as saying that he would propose the government to impose a 65 percent import duty for sugar.

He said that a 25 percent duty would not protect local farmers from cheap imports.

Price of imported sugar is currently at Rp 2,200 per kg, while local sugar is sold at Rp 2,500 per kg.

East Java is the country's major source of sugar. (rei)