Govt announces plan to liberalizes sugar trade

JAKARTA (JP): The government announced yesterday it would liberalize the domestic sugar trade and assigned the State Logistics Agency (Bulog) to stabilize market prices.

Minister of Trade and Industry Rahardi Ramelan, speaking after the Economic and Finance Resilience Council's meeting, said sugar mills were now required to give farmers the sugar they are entitled to -- 65 percent of sugar output -- rather than cash compensation as previously.

Farmers would then be free to sell sugar in the market.

The mills are also required to sell the remaining 35 percent of the sugar output to Bulog, which distribute it to the market.

The government sets the floor price of sugar at Rp 1,690 (12 U.S. cents) per kilogram -- the level the mills normally pay for farmers -- and the maximum selling price at Rp 2,500 a kilo.

"If sugar prices fall below Rp 1,690 a kilo, Bulog will buy sugar directly from farmers at the floor price. But if the prices shoot past the Rp 2,500 level, Bulog will conduct market operations to bring the price to below that level," Rahardi said.

"So, we save the interests of both farmers and consumers. We protect farmers with the floor price and consumers with the maximum selling price."

At present the country suffers a deficit of Rp 1.3 million tons of sugar, Rahardi said.

To anticipate scarcity of sugar in the domestic market, he said Bulog would soon import raw materials to be processed by sugar mills in the country.

The minister also said that the government would continue to ensure the availability of cooking oil at affordable prices in the market by assigning Bulog to distribute cooking oil.

Bulog would purchase cooking oil, not crude palm oil (CPO), directly from state plantation firms (PTPNs).

PTPNs are required to process their CPO at plants owned by private firms, which would only get processing fees from PTPs.

The Ministry of Trade and Industry will appoint the private firms to process the plantation companies' CPO.

"Bulog will purchase cooking oil from PTPNs and then distribute it through its networks and through cooperatives. This is a new measure to ensure that there will be no more fighting in the market on who has the right to distribute cooking oil," Rahardi said.

As the plantation firms' production would not be enough to meet domestic demand, Bulog would be assigned to buy cooking oil or CPO from the free market through an auction system.

"Bulog's operation will end by the end of December 1998. After that, both cooking oil and sugar trade will be liberalized, and cooperatives will be given a chance to purchase and distribute them," Rahardi said.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita noted that the government's decision to give Bulog a central role in both the cooking oil and sugar trade should not be interpreted as a backward move toward monopoly.

"Please, don't get the idea that we have returned to the monopoly because what Bulog will be doing is to stabilize prices. Please trust Bulog while we are preparing cooperatives to take over its role in 1999."

Rahardi also revealed that the government would introduce an export ban for subsidized commodities and their derivatives, but he did not specify what they were.

Meanwhile, Bank Indonesia Governor Sjahril Sabirin said the central bank would maintain the current free foreign exchange arrangement, arguing that it served the country best for long- term period.

"We want to have a high quality foreign exchange management and a high quality rupiah. And we can achieve that only by maintaining our free foreign exchange regime." (rid)