Govt, IMF agree to reimpose import duty on rice, sugar

Govt, IMF agree to reimpose import duty on rice, sugar

JAKARTA (JP): The government has agreed with the International
Monetary Fund (IMF) to reimpose the import duty on rice and sugar
to protect local farmers from cheap imports, Coordinating
Minister for the Economy, Finance and Industry Kwik Kian Gie said
on Thursday.

He said the IMF, which pressured the government to cut the
import tariff on both commodities to zero percent, was initially
opposed to the proposal.

"IMF still wanted a zero percent duty. But we said zero
percent will kill farmers," Kwik was quoted by Antara as saying
on the sidelines of the hearing between President Abdurrahman
Wahid and the House of Representatives.

Kwik said the amount of tax to be levied on both commodities
had yet to be decided.

Minister of Industry and Trade Yusuf Kalla recently said the
government was considering imposing a 30 percent to 35 percent
import duty on rice, while Minister of Agriculture M. Prakosa
recommended the government establish an import duty on rice of
between 55 percent and 78 percent.

The price of imported rice has declined sharply due to the
strengthening of the rupiah against the U.S. dollar. The
availability of cheap imported rice has severely hurt prospects
of local farmers.

The government's proposal to reintroduce the import tariff on
both commodities has drawn criticism from experts, who believe it
is overly accommodating of local farmers but will not solve the
country's rice supply problem.

"I don't think that an import duty on rice is necessary, even
if it is only for a short-term period. Local farmers should
neither be spoiled nor overprotected," agricultural expert
Bungaran said earlier.

He said the wide price gap between imported and local rise was
not necessarily due to the influx of imported rice into the
country.

He said the fact that imported rice was sold at lower prices
compared to local rice only reflected the uncompetitiveness of
local products.

He said locally produced rice was of better quality than rice
imported from Thailand, Vietnam or the Philippines.

"The problem here is not the import duty, but the inability of
our farmers to compete ... The inefficiency of rice management by
government institutions," he said.

Bungaran said in order to promote the competitiveness of local
rice, the government should reform the marketing and distribution
of rice on the domestic market, establish a special financial
agency to foster the development of the agriculture sector and
boost the promotion of Indonesian agriculture products on
overseas markets.

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
tons for industrial use and two million tons as a reserve for the
State Logistics Agency. (jsk)