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)