Govt to cut down 50m clove trees

JAKARTA (JP): The government last week launched a massive Rp 400-billion (US$173.91 million) clove conversion program to cut down on the current oversupply.

The program officially began last Thursday in Sukabumi, West Java, with Minister of Home Affairs Yogie S.M. chopping down the first of more than 50 million clove trees which will eventually be replaced with other crops, including coffee, vanilla, cocoa and other hard-crop plantation types.

A total of 212,500 hectares of clove plantations are to be converted this way, slashing the area of Indonesia's clove plantations to almost half of its current size of 515,500 hectares.

Yogie was quoted by Antara as saying that the clove conversion program was aimed at balancing national clove supply and demand.

"Annual clove production is currently 110,000 tons while consumption (by cigarette producers) is about 80,000 tons," he said.

He said the program would be carried out in 16 provinces which were not the country's main clove-producing regions, including Riau, West Sumatra, North Sumatra, the four provinces in Kalimantan, East Nusa Tenggara and Irian Jaya.

The Ministry of Industry and Trade's director general of domestic trade, Djoko Moeljono, said the 16 provinces were chosen because they produced low-quality cloves which were "unfavorable" for the cigarette industry.

The 10 provinces that will be maintained as Indonesia's major clove producers are Aceh, Lampung, West Java, Central Java, East Java, Southeast Sulawesi, South Sulawesi, Bali, Maluku and North Sulawesi.

Djoko said that by the year 2002, the conversion program should be able to balance the supply and demand for cloves.

Last year, he said, clove stocks in the warehouses of the Clove Stock Management Agency (BPPC) and village cooperatives reached 266,000 tons. With this year's harvest, BPPC and cooperatives expect a stockpile of about 350,000 tons of cloves.

BPPC, chaired by President Soeharto's youngest son, Hutomo Mandala Putra, was granted the clove-trading monopoly in early 1991.

Since then, farmers have been obliged to sell their cloves to the agency -- through village cooperatives -- and producers of clove-blended cigarettes must buy their cloves from the agency.

In 1991, BPPC was given Rp 700 billion in low-interest loans by the central bank, Bank Indonesia, to help it procure cloves from farmers and to cover stockpiling costs.

The government has set the floor price for standard-quality cloves at Rp 8,000 per kilogram.

However, farmers only receive Rp 5,000 per kilogram for the cloves they sell to BPPC, which stores up Rp 2,000 in compulsory farmer savings funds and Rp 1,000 in conversion fund money.

Money from the conversion fund, which was introduced by the government earlier this year, is used to convert clove plantations into other types of crop. The conversions are expected to help raise falling clove prices.

Through Presidential Instruction No. 4/1996, the government stipulates that clove-cigarette producers must pay Rp 1,000 to the "conversion fund" for every kilogram of cloves they buy from BPPC.

Djoko said that under the clove conversion program, farmers whose trees were replaced by new crops should get compensation of between Rp 10,000 and Rp 20,000 per tree.

Djoko said that the program would also be financed by the Federation of Village Cooperatives (Inkud) and the farmers' cooperative savings fund.

According to the Kontan business tabloid, BPPC expects to receive Rp 170 billion from Inkud, which is to receive the funds in loan form from several private banks.

Meanwhile, BPPC expects to raise Rp 192.78 billion from the farmers' savings program to carry out the program.

The savings money is intended as a "bumper fund" to be used by BPPC in case the agency has to absorb an oversupply in stock.

According to the Central Bureau of Statistics, the number of clove plantations has declined in the last five years.

The number dropped from 668,000 hectares in 1991 to 590,000 hectares this year.

However, the decline in area has not been followed by a drop in production. In 1991, national clove production reached 80,000 tons a year. It now stands at about 110,000 tons.

Analysts say the increase in stocks is caused by cheap imports from Zanzibar priced at about Rp 2,500 per kilogram.

BPPC is the only agency in the country that is permitted by the government to import cloves.

Faisal Basri, an economist at the University of Indonesia, once said that the amount of cloves imported might explain why BBPC's stocks have never dropped below 240,000 tons.

"The high stocks are a justification for BPPC to continue its operations," he said, adding that if clove supply and demand were balanced, BPPC's role as a buffer stocking agency would no longer be needed. (pwn)