Govt to review all rice import procurement deals
JAKARTA (JP): The government is to review the country's rice import arrangements, including the overseas procurement contracts signed by the State Logistics Agency (Bulog), in anticipation of a declining supply in the international market.
Minister of Trade and Industry Rahardi Ramelan said that the review was essential to make sure existing import deals would not only rely on certain countries.
He pointed out that the query emerged because many of the traditional rice-exporting countries had started to import following the long drought induced by the El Nio weather phenomenon. A substantial supply is likely to be available only in China and Pakistan since only those two countries are expected to have successful harvests this year.
"We're studying these issues," he said, adding that the import contracts which had been signed by Bulog would also have to be reviewed to make sure that the suppliers had access to international rice resources.
Bulog said earlier this week that Indonesia may have to import up to 3.1 million tons of rice this year because domestic procurement is expected to reach only 250,000 metric tons, the lowest level in 20 years.
The agency said that rice stocks on May 28 stood at 2.5 million tons, sufficient for just three months.
Several countries have pledged to provide the country's 202 million people with staple food. Japan pledged to supply 500,000 tons of rice in soft loans and 100,000 tons as a grant, Taiwan has promised to sell 200,000 tons, China 250,000 tons and Vietnam 10,000 tons, while Thailand is to donate 5,000 tons.
Rahardi's comments seemed to contradict those of Bulog chief Beddu Amang.
He said told a House of Representatives (DPR) briefing that the world rice market has a surplus this year following higher production in Thailand, Pakistan and India.
He predicted a 500,000-ton surplus that would make the worldwide supply 21.5 million tons this year.
Trade financing
Indonesia is facing another serious problem in importing essential food items including rice, sugar, wheat flour and soybeans due to its letters of credit (L/Cs) problems and the alarmingly low level of foreign exchange reserves.
Recent reports have said that Thai rice and sugar exporters are not accepting Indonesia's L/Cs if they're not opened by state banks and endorsed by foreign banks in Singapore.
The Singapore government has committed itself to guaranteeing a total of US$3 billion in Indonesian L/Cs on the condition that the International Monetary Fund disburses its bailout funding for Indonesia.
The agency is expected to soon disburse another $1 billion in bailout money to Jakarta; the funding was delayed due to the recent political unrest.
Rahardi, however, said that he would renegotiate the terms offered by Singapore because Indonesia is finding them hard to implement.
"Even though we're in a crisis, we should not take terms which will be a disadvantage to us," he said, but declined to give details.
He also said that similar renegotiating would also be done with the 300 million deustchemark L/C guarantee offered by Germany.
More than $2 billion in L/C guarantees provided by the U.S., Japan, and Australia have also started to work.
Following the closing down of 16 private banks in November and plunging confidence in the banking sector, overseas banks began to reject Indonesian L/Cs. This caused a serious blow to the country's ability to export non-oil and gas products.
Solving the trade financing problem is key to reviving the export industry as it largely depends on imported raw materials, Rahardi said.
He added that boosting exports was one of the government's main priorities because it would provide foreign exchange that was badly needed, especially for importing the five essential foodstuffs.
He also said that priority would be given to labor-intensive export industries like garments and textiles.
Some economists have forecast that the country's economic crisis will cause a 10 percent contraction in the economy and unemployment of 20 million this year. (rei)