Govt to review all rice import procurement deals

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)