Wed, 22 Mar 2000

Indonesia has no plan to cancel rice imports

JAKARTA (JP): Minister of Trade and Industry Jusuf Kalla said on Tuesday the government had no plans to cancel rice import contracts despite the sharp drop in rice prices in the domestic market.

"We still need to import rice because our local production is still insufficient to meet the demand," he told reporters.

Kalla, also the chairman of the State Logistics Agency (Bulog), was commenting on Minister of Agriculture M. Prakosa's statement about the government's plan to temporarily halt rice imports.

Indonesia's import of rice is estimated to reach 1.5 million tons this year, far below last year's figure of 4.8 million tons.

The country imported 4.8 million tons of rice in the 1998/1999 fiscal year ending last March because of a series of harvest failures largely attributed to bad weather.

The country's annual rice demand is estimated at 32 million tons, including 27 million tons for consumption, three million tons for industrial use and two million tons as a reserve for Bulog. But domestic output is estimated at only around 30 million tons.

Minister of Agriculture M. Prakoso said on Tuesday that the government should temporarily halt rice imports to stablize the rice market.

" Government intervention is still needed to protect the farmers," he said.

Kalla said the government was aware that the influx of imported rice had caused a sharp drop in rice prices in the domestic market.

But he insisted that contracts that had been concluded could not be cancelled, otherwise Indonesia's credibility in the market would be damaged.

The price of rice has dropped sharply within the last two months due to the influx of cheaper imported rice. The drop in price has also caused a sharp decline in the price of unhusked price, to below Rp 800 per kilogram, or less than the cost of farming.

The government, through Bulog, has been committed to buying unhusked rice at a price of Rp 1,400 per kilogram in an attempt to push up the its price to a more realistic level, but the program is not really working as most of the cooperatives assigned to buy unhusked rice from farmers have received no funding from Bulog.

The government also has decided to impose a 30 percent duty on rice imports beginning in April to protect the farmers, but the move is considered too late because the rice harvest will reach its peak this month.

An analyst from the Econit Advisory Group, Arif Arryman, blamed the government for its slow response in dealing with the rice problem.

He said the delay in the procurement of unhusked rice by Bulog had caused a steep fall in the rice price in some producing areas to below Rp 500 per kilogram, or much lower than the farming cost.

"The current government is too slow in responding to the problem. It is not giving any attention to the problem and has no clear policy. Even the Soeharto regime did better in this case than the current government," he told a news conference.

According to Kalla, Bulog will spend about Rp 6 trillion this year for procuring unhusked rice from local farmers for national stockpiles.

Bulog has spent Rp 600 billion buying five million tons of unhusked rice in the last two weeks alone but the procurement seems unable to soak up the glut in the market due to the bumper harvest in several provinces. (cst)