Low-lending rates proposed to aid agribusiness

JAKARTA (JP): Minister of Agriculture Justika Sjarifudin Baharsjah urged the central bank yesterday to lower lending rates charged on farming activities to encourage businesspeople to invest in the agribusiness sector.

Justika said the lending rates currently given by Bank Indonesia were too high for agriculture-based companies and discouraged businesspeople from entering the agribusiness sector.

At present, Bank Indonesia provides loans for farming activities through commercial banks at a subsidized rate of 16 percent per year, much lower than the commercial lending rate of more than 50 percent.

The minister said a reasonable lending rates for the agribusiness sector would be between two percent and three percent per annum.

"Lending rates for agribusiness should be lower that those for other sectors because it is a resource-based business and people cannot make a profit in a short period," she told journalists on the sidelines of an agribusiness seminar held by the Bogor Institute of Agriculture (IPB).

For example, she said, horticulture plantations can only be harvested after five years. It was difficult for agribusiness companies to pay 16 percent lending rates every year while their plantations were not yet making a profit.

Justika noted that Malaysia and Thailand had given special lending rates to agriculture-based companies of between two percent and three percent which had made their agriculture products more competitive than Indonesia's.

She said her ministry had repeatedly suggested the reduction of the lending rates but had never received a satisfactory response from the central bank.

According to the central bank, she said, a further cut in the lending rates was impossible because it would put a heavier burden on the government budget.

IPB rector Soleh Solahuddin echoed Justika's view. He said the government should give the agribusiness sector more privileges because it could lead the country out of the economic crisis.

But Soleh said that the lending rates for the agribusiness sector should be set at different levels depending on the commodity but should not exceed 10 percent.

Soleh also suggested the government establish agriculture banks or develop special facilities at existing banks to service the financial needs of agriculture-based companies.

He added the banks should provide special treatments for the agribusiness sector because it was different from other sectors such as manufacturing. (gis)