Milk cooperatives ask for loan rescheduling

JAKARTA (JP): The Federation of Indonesian Milk Cooperatives (GKSI) plans to request a write-off or rescheduling of loans from two creditor banks which provided funds for the purchase of dairy cows.

GKSI's general-secretary, Salim Al Bakry, told reporters here yesterday the request was being made because many of the borrowers have lost their cattle due to natural disasters.

But he admitted that he was not sure how many cattle farmers were hit by natural disasters and were thus unable to service their loans.

Salim was speaking during a break at a hearing with members of the House of Representatives' Commission VII, which oversees cooperative, financial and trade affairs.

He said the distribution of credit to breeders was based more on notions of equality than economic considerations.

Salim said that part of the credits given by the two banks -- Bank Rakyat Indonesia (BRI) and Bank Bukopin -- should have included a "training fee" to teach farmers how to manage their cattle professionally.

In the 1987/1988 fiscal year, GKSI obtained Rp 19.4 billion (US$8.43 million) in loans from Bukopin and in 1988/1989 it obtained Rp 22.6 billion from BRI, bringing its total credits to Rp 42 billion; all this money was used to buy dairy cows.

From this total, around Rp 36.7 billion has not been repaid, Salim said.

During the 1987-1989 period, 27,410 live cows were shipped in from New Zealand, America and Australia. The imported cattle was distributed to individual farmers through "village cooperatives" and the larger "primary cooperatives", all of which are members of GKSI.

Salim said he was optimistic that Indonesia would be in a favorable position when the World Trade Organization regulations for the industry come into effect in 2005.

Salim explained that milk prices on the international market are currently increasing because the WTO does not allow subsidies. Subsidies, Salim said, would be an advantage to Indonesian milk producers considering that milk costs more to produce than to import here.

Local milk costs Rp 682 per liter, while imported milk averages at Rp 550 per liter.

Import

Indonesian milk-processing companies are currently allowed to import the equivalent of 2.9 liters of fresh milk for every liter of fresh milk they buy from domestic farmers.

The import-ratio policy for milk products, which has been in effect since 1982, is meant to guarantee the sale of fresh milk produced by domestic farms.

This ratio is reviewed every six months based on negotiations between milk-processing firms, the Federation of Indonesian Milk Cooperatives and the national coordinating team for milk distribution.

GKSI Chairman Hardjono Hamidjojo said yesterday that increasing import ratios over the year were not caused by a decline in domestic milk production but were a result of a rise in milk consumption.

By the year 2000, consumption is expected to reach 9.7 kilograms per capita per year. Currently it is estimated at around 6.4 kg per capita per year.

Domestic production in 1996 is estimated to weigh in at 471.2 tons, up from around 346 tons in 1990. (pwn)