New firm 'controls' clove supply

JAKARTA (JP): The nation's cigarette manufacturers are still under an unofficial obligation to buy their cloves from one supplier, PT Kembang Cengkeh Nasional (KCN), the chairman of the Association of Indonesian Cigarette Companies said yesterday.

Ismanoe Soemiran confirmed that the association's members were unofficially required to buy cloves from the firm -- controlled by President Soeharto's youngest son Hutomo Mandala Putra -- as a prerequisite to purchase excise stamps from the Directorate General of Customs and Excise.

Under an agreement for a bailout arranged with the International Monetary Fund to salvage the country's ravaged economy, the clove-trading monopoly must be ended by June.

"That's all right, we are still in the transition period. Moreover, such an arrangement benefits small cigarette companies," Ismanoe told The Jakarta Post from his home in Lawang, East Java, yesterday.

A front-page report in the April 27 edition of Kontan business tabloid, which hit newsstands yesterday, said most cigarette companies were bound by one-year or longer purchase contracts with KCN.

If cigarette companies do not buy cloves from KCN, they are reportedly unable to purchase excise stamps from the customs and excise office.

A cigarette businessman told the tabloid that the new clove trading arrangement was no different from the period when the Clove Marketing and Buffer Stock Agency (BPPC), defunct under the agreement with the IMF, monopolized the clove trade.

BPPC was also controlled by Hutomo Mandala Putra.

"Before, in the era of BPPC, clove purchase receipts (from the agency) had to be enclosed. Now, excise officials confirm it by telephoning KCN whether I bought cloves from that company," the businessman said.

"The rules of the game are exactly the same. The people and the contact telephone numbers to buy cloves from KCN are exactly the same.

"Only the name now is not BPPC anymore."

This trading arrangement, Kontan said, was designed to keep KCN -- currently with about 167,000 tons of clove stocks, inherited from BPPC -- in business.

Director General of Customs and Excise Soehardjo Soebardi denied, however, that his office operated under such an arrangement.

"That's totally untrue. Nevertheless, I will check it in the field," Soehardjo told the Post yesterday.

Ismanu said the new clove trading arrangement with KCN benefited around 380 small cigarette companies, including his Retjo Pentung in Tulung Agung, East Java, because they did not have ready stocks of cloves and were therefore heavily dependent on KCN's supply.

The 380 small companies consumed about 10,000 tons of cloves per annum, compared to 90,000 tons of cloves consumed by three large and five medium cigarette companies annually.

The three large cigarette companies are Gudang Garam, Sampoerna and Djarum Kudus; the five medium firms are Noroyono, Sukun, Grendel, Filasta and Bentoel.

"We have got used to the trading system under BPPC. Therefore we need a transition period toward a free market. Otherwise, many of us, especially the small ones, would die," he said.

BPPC was granted the clove-trading monopoly in early 1991. Farmers were then required to sell their cloves to the agency through primary cooperatives, Puskud and Inkud, and producers of clove-blended cigarettes had to buy their cloves from the agency.

In compliance with the IMF agreement, President Soeharto liberalized clove trading through Presidential Decree No. 21/1998.

Minister of Cooperatives and State Enterprises Subiakto Tjakrawerdaya subsequently said the government would help maintain the clove-trading system by requiring farmers to sell their cloves to primary cooperatives.

Primary cooperatives would then sell the commodity to the Association of Primary Cooperatives (Puskud), which would in turn sell the cloves to the Confederation of Primary Cooperative Associations (Inkud). Inkud would be responsible for selling the product to customers, including cigarette manufacturers.

This arrangement has been widely criticized as an effort to maintain the clove trading monopoly. (rid)