New firm 'controls' clove supply

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)