New rule needed to protect staple markets

New rule needed to protect staple markets

JAKARTA (JP): The chairman of the State Logistics Agency
(Bulog) Beddu Amang said yesterday that the government should
issue a ruling to prevent private companies from controlling the
market of staple products such as wheat.

He said he feared that without such a ruling, the government's
plan to scrap next year the agency's monopoly on the staple
products of wheat, wheat flour, garlic and soybeans would benefit
only a few big businesses.

"If Bulog still maintained its monopoly, we could assure that
commodity prices would be stable," he said. "But if Bulog's
monopoly privileges are abolished, we need a ruling to safeguard
public interest," he told the House members.

According to him, if there is no "safety ruling", the
scrapping of Bulog's monopoly would only mean the transfer of its
monopoly to big companies.

The government announced early this month to abolish Bulog's
trading monopoly on soybeans, garlic, wheat and wheat flour
starting Jan. 1, but would maintain the agency's monopoly on rice
and sugar.

According to Ministry of Industry and Trade Decree No.
407/MPP/Kep/11/97, Bulog will still be the exclusive sole
distributor of wheat flour in the domestic market for the next
three to five years to help stabilize its price.

Beddu said that under the decree, consumers would still
receive a government subsidy during the transition period, but
private companies were allowed to directly import wheat flour.

Beddu added that the government subsidy for wheat flour was
the biggest compared to other subsidized commodities, but he
declined to give details on the amount of the subsidy.

He said that with the abolishment of Bulog's monopoly, the
price of wheat flour was expected to rise soon.

Previously, Bulog periodically raised the price of wheat flour
every four months.

Analysts said the government's move to end Bulog's monopoly,
which has been in existence for over 25 years, was a little late
in coming because any newcomers would find it extremely difficult
to make inroads in the wheat flour industry which has been
dominated by Bogasari.

Bogasari Flour Mills, a subsidiary of the Salim Group, has
been holding the exclusive rights to mill Bulog's wheat into
flour for decades.

But analysts also welcomed the move saying that Bulog should
concentrate on maintaining a stable price for rice.

At the hearing, Beddu also briefed the House members about
rice stocks.

He said Bulog currently had around 2.2 million tons of rice in
its storehouses across the country.

He hoped that the agency's existing rice stocks, which dropped
from 2.7 million tons last month, were sufficient enough to
offset a possible drop in rice production.

He said that Bulog would supply around one million tons of
rice in its market operation, which would be performed soon in
preparing for the increase in food demand over Christmas and the
Idul Fitri festivities.

"We will see the result of our market operation in the next
few weeks. If demand reaches over one and a half million tons, we
may import rice," he said.

Indonesia's rice production is expected to drop by 4 percent
to around 49 million tons from 52 million tons set by the
government before the prolonged dry season. (08)