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)