Poultry feed manufacturing remains costly

JAKARTA (JP): The government's package of reform measures for the poultry feed industry has failed to lower feed prices because it has not been supported by efficiency improvements on the part of producers, a senior official says.

The agriculture ministry's Director General for Animal Husbandry Soehadji said yesterday that poultry feed producers need to improve their performance and boost efficiency in order to lower prices.

"The ideal ratio of raw material costs and other expenses is 90 to 10. Presently, however, most poultry feed producers have a ratio of 70 percent for raw materials, 27 percent for operational costs and three percent for other expenses," he told a hearing between the House of Representatives' Commission IV, which oversees agricultural and forestry affairs, and Minister of Agriculture Sjarifudin Baharsjah.

Soehadji said that the government's deregulatory measures, introduced in May and June, should have helped to reduce prices.

"But the low efficiency of producers, in addition to unfavorable prices on the international market, has kept prices of poultry feed high," he said.

Soehadji said the government has encouraged private poultry feed producers to improve their efficiency by minimizing operating expenses and bringing down their proportion from 27 percent to 10 percent.

"Efficiency will become an increasingly important factor in the international trade liberalization era under the World Trade Organization," he said.

Measures

The government's deregulatory measures, introduced in May, covered the aspects of investment, import tariffs and trade in the poultry-breeding industry.

Import tariffs on corn, for example, were reduced from five percent to zero and corn gluten meal from 10 percent to zero.

A further deregulation in June allowed poultry feed an imported soymeal content of up to 80 percent, up from the previous ratio of 70 percent. Beginning next April, the government will even allow feed producers to import all of their soymeal requirements.

In spite of deregulation, however, prices of poultry feed have remained high and have soared still higher from time to time.

House members said that, while deregulation should have cut Rp 1.5 (less than one U.S. cent) per kilogram, prices have in fact increased by Rp 20.6 per kilogram. In August, prices rose by Rp 29 (1.3 U.S. cents) per kilogram to Rp 873 per kg for starters and to Rp 825 for finishers, compared with their levels in the previous month.

Sjarifudin said that his office, in cooperation with the ministry of transportation, is attempting to reduce red tape in the fishing industry.

"It is possible to drastically reduce the 31 steps which are currently needed to obtain permits to operate," he told reporters.

House members also questioned Sjarifudin over the possibility of allowing the importation of second-hand fishing vessels, which remains prohibited.

He said the government is formulating regulations on the importation of fishing vessels.

Sjarifudin said that small vessels, measuring between 30 and 60 gross tons, are already manufactured in Indonesia and do not, therefore, need not be imported.

"This is the size of vessels that our fishermen need. The requests to allow large vessels of over 100 tons come from large- scale businesses," he said, adding that large vessels could be produced by PT PAL, a state-owned shipbuilding company. (pwn)