PPP criticizes new clove trading policy

JAKARTA (JP): The United Development Party (PPP) faction in the House of Representatives criticized yesterday the latest policy on domestic clove trading, which it charged would maintain the clove trade monopoly instead of abolishing it as promised.

The secretary of the Moslem-based faction, Bachtiar Chamsyah, told a media conference that the government's call on farmers to sell cloves to cooperatives recently would only keep them out of the market.

"We're afraid that the monopoly will persist, and it (the policy) will only shift the monopoly privileges from one party to another," Bachtiar said.

He said that such an antimarket policy would discourage farmers from nurturing or even harvesting their cloves as they knew that prices would not improve.

He said that following an agreement between the government and the International Monetary Fund (IMF), farmers enjoyed better prices.

The IMF, which arranged a US$43-billion bailout fund for Indonesia, prescribed massive reforms, which among other things, required the government to abandon managed clove trading by dismantling the much-criticized Clove Marketing and Buffer Stock Agency (BPPC) by June.

Following the agreement, President Soeharto liberalized clove trading through Presidential Decree No. 21/1998.

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

Primary cooperatives then sell the commodity to the Association of Primary Cooperatives (Puskud), which sells the cloves to the Confederation of Primary Cooperative Associations (Inkud). Inkud then sells the product to customers, such as cigarette producers.

Subiakto said such an arrangement was necessary to strengthen farmers' bargaining position with cigarette makers following the disbandment of BPPC in June.

BPPC is controlled by President Soeharto's youngest son Hutomo Mandala Putra.

Under the prevailing system, Inkud, which buys cloves from farmers through Puskud at set prices, sells the commodity to BPPC, which then sells the product to cigarette makers at prices twice as high as what the farmers can get.

Bachtiar suggested that the government abandon its plan to maintain the current clove trade regime because it could be counterproductive.

"We'd better not take any steps that will be interpreted as creating a new monopoly just as we are setting out our economic reforms," he said.

Bachtiar said the letter of intent signed by Soeharto last month before IMF chief Michel Camdessus and Presidential Decree No. 21/1998 should allow farmers to sell cloves directly to cigarette makers and let the market decide prices.

"Before BPPC was established, clove prices were decided by the market, and clove farmers were among the richest people in the country," Bachtiar recollected.

"We believe that the farmers will regain ground in the business the clove trading is liberalized to be like it was in the old days," he said.

Bachtiar also criticized what he described an "unfair distribution" of funds worth Rp 1.1 trillion (US$115 million) collected by Inkud from farmers for equity participation in their cooperatives.

At its recent shareholders meeting, Inkud gave clove farmers only 25 percent of the funds, despite the fact they are the largest shareholder. Half of the money went to Inkud, while the remaining 25 percent was given to Puskud. (amd)