PPP criticizes new clove trading policy

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)