Wed, 21 May 2003

Rini plans PSI system on rice imports

Adianto P. Simamora, The Jakarta Post, Jakarta

The Ministry of Industry and Trade is mulling over a plan to apply a preshipment inspection (PSI) system on the importation of rice as one way to help curb the smuggling of rice into the country.

"Frankly speaking, I have yet to discuss it with the relevant ministers," Minister of Industry and Trade Rini MS Soewandi said on Tuesday on the sidelines of the opening of an Indonesian products expo.

Rini said she would propose the plan at a Cabinet meeting next week.

She said that once the PSI system on rice was agreed upon by relevant ministers, her office would establish a supporting policy to help ensure the implementation of the system in the field.

She said the PSI system should help protect the interests of local farmers who had seen the price of their current harvests drop partly due to the entry of cheap smuggled rice.

Under the planned PSI system, imported rice would have to be inspected at the port of origin before entering Indonesia. Today, the country adopts a post-audit system.

Local farmers have long complained that the massive influx of cheaper imported rice, mainly during local harvest season, had resulted in the steep fall of the price of rice on the domestic market.

The State Logistics Agency (Bulog) had demanded that the government temporarily ban rice imports to avoid oversupply during the current harvest season.

But Rini said that such a move would be in violation of a World Trade Organization (WTO) ruling, and would cause the price of rice at home to surge.

Under the WTO ruling, member countries are prohibited from banning the importation of goods.

Previously, the Indonesian Farmers Association (HKTI) also urged the government to impose higher import tax on rice to help limit the entry of cheap imports.

Indonesia currently applies import tax of Rp 430 per kilogram (equal to 30 percent), the lowest in the region.

HKTI said that imported rice, mainly from Thailand, was sold at home far cheaper than the local farmer's production cost of about Rp 3,100 per kilogram.

The price of unhusked rice at the farm level has dropped to around Rp 800 per kilo compared to the government set price of Rp 1,230 per kilo.