Soeharto pledges no more monopoly of clove trading

JAKARTA (JP): President Soeharto promised yesterday a new agency would not be formed to take over the clove monopoly of the soon-to-be-disbanded Clove Marketing and Buffer Stock Agency (BPPC).

"There are concerns that BPPC will form a new agency ... I think there should be no such worries," Soeharto said at a ceremony marking the transfer of BPPC's responsibility from his youngest son Hutomo "Tommy" Mandala Putra to Minister of Industry and Trade Mohamad "Bob" Hasan.

Soeharto's comment came following reports that cigarette firms, the main consumers of cloves, had been unofficially required to buy their cloves from PT Kembang Cengkeh Nasional (KCN), a company controlled by Hutomo, in order to obtain excise stamps.

Excise stamps are required on all cigarette packages for sale in Indonesia.

Soeharto said clove trading had been liberalized and that everybody was now free to trade the commodity.

The government liberalized clove trading Feb. 1 through Presidential Decree No. 21/1998, and it has promised to disband BPPC by June 30.

"BPPC was created by presidential decree and it is now time that it should be disbanded by presidential decree," Soeharto said.

The government has stated that it is committed to abolishing BPPC as part of its pledge to sweep away cartels and monopolies in exchange for a US$43 billion bailout package arranged by the International Monetary Fund (IMF).

Soeharto's announcement came ahead of an IMF board meeting in Washington to consider the release of funds from the rescue package which were put on hold in March pending progress by the government in implementing reforms.

BPPC was granted its clove-trading monopoly in early 1991. Since then, farmers have had to sell their cloves to the agency, through village cooperatives, and producers of clove-blended cigarettes have had to buy their cloves from the agency.

The government set the floor price for standard-quality cloves at Rp 8,000 ($1) per kilogram.

However, farmers only received Rp 5,000 per kilogram for cloves they sold to BPPC. The agency kept Rp 2,000 as equity shares in cooperatives and transferred Rp 1,000 to a special account for crop diversification funds.

BPPC sold the cloves to cigarette makers at a far higher price, ranging from Rp 10,000 per kilogram for small producers to Rp 12,000 for large producers.

Soeharto said funds for farmers' equity shares at cooperatives collected by BPPC now amounted Rp 1.1 trillion, which yesterday was symbolically handed over by Hutomo to the chairman of the Confederation of Primary Cooperative Associations (Inkud), H.M. Rafi'i.

At its recent shareholders meeting, Inkud decided to give 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 the Primary Cooperative Associations (Puskud).

Soeharto said BPPC had proved to be successful in its mission, stabilizing clove prices and collecting huge funds for the capital of cooperatives.

"Some people have said the policy to establish BPPC was not correct. But the reality is that now we can see that KUD (primary cooperatives), Puskud and Inkud have an accumulated capital of Rp 1.1 trillion.

"In this occasion, I, as the one who gave the responsibility to BPPC, need to express my gratitude and thanks to BPPC staffers, not Tommy," he said.

Soeharto also suggested that Inkud buy private sector's stake of wholesaler firm Goro so the confederation could strengthen its distribution network.

"If it (PT Goro) is considered to be monopolistic, the private sector owner should step back and sell all its stakes to Inkud," he said, referring to some opposition to a canceled government plan to assign Goro the distribution rights of basic necessities, excluding staple foods.

Goro, established in 1995, is 55 percent controlled by PT Goro Batara Sakti and 45 percent by PT Goro Yudhistira Utama. Goro Batara is 80 percent owned by Hutomo's PT Humpuss and 20 percent by businessman Ricardo Gelael, while Goro Yudhistira is 75 percent owned by Goro Batara and 25 percent by Inkud.

Later yesterday, Inkud said it had taken over Humpuss' 80 percent stake and Gelael's 20 percent stake in Goro Batara, making it the full owner of the wholesaler. Details concerning the funds involved in the transaction, however, were not available. (prb/rid)