Soeharto pledges no more monopoly of clove trading

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)