WB opposes govt plan to raise rice import tax
WB opposes govt plan to raise rice import tax
JAKARTA (JP): The World Bank opposed on Friday the
government's plan to raise the rice import tax because it would
disadvantage the country's poor.
World Bank country director in Indonesia Mark Baird said that
the relatively low domestic rice prices enjoyed by the poor now
had been supported by access to cheaper imported rice.
"Therefore, from the poverty point of view, we are concerned
about recent press reports suggesting that import controls or
higher taxes may be reimposed on rice," Baird told a business
gathering.
Baird said that around 50 percent of Indonesia's more than 200
million population were living in poor conditions, and that the
poor spend about 25 percent of their income on rice.
"So lower rice prices are definitely a pro-poor policy," he
said.
The current tax on rice imports is 10 percent. The government
imposed a 30 percent tax at the beginning of the year but reduced
it in April following a protest from the International Monetary
Fund, which is providing the country with multi-billion dollar
loans.
Previous reports said the government was planning to raise the
tax to prevent the country from being flooded with cheap imported
rice and to protect rice farmers.
The government is also planning to increase the floor price of
unhusked rice to protect farmers.
Baird said that the measure would have a serious consequence
on the state budget.
"We are unconvinced that a higher floor price to farmers is
justified or affordable given current budget constraints," he
said.
The government set the floor price for unhusked rice in 1999
at between Rp 1,400 and Rp 1,500 per kilogram, but a surge of
cheap rice imports from Thailand and other neighboring countries
has pushed prices down to between Rp 700 and Rp 900 per kilogram.
Baird also said that the government must continue to gradually
lower fuel subsidies although it would definitely have an impact
on the poor.
But he said that the poor only consumed a small amount of fuel
compared to richer families.
He said that fuel subsidies created a heavy burden on the
state budget.
He also said that the fuel subsidy was causing massive
smuggling of the commodity out of Indonesia.
The government has reduced fuel subsidies this year, and is
planning to make another reduction in April next year.
On inflation, Baird said that it could be contained within the
8.0 percent to 10 percent range this year with "a relatively
conservative monetary policy and regain investors's confidence."
"Low inflation is one of the best pro-poor policies that you
can have because the poor are able to protect themselves from
rising prices," he said.
"There have been some recent increases in inflation due to
adjustment in administered prices and the rupiah depreciation,"
he added, referring to the recent fuel, electricity rate hikes.
Baird said that regaining investors' confidence" would lead to
a stable and possibly appreciating (rupiah) exchange rate".
The rupiah has been under strong pressure over the past few
months due to a combination of external factors and domestic
political troubles.
The exchange rate of the rupiah is currently hovering at
around Rp 9,300 per U.S. dollar, which is around 23 percent lower
than earlier this year.
A low rupiah value causes higher prices for imported products.
The country's manufacturing sector is still heavily dependent on
imported raw materials. (rei)