Bulog’s powers limited to rice

FINANCIAL TURMOIL IN INDONESIA

The “sacred cows” of the Indonesian economy – the national car project, IPTN airline projects and Bulog’s monopoly – suffered severely as Jakarta agreed to sweeping reforms.

DERWIN PEREIRA checks out with analysts in Jakarta on their perceptions of the latest announcements and their likely effect on the national economy.

* WINGS CLIPPED —————

THE National Logistics Agency (Bulog) will have its powers checked from next month, with limits on its market monopoly of food commodities.

Under the IMF-ordered reform measures, Bulog will be confined only to importing and distributing rice from Feb 1, a role analysts said could lower staple prices in the long term.

Bulog, criticised widely for its import monopolies over so-called strategic commodities such as rice, sugar, wheat and soyabeans, also has the authority to intervene in the market when prices of a particular commodity are considered high. It maintains stockpiles of these key food items.

The agency’s role is to stabilise prices and ensure food prices do not negatively affect the inflation rate.

But observers believe that it has done the reverse. They said that as a result of unlimited powers, prices of goods are pushed up artificially.

The World Bank, for example, said in one of its annual reports that state presence in production and distribution of basic goods reduced efficiency and offered customers no special protection.

Noted a stockbroking analyst: “Many people have little confidence in Bulog because they think it has too much control which is not good for the market.

“If the private sector takes over, it might be able to lower inflationary prices.”

He stressed, however, that despite criticisms levelled at Bulog for “inefficiencies”, it was a good decision for the government to allow it to retain monopoly over rice.

“Rice is a sensitive commodity now, given prevalent shortages,” he said. “And there should be a body keeping watch and if necessary intervening in the markets to control prices.”

On Wednesday, economist Martin Panggabean of Lippo Securities had cautioned against the dismantling of Bulog’s control over distribution of key food staples, saying that “if not for Bulog, the country would have been torn apart by food riots last week”.

Panic-stricken Jakarta residents had rushed out to stockpile on supplies, driven by a myriad of rumours and fears that shortages would send prices skyrocketing.

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