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Indonesia tightens nozzle to prevent rice smuggling PDF Print E-mail
Monday, 28 April 2008

The Indonesian President has ordered government officials to prevent the illegal export of rice amid the rising demand of the grain in neighbouring countries, reports agency.

President Susilo Bambang Yudhoyono said the government would prioritise efforts to strengthen domestic food security in anticipation of a global food supply crisis.

"Don't let our rice flow to other countries," said Yudhoyono as quoted by Antara at the launch of a poverty eradication programme in Palangkaraya, Central Kalimantan.

He has also ordered ministers and local authorities to halt rice exports unless domestic supply is deemed sufficient to weather food shortages and maintain affordable prices.

On Tuesday (April 22), the Indonesian government raised the benchmark price for rice purchasing by state logistics agency Bulog in hopes of raising farmers' income and discouraging smuggling. Less disparity in the price of rice in Indonesia with that in neighbouring countries reduces the incentive to smuggle the grain.

The price of unhusked paddy delivered to Bulog now stands at 2,600 rupiah (28 US cents) a kilo, while stored rice is sold at 4,300 rupiah. Rice prices in Chicago on Thursday (April 24) reached a record high of more than US$25 per pound, or about 50 US cents per kilo.

The government is currently on high alert over the possible illegal export of rice to the Philippines, which is suffering a severe shortage of the grain as Viet Nam, the world's second-largest rice exporter, has refused to entirely meet the country's demand.

Bayu Krisnamurthi, the deputy minister for agriculture and marine sectors at the office of the coordinating minister for the economy, said the President had sent a letter to UN Secretary General Ban Ki-moon to take immediate measures in easing speculation in commodity markets.

Bayu said many global investors had now poured in their money to speculate in the commodity market following the less desirable yields and higher risks due to the recent credit crunch in the United States. He said the inflow of the hot money in the commodity speculations had triggered an unprecedented surge in the prices of food crops, including rice, soybeans, palm oil and wheat.

"Rice prices in Chicago have never been higher than in Indonesia until the past six months," said Bayu. To help secure domestic food supply and keep prices affordable, Bayu also said the government would improve disbursement of subsidies for farmers.

The government, said Bayu, was giving out around 20 trillion rupiah ($2.6 million) in subsidies for rice farmers this year in the form of fertilisers, seeds and working capital.

The amount is far lower than 126.82 trillion rupiah ($13.7 million) allocated for fuel subsidies. "Subsidies are common things, but which subsidies will be the most effective?" said Bayu.

University of Indonesia economist M Chatib Basri said the government should focus more on subsidies for food than for fuel, which had proven to benefit only people in middle and high income ranges.

"I am not against subsidies, but where are they being allocated?" he said, adding that he thought the government should raise fuel prices.

Chatib said poor people would be more burdened by the recent high inflation environment, which was mainly caused by rising food prices. During the first quarter of this year, inflation reached 3.4 per cent, more than half of the government's target of 6.5 per cent for the year.

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