Tuesday, 10 September 2013


Bad news busted out there had been alleged secret kartel in six basic commodity amounting to Rp114 trillion in import activities. This was an accusation by he Indonesian Chamber of Commerce [KADIN] about storming import of various commodities lately.

In response to KADIN’s statement, the Minister of economy Hatta Rajasa asked the Commission of Business Competition Watch [KPPU] to investigate the case. Hatta urged KPPU to work hard to detect indications of kartel, they were asked to crackdown on it. A simple but clear message.

According to Kadin and Bulog, so far national food distribution was not balanced as demand was high alleged supply was low. According to KADIN’s data, the alleged kartel encompassed six strategic commodities, i.e. beef, chicken, sugar, soy, corn, and rice which altogether of other commodities which influenced food distribution system.

The breakdown national consumers need based on kartel could be estimated. The need for cow’s meat which came to 340 thousand tons had a kartel value of a around Rp340 billion. Furthermore chicken meat of 1.4 million tons had a kartel value of Rp1.4 trillion. Meanwhile 4.6 tons sugar had kartel value of Rp4.6 trillion, soy of 1.6 million tons, corn of 2.2 million tons had kartel value of Rp2.2 trillion and imported rice was estimated at Rp1.2 trillion.

About import for meat, bettered prosperity of the Indonesian population increased per capita meat consumption which was previously 2.3 kg per capita/year to play catch up with other nations where meat consumption was already 20 kg. The problem was that local livestock farm was not growing and even contracting instead. Meat production still relied on cattle readers who only reared one or two cows the traditional way.

Meanwhile neighboring countries like Australia and New Zealand were developing highly sophisticated animal farm industry which was modern and efficient in any way. That explained why production cost of livestock farming there was much cheaper and ensured high quality; and that was also why they commanded over the local market for decades.

The above condition was on account of national food management which was still inferior in terms of production, distribution, and trading. The management policy was rated as till over-centralized and Ministry of Industry seemed reluctant to delegate food management to the provincial governments who were supposed to know better about local need.

Not just that the Parliament’s control over food trading was also rated as weak. Supposedly House could put sanction on ministries who were unable to control food prices which might injure the people. The sanction could be reduced budget for Ministry. For that matter KADIN was expecting the Government, through the Coordinating Minister of Economy could reform food management for the better, especially strategic food commodities like consumed and rafinated sugar, [for which new factories needed to be set up], soy, corn, beef, chicken, and garlic.

As footnote, lately the Government and BULOG had distributed imported meat to some traditional markets, the cheap meat on sale was from Australia. The need for this commodity jumped through the month of Ramadhan and Idul Fitri. The Government through the Ministry of Trade Gita wirjawan was certain that this step could control price of beef which at the moment had reached Rp90.000 per kg.

Basically Indonesia was not an import addicted country; the government did not wish to depend on importing to fulfill domestic need. As long as national production was sufficient, the Government would not do importing to meet market’s demand. However since national production was not sufficient to meet high demand as the consequences of high economic growth, the Government stabilized supply by importing so inflation could be under control.

Price stabilization was not only necessary for cow’s meat, but also other food commodities like red onions and rawit chill. It was reported that 3,000 tons of imported meat and 10,000 tons of imported chili entering Indonesia was merely to fulfill domestic need. If import was not exercised to meet market demand, inflation was not soarup high and had the potential to increase people’s misery.

Word was out that the import quota being exercised made trading system of meat more messy; it was not clear which data of supply served as reference. The import quota system must end, not just in meat but also other commodities like garlic which was frequently restless.

This system only resulted economic excess which enriched a group of people but made farmers and livestock farmers poorer.

Inflation in the food sector soared up and make banks increase interest rate amidst downturning people’s purchasing power. The industry was also troubled by high production cost, not to mention workers who demanded wages increase. Competitiveness of national industry slumped, many foreign companies were ready to walk out while import mounted up.

The result was that trade balance swelled, investors trust faded and balance of payment minus USD 6.6 billion in quarter 1 of this year. The result was that Rupiah value was downpressed to below the psychological level of Rp10,000,- And so was projection of economic growth which was axed to around 5.6% - 0 6.1%. The painful thing was that weakening of Rupiah elevated goods prices due to imported inflation.

For that matter there was the quota system in importing be replaced by flexible tariff system which projected consumers and producers. By pricing system import tariff must be lowered when price of commodity soared up due to under supply. On the other hand, import tariff be increased to protect farmers when supply abounds.

This taxation system should further be managed to develop and strengthen domestic food industry for example the develop cattle breeding which was expensive. Hence Indonesia would be in a position to promote beef production and farmers could be enriched.

In addition to the above farmers should renegotiate Free Trade Agreement as well as Comprehensive Economic Partnership Agreement [CEPA]. In ASEAN-Australia-New Zealand Free Trade Agreement [AANZEAFTA], around 80.7% of 11 Indonesia’s tariff posts for goods exported to Australia were exempted of import tax as per October 2009, while Indonesia freed 85.2% tariff post through 2009-2014. In case of meat and milk, tax exemption would be fully exercised in 2019, while sensitive products like sugar and rice should be exceptional.

Whatever the form, a collaboration should be mutual benefit. Revisions or corrections were not forbidden things for the sake of all Indonesia people; price stabilization was necessary to equally protect consumers and producers. The Government was expected not to be hesitant to enhance self reliance in food and accordingly and dependency on import must be systematically reduced.

The habit of blaming each other among institutions should be eliminated and be changed into the positive habit of communication, coordination, and synergizing. If the President as head of state make his reminders to the ministers openly it must be due to low performance of ministers. Leaders should listen to the people before their office ended in 2014 next. 

Business New - July 31, 2013                  

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