Devi Asmarani, Straits Times 2 Feb 08;
Poor people, small businesses to get subsidies; import duties to be cut
JAKARTA - INDONESIA yesterday unveiled a slew of measures to curb rising food prices, giving new subsidies to poor households and small businesses, and slashing taxes and levies to ensure enough food supplies in the country.
The measures - mainly applicable to rice, cooking oil, soya beans and wheat - came amid concerns over an imminent food crisis in the country, which has seen prices of staple commodities rocket in the past few months.
'We made this decision to stabilise prices so as not to burden the people,' President Susilo Bambang Yudhoyono said at a press briefing yesterday.
'There will be consequences to the 2008 state budget, but we will make some adjustments.'
Earlier in the day, he made an unannounced visit to West Java, where he checked prices at traditional markets, visited soya-bean cake factories and spoke to rice farmers.
The policy package had been in the making since Sunday, said the President, after the government consulted state-owned companies, exporters, small-scale businesses and consumers.
Over the past week, street rallies were staged, calling for the government to keep food prices down.
Last month, the rising price of soya beans drove producers of tofu and tempeh (fermented beancurd), which are the main sources of protein for most Indonesians, to hold a strike and massive demonstrations in the capital.
Coordinating Minister for the Economy Budiono said yesterday that the government will sell the basic commodities to the market at subsidised prices.
Poor households will get 15kg of rice a month as well as a supply of kerosene, used by many for cooking, while import duties for rice will be reduced from 550 rupiah (0.08 Singapore cents) to 450 rupiah per kilogramme.
Following the lifting of a 10 per cent import duty on soya beans earlier, a further tax cut was made for imported soya beans, from 2.5 per cent to 0.5 per cent.
Import duties and value- added taxes for wheat and wheat flour will also be lifted.
Mr Budiono said that about 50,000 street vendors selling snacks such as murtabak tofu and tempeh fritters will be entitled to soft loans amounting to 2 million rupiah.
To ensure enough domestic supplies of cooking oil, Indonesia will also raise its export tax on crude palm oil to 15 per cent if international palm oil prices exceed US$1,100 (S$1,600) a tonne, said the minister.
The current export tax is 10 per cent, and current price US$1,020 per tonne.
Mr Budiono said the government is also planning to boost the domestic production of food by giving out supplies of rice and soya bean seeds.
Indonesia, once an agricultural economy, has drawn criticism from some quarters for relying heavily on imports and neglecting to protect its agricultural sector.
'The agricultural sector used to be a priority under the late president Suharto,' said economist Fadhil Hasan of the Institute for the Development of Economics and Finance Indonesia.
'There was construction of infrastructure like irrigation systems, price intervention and R&D on seed varieties and farm equipment.'
After Indonesia agreed to liberalise its agricultural sector in exchange for financial aid from the International Monetary Fund in the wake of the 1998 economic crisis, farmers could not cope with the flood of cheap food imports, the economist noted.
