Indonesia reviews trade regime

Govt official says it may abolish licences for food commodity imports

JAKARTA: Indonesia may abolish the licensing system for importers of some food commodities and put in place a tariff system in order to open its economy, a government official said.

“At this moment, we are reviewing the trade regime for important commodities such as rice, sugar, beef, chillies, onions and two other commodities,” Denni Purbasari, deputy chief of staff at the executive office of the president, said during the launch of the World Bank’s Indonesia economic quarterly report.

“We are looking at the possibility of changing from licensing regime to tariffs, such that everybody can play to import the commodities,” she said.

Indonesia’s food trade restrictions and other policy interventions impose a massive “tax” on consumers, the World Bank said in the report.

In 2015, the cost burden from the system on Indonesian consumers was estimated at US$36 bil, much higher than the US$22 bil estimate for the entire European Union, the report said.

Currently, the Indonesian government has a quota system for the import of food commodities it considers important.

Only the state procurement agency Bulog is allowed to import non-premium rice. Importation of white sugar is limited to stateowned companies appointed by the government.

Indonesia has abolished its quota system for cattle imports, allowing firms to bring in the livestock as long as they commit to a breeding programme.

The import quota is decided based on domestic food production data compiled by the agriculture ministry.

But ministry officials routinely inflate the rice production data to present a rosy picture to the government to keep farm subsidies flowing, a senior government official told Reuters earlier this year.

The World Bank said Indonesia needs to rebalance its food security policy, highlighting not only the trade barriers on some commodities, but also the government’s approach on public spending to increase productivity.

The multinational lender said the government needs to replace “the large, poorly targeted fertiliser subsidy programme with a comprehensive soil fertility and water management programme” to increase productivity.

Purbasari said Indonesia is also looking at ways to reform the fertiliser and rice-for-poor subsidy scheme “to make sure that every single penny is spent really well.” – Reuters

We are looking at the possibility of changing from licensing regime to tariffs, such that everybody can play to import the commodities. Denni Purbasari