SBY orders officials to prevent rice smuggling

Aditya Suharmoko , The Jakarta Post , Jakarta | Fri, 04/25/2008 12:27 PM | Headlines

The President on Thursday ordered government officials to prevent the illegal export of rice amid the rising demand of the grain in neighboring countries.

President Susilo Bambang Yudhoyono said the government would prioritize 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 program 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, the 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 neighboring countries reduces the incentive to smuggle the grain.

The price of unhusked paddy delivered to Bulog now stands at Rp 2,600 (28 U.S. cents) a kilogram, while stored rice is sold at Rp 4,300.

Rice prices in Chicago on Thursday reached a record high of more than $25 per pound, or about 50 cents per kilogram.

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 Vietnam, 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 Rp 20 trillion in subsidies for rice farmers this year in the form of fertilizers, seeds and working capital.

The amount is far lower than Rp 126.82 trillion 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 percent, more than half of the government's target of 6.5 percent for the year.

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