Agriculture Reference
In-Depth Information
TABLE 6.3
Estimated amount and sources of inefficiency in the Food Logistics
Agency (BULOG), Indonesia (Rp trillion)
Source of inefficiency in BULOG
Unfair trading
Illegal
Weak
Itemized activities
requirements
practices
monitoring
Total
Procurements
2.1
—
—
2.1
Transportation
0.1
—
—
0.1
Warehouses
—
—
0.7
0.7
Processing
0.2
—
—
0.2
Sales and distribution
0.1
1.8
0.3
2.2
Supporting services
0.1
—
—
1.4
Total
2.6
1.8
2.3
6.7
SOURCE
: GOI (1999).
NOTES
: Exchange rate is US$1 = Rp 8500. During the period of audit (April 1993-March 1998),
BULOG handled several commodities other than rice, such as sugar, wheat flour, cooking oil, soy-
bean, soymeal, and garlic. — indicates not available.
taker status in rice trading. In a fair competition, farmers as producers should
have freedom to choose which marketing agents they wanted to trade with.
However, most farmers developed a social dependency with the collector-
traders and so they did not always exercise their options (see Arifin et al. 2001).
BULOG handled other strategic commodities, such as sugar, wheat flour,
cooking oil, soybean, soymeal, and garlic (Garcia-Garcia 2000).
3
The policy
formulation being used in the domestic distribution and marketing of these
commodities was not open; only limited circles in politics and business had ac-
cess to market information. BULOG became a very-high-profile government
agency, where political and business intererests misused the privileges and mo-
nopoly power possessed by BULOG.
The Future of BULOG
The larger question then, is whether BULOG should continue to stabilize rice
prices, given that the rice sector is no longer the barometer of the economy, even
though it is still significant in total food consumption. Tabor and Meijerink
(1997) observe that price stabilization might not be necessary under current
conditions. There are reasons to support such arguments. For example, rice dis-
tribution is much better than it was 30 years ago, when BULOG was created;
3. BULOG made greater profits on these commodities than on rice, and it could be argued
that, given the greater economic importance of rice, perhaps dealing in the other commodities per-
mitted it to be more socially responsible than it might have otherwise been in implementing rice
policy.
