Agriculture Reference
In-Depth Information
A field observation on the policy performance of import tariffs in Belawan
Port in Medan and Tanjung Priok Port in Jakarta confirms that underreporting
or under-invoicing in rice imports occurs and can reach as high as 50 percent
of actual imports (Arifin, Oktaviani, and Hartati 2002). Data on actual imports
may need further verification, but data on rice exports to final destinations in
Indonesia, compiled by
The Rice Trader
(Slayton various years), also suggests
severe underreporting. Although the causality between the new import tax pol-
icy and underreporting needs to be tested more rigorously using some econo-
metric techniques, it is now very clear that this on-site distortion has some con-
sequences on incentive systems to the rice producers, government revenues, and
the food policy in general in the country.
7
Domestic policy is an important determinant of trade openness in rice and
other agricultural products. The policy instruments usually include a combina-
tion of trade and buffer stock policies to maintain adequate domestic supplies,
ensure domestic price stabilization, oversee market operations, and support the
farm sector through income transfers. Because rice demand and supply condi-
tions are price-inelastic in Asia, small supply shocks can result in significant
domestic price risks and farm income volatility. Therefore, fluctuations in do-
mestic production from pests, drought, and flood, for example, can result in price
risks. Equally important, disruption of international trade flows to Indonesia
and other Asian rice-importing countries can destabilize the domestic economy
and undermine political stability.
Rice for the Poor
Indonesia has one of the highest levels of rice consumption in the world, with
the average annual consumption reaching 116 kilograms per person (data based
on the National Social-Economic Survey conducted by the Central Agency of
Statistics [BPS 2002]). The majority (76 percent) of Indonesian households are
net consumers of rice and the rest (24 percent) are net producers. In urban
areas, 96 percent of households are net consumers and only 4 percent are net pro-
ducers of rice; in rural areas, 60 percent are net consumers of rice, and 40 per-
7. The field study suggests that import registration and customs management practices suf-
fer from several deficiencies that could contribute to smuggling and underestimation of rice im-
ports. Previously, almost all rice imports were shipped into the main Jakarta or Surabaya ports.
Since the new trade policies have been in place, rice has been imported into small regional ports
nationwide, making it easier to avoid customs duties and import tariffs and controls. The study also
found that most rice importers operating out of the port of Medan were registered under false names
and false addresses, and a small trader cartel dominated both rice imports and wholesale trade. In
addition, customs usually requires cash payments; and the administration within customs proce-
dures in Medan were not computerized or otherwise linked to the banks. Under weak institutional
arrangements and poor policy enforcement, the traders might collude with the clearance agents
(concerning customs) to “expedite” document approvals and release of goods.
