Agriculture Reference
In-Depth Information
policy to increase sugar prices in the domestic market by administering the dis-
tribution scheme, similar to earlier
tataniaga
causing distortions in the econ-
omy. In September 2002, the government launched a ministerial decree of
trade and industry, allowing registered millers or importers who have used at
least 75 percent of sugarcane from the farmers and are collaborating with farm-
ers in its localities (Decree 643/MPP/Kep/9/2002). The decree implied that
only state-owned enterprises qualified to import and supply domestic needs of
sugar. Also implicit in the decree was the desire to keep the price of sugar high
enough to create incentives for farmers to increase their production and pro-
ductivity and for sugar mills to increase their sucrose yields and efficiency. Al-
though not formally expressed in the ministerial decree, BULOG was given
the role of maintaining the buffer stock of sugar, including market interven-
tion, whenever necessary.
But BULOG's intervention in the sugar sector has not resulted in higher
prices at the farm level, which would have generated a higher farm income for
sugarcane farmers. It has instead only caused a price hike in retail sugar mar-
kets. Decree 643/2002 used a
tataniaga
model similar to those applied to cloves,
oranges, and other strategic commodities, involving the cronies and elites as-
sociated directly and indirectly with the Suharto regime. President Megawati's
administration did not learn from the past failure of the New Order.
It is also questionable whether the domestic policy of sugar distribution
(such as the case of
tataniaga
above) is compatible with the spirit of openness
and fair treatment that can most benefit stakeholders in the sugar economy. A
policy aimed at increasing farmgate price of sugar could not solve many problems
associated with the structural shortcomings facing the sugar agro-industry, such
as a very low productivity at the farm level; low sugar content of sugarcane; re-
lationships among farmers, traders, and sugar millers; and inefficient operations
of sugar mills owned by the state. Heavy government intervention and BULOG's
involvement in the sugar business cannot solve the above structural problems
instantly, but the way BULOG operates does not differ very much from the old-
style parastatals system of state intervention in marketing and distribution of
strategic commodities.
From a management point of view, BULOG remains scandalous, and its
various actions continue to be debated. In a 2003 scandal that triggered public
discussion and parliamentary debates, BULOG was accused of being involved
in the purchase of Sukhoi jet fighters and helicopters from Russia. This scan-
dal indicates that BULOG's reform does not guarantee a model of transparency
and public accountability as was originally hoped. The scandal started with In-
donesia's immediate need of jetfighters to strengthen the air force and the nec-
essary defense systems. BULOG was appointed to secure the initial finance
mechanism for the purchase and to proceed with the deals. In close cooperation
with the Ministry of Trade and Industry, on behalf of the Government of Indo-
nesia, BULOG arranged a countertrade mechanism with Russia. Indonesia
