Government to buy 520,000 tons of rice  


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December 22, 2006
The Jakarta Post, Jakarta

The government has decided to import 520,000 tons of rice up until the end of March to secure supplies and stabilize prices, which have continued to rise and could result in higher-than-expected inflation.

Vice President Jusuf Kalla said in a press conference Thursday that rice imports were needed to cover possible shortfalls in the national rice buffer stock, which has been declining due to recent market interventions designed to contain prices, and the provision of subsidized rice to the poor.

"Why are we importing? For the sake of the nation's food security. We don't want to take any risks," he said.

"We will import rice for the national buffer stock up until the harvest in March."

Kalla said the government, through the State Logistics Agency (Bulog), would start accepting offers for imported rice supplies this week.

He explained that the government had calculated rice import needs at 160,000 tons for January and February respectively, with another 200,000 tons being required to further secure supplies.

Bulog has been releasing up to 250,000 tons per month from the national stock to secure supplies and keep rice prices stable.

The government considers one million tons as a safe level for the national rice stock. The stock could become critical if it is not replenished and, for example, a natural disaster were to occur, Kalla said.

The Vice President gave assurances that the decision to import rice would not prejudice rice growers, especially given that many growers now found themselves in a position where they had to buy rice.

"The government wants to bring rice prices back down to around Rp 4,000 (44 U.S. cents) per kilogram, the level that prevailed in November," he said.

The price of rice has recently surged to Rp 5,000 per kilogram. Although rice prices usually rise between the harvest and the end of the year, this year the rise has been exceptional, suggesting distribution problems and possible speculative hoarding.

Rising rice prices could also derail the year-long effort to bring down inflation, which slowed to an on-year level of 5.3 percent in November after having reached 17 percent at the beginning of the year.

In its latest report on Indonesia, the World Bank suggested lifting the ban on rice imports as it had contributed to a 33 percent increase in rice prices over the year, and, as a result, swollen the ranks of the poor.

Kalla said that the decision to resume rice imports had been discussed with President Susilo Bambang Yudhoyono, who had instructed that the efforts to secure supplies be expedited, and that subsidized rice continue to be distributed to the poor.

Kalla, therefore, expressed the wish that the issue would not become politicized.

However, the decision has already been met with objections from the Indonesian Farmers Association (HKTI), which offered to help the government procure additional supplies from local rice surpluses in a bid to stave off imports.