Indonesia’s Ministers Fight Over Food

By webadmin on 06:48 pm Jul 27, 2012
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Markus Junianto Sihaloho

Trade Minister Gita Wirjawan has dismissed the effectiveness of a solution proposed by one of his Cabinet colleagues to combat the rising cost of food, in particular soybeans, which are used to make tofu and tempeh.

Hatta Rajasa, the coordinating minister for the economy, said on Wednesday that the government would remove the 5 percent import tax on soybeans. The suspension will be run from early August until the end of the year.

But Gita said on Thursday that the import tax cut would not do anything to slow the rise in the price of the commodity.

“Say, for example, that the price [of soybeans] goes up by 200 percent, will the removal of the import levies do any good? I don’t think so,” Gita said.

Indonesia, the world’s fourth most populous nation, is feeling the squeeze because a drought in the United States is leading to lower yields, sending prices soaring. In Indonesia, the price of soybeans has skyrocketed by about 33 percent in the past three weeks. They are currently selling for Rp 8,000 (85 cents) per kilogram.

Gita said weather anomalies in soybean-producing countries including the United States, Brazil and Argentina have caused the price of the commodity to climb. That has affected Indonesia because this country imports soybeans from them.

“Who could have predicted this weather anomaly?” Gita asked.

Tofu and tempeh, often eaten with rice, is the main staple for many Indonesians, as they are among the cheapest sources of protein. Demand for these foodstuffs typically increases before and during the Ramadan fasting month, which will run through Aug. 19.

Gita proposed that the country generate a better food policy in the long-term, including creating decent land and technology to grow soybeans inside the country. Gita said that Indonesia will need 20 million tons of soybeans in coming years, but did not give a time frame.

“Maybe we should discuss ways to improve productivity,” Gita said. “And to increase production, we need a better financing scheme.”

Meanwhile, a lawmaker has called on the government to set aside some of the funds in the state budget to resolve the problem.

M. Romahurmuziy, chairman of House of Representatives commission IV, which oversees food and agricultural affairs, said the government could use some of the Rp 2 trillion in funds that has been set aside in the 2012 state budget for a food crisis.

According to Romahurmuziy, who is a member of the United Development Party (PPP), the government can distribute the funds to farmers growing soybeans.

“This would be an incentive [to grow the produce],” Romahurmuziy said.

But the plan would likely place further strain on a national budget already under stress due to a Rp 306 trillion increase in spending on fuel and electricity subsidies this year.

Deputy Agriculture Minister Rusman Heriawan said on Tuesday that the government saw no urgency in subsidizing soybean prices despite their recent rise.

He said the government subsidized Rp 1,000 per kilogram of soybeans four years ago when the price of the commodity increased, but the subsidy had no impact.

“Subsidies are not a good approach because they will only have a short-term impact. In fact, farmers did not benefit from the subsidy four years ago,” he said.

He added that the recent soybean price hike was the result of drought in the United States, which is the world’s largest soybean supplier.

Right now Indonesia depends on 70 percent of its soybean needs from imports, while the remaining 30 percent comes from local production, Rusman said.

Clashes between tempeh makers and sellers took place in several wet markets earlier in the week, underscoring the pain of the rising soybean prices in Indonesia.

As of last week, US wheat for September delivery had climbed 35 percent in the past month, while soybeans soared more than 15 percent, according to Bloomberg data.

Additional reporting from Antara