The Jakarta Post, Jakarta
In a move widely applauded in agricultural circles, the House of Representatives passed the bill on a warehouse receipt system into law Tuesday.
Among other benefits, the new legislation will enable farmers and growers, and small and medium enterprises (SMEs) to use their warehousing receipts as collateral for bank loans.
All 10 factions in the House gave their approval to the bill during a plenary session, saying that the law would help farmers and SMEs expand their businesses, and provide greater protection for banks, thus encouraging them to extend loans.
Trade Minister Mari Elka Pangestu said that farmers and SMEs often faced difficulties in obtained loans from banks as they lacked the necessary physical assets to pledge as collateral, as normally required in the banking industry.
""With this new law, farmers can use their warehousing receipts to secure loans,"" she said.
Under the legislation, a receipt issued by the management of a designated warehouse for the storage of commodities can also be employed by its owner as a tradable derivative, or used for the settlement of maturing futures contracts on a commodities exchange.
The new legislation is also expected to help lessen commodity price fluctuations, and thereby reduce the losses these frequently cause to farmers, Mari said.
Farmers often receive low prices for their produce, particularly after bumper harvests, she explained.
Under the warehouse receipt system, farmers and growers will be able to store their commodities, such as cacao, coffee and corn, in warehouses while waiting for prices to improve.
""Thus, this law will also help stabilize commodities prices,"" she said.
The chairman of the House commission that deliberated the bill, Didik J. Rachbini, said that the warehouse receipt system would be put into effect by the Trade Ministry, which would appoint the Commodity Futures Exchange Supervisory Board (Bappebti) to act as the oversight agency.
The Ministry would also designate the Futures Clearing Agency (LKB) as the warehouse receipt registration center. This agency would be responsible for administrative matters and the provision of an information network.
""The registration center will keep information on all registered warehouse receipts, and these can be used by the government to estimate national commodities stocks,"" Mari explained.
Mari said that her ministry had one year to disseminate information on the scheme and draw up technical guidelines before putting the legislation into effect.
""Hopefully, we will be able to complete the job in less than a year,"" she said.
