T

he government’s plan to reinstate state-owned logistics firm Bulog’s role as a buffer stock agency of several basic commodities, including rice, sugar and soybean, has received a positive response from economic observers.

The economists said that government intervention was still necessary in the market, which had increasingly become more oligopolistic while local farmers still had a weak bargaining position.

However, they warned that stricter control should be put in place to ensure that the new policy would not revive rampant corrupt practices within Bulog, which was known as a cash cow for political parties. Past cases involving Bulog have see several high-ranking party officials in prison.

“Poor governance exists in any institution in our country, including in the banking sector or ministries. But with tight supervision, it can be improved, like the way BI did with the banking sector,” said A. Tony Prasetiantono, the director of Gadjah Mada University’s Center of Economic and Public Policy Studies.

Unlike in developed nations, the economic system in Indonesia was not well-developed and therefore state intervention in the market of food commodities would be necessary, Tony said, adding that a system should be devised to avert the moral hazards and minimize the chance of corruption.

“The government can set up a special task force to monitor the operation of Bulog as a buffer stock agency. This task force should be directly controlled by the president or vice president, as was done with the poverty eradication task force,” Tony explained.

Ahmad Erani Yustika, an economist at the Institute for Development of Economic and Finance (Indef), pointed out the urgency of standard operating procedures for the procurement of basic food commodities managed by Bulog once it was given its new task.

“The new authority for Bulog should be followed by a strict mechanism for its operation and supervision. Imports can be permitted but there should be a clear procedure, such as a price limit, and bidding should be monitored by the government,” he said.

To manage the supervision function, the government could set up a watch body to be attached to Bulog, with supervisors coming from the Trade Ministry or relevant institutions, and engage associations of commodities’ growers, such as soybean and sugarcane, Erani said.

At present, rice importation is one of the sources of profit for Bulog, as it can buy rice from overseas at a lower price than that from local farmers, and cross-subsidize its public-service obligation operations, Bulog chief Sutarto Alimoeso has claimed.

Indonesia Corruption Watch (ICW) deputy coordinator Adnan Topan Husodo pointed out that in the past, the most common corrupt practices in Bulog took place with rice imports, in which officials and sellers agreed to inflate the price and split the proceeds of the higher price among themselves.

“In this case, it is important to limit the authority of high-ranking Bulog officials as the sole decision-makers for market interventions, or importation. There should be a special unit to monitor and engage in the policy-making process within the agency,” he said.