Bulog ready to serve as non-profit organization

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State-owned logistics agency Bulog is ready to serve as a not-for-profit organization if the government returns its function as a buffer stock agency for several main commodities such as rice, sugar and soybeans, the agency’s top executive says.

With the new role, the agency would have to shed its commercial activities in order to focus on its main role in price stabilization, Bulog chief Sutarto Alimoeso said in Jakarta on Monday.

At present, as a semi-business entity, Bulog is allowed to seek profits in order to support its public service activities such as the distribution of rice for the poor and its market operations to curb rising prices.

“The most ideal form would be a buffer stock body like the way Bulog was set up in the past, with certain authority and strong support from the government,” he told reporters after a hearing at the House of Representatives.

Last week, the government announced that it would reinstate Bulog’s role as a buffer stock body to help curb volatility in key food commodities. The body lost its status in 1998 during the Asian financial crisis as Indonesia agreed to reform the subsidy and market intervention mechanisms as required by the International Monetary Fund in order to get bail-out funds it needed to save the ailing economy.

According to the government’s short-term plans, Bulog will be allowed to control three main commodities — rice, sugar and soybeans, while in the long term, it will also manage the supply of corn and beef.

However, the government has yet to issue the technical details on how Bulog will function, or whether the agency will be restructured to operate under the new role.

The President might issue a presidential decree to specify Bulog’s new role, including establishing the lines of responsibility within the government, such as through the Office of the Coordinating Economic Ministry, Sutarto said. He added that the structure of Bulog would likely be stipulated in a bill on food security currently under deliberation by the House of Representatives.

According to Sutarto, once the government reorganizes Bulog, its three business units — farming, distribution services and Bulog Marts — can be merged with the state-owned food firm that the government is considering establishing in the future.

Economists have welcomed the government’s new move to give Bulog a greater role to managing the prices of staple foods, a main contributor to inflation in the Southeast Asia’s largest economy. However, the government should impose strict mechanisms and procedures, such as on making data on its stockpiles publicly accessible, to ensure that the agency can become more transparent and avoid a return to its notoriously corrupt past, analysts have said.

At present, Bulog maintains rice stockpiles of 2.2 million tons, with 1.2 million tons slated for distributed to low-income households. It plans to procure to 500,000 tons from farmers in the coming months, to return the total stockpile to 1.5 million tons by the year end.

It aims to increase its purchase of the staple by around 10 percent next year to 3.9 million tons from 3.5 million tons this year.