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Jakarta Post

Food price controls failing

For Muslims, Ramadhan is a time of joy, a time to seek forgiveness through fasting and prayer, but this spiritual journey does not come cheap in Indonesia

Dewanti A. Wardhani (The Jakarta Post)
Jakarta
Tue, June 7, 2016 Published on Jun. 7, 2016 Published on 2016-06-07T08:11:05+07:00

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Food price controls failing

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or Muslims, Ramadhan is a time of joy, a time to seek forgiveness through fasting and prayer, but this spiritual journey does not come cheap in Indonesia.

As many Indonesians have observed, Ramadhan is also a time when they have to dig deep into their pockets to cope with soaring food prices.

The highly anticipated “annual habit” has led both customers and vendors to question whether the government will be able to realize its much-vaunted ambition of reducing prices through a series of efforts, including by the importation of staple foods from overseas.

The government is set to import 27,400 tons of beef, 381,000 tons of sugar and 2,500 tons of shallots to meet local demand. It also seeks to stabilize the rice price, which usually fluctuates ahead of Idul Fitri.

The government hopes beef imports will force the price to Rp 80,000 (US$5.93) per kilogram (kg), down from between Rp 110,000 and Rp 125,000 per kg in markets currently, while imports of shallots will hopefully bring the price to Rp 25,000 per kg from almost Rp 40,000 per kg at the moment.

Trade Minister Thomas Lembong said that he hoped to maintain fair prices for commodities as the government sought to achieve coordination among ministries.

Vegetable vendor Ishak, however, is not convinced. He said he was already selling Brebes-grown shallots for Rp 40,000 per kg at his stall in Perumnas Klender Market in East Jakarta because he was paying Rp 35,000 per kg for them at the Kramat Jati wholesale market, also in East Jakarta.

“That does not include the cost of transportation from Kramat Jati to Perumnas Klender,” he said with irritation, adding that the long supply chain from Brebes, Central Java, to Jakarta added extra overhead.

Ishak is not the only one casting doubt on the government’s planned price cuts.

Hendy Maulana, a beef trader at the same Klender market, said President Joko “Jokowi” Widodo’s goal of getting beef prices down to Rp 80,000 per kg was “impossible”.

He argued that he had to pay Rp 108,000 per kg just to obtain chopped beef from a slaughterhouse in Cakung, East Jakarta. To compensate for the already high price, he sells his beef for Rp 110,000 to Rp 120,000 per kg.

Hendy blamed the high price on both the lack of supply and the long distribution chain.

“There is a long chain before the beef actually gets to the market after being imported from Australia. So it’s impossible to sell it at Rp 80,000 per kg when my initial lay-out is already Rp 108,000 per kg,” he explained.

The executive director of the Institute for Development of Economics and Finance (Indef), Enny Sri Hartati, told journalists on Monday the same thing, that the government had set an unrealistic target, considering that live cattle sold for between Rp 40,000 and Rp 45,000 per kg.

Only 45 percent of the body weight of live cattle can be sold as beef, while the rest comprises hide, bones, offal, etc.

According to Indef’s calculations, beef prices should be two-and-a-half times the price of cattle on the hoof, bringing the end figure to about Rp 100,000 to Rp 112,000 per kg. Therefore, it claims that it is normal for current beef prices to hover at around Rp 120,000 per kg in the markets.

“If the government conducts market intervention by setting beef prices at Rp 80,000 per kg, it will be detrimental to the cattle farmers,” Enny said.

Indef argues that the root cause of the high beef prices lies in the high price of cattle feed, which accounts for 70 percent of the price of live cattle.

Business representatives are not convinced either by the plan.

Indonesian Meat Importers Association (Aspidi) executive director Thomas Sembiring said he was pessimistic the government’s measures would succeed in such a limited time frame, while Indonesian Employers Association (Apindo) chairman Anton J. Supit questioned the validity of the data currently circulating on supplies. (vny)
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