Difficulties faced in the Reformasi era
The central role of Bulog in food and economic policy had been diminished. Subsidies for the agriculture sector (with nine sub-sectors) were also disrupted. And the role of the state to make comprehensive policies towards food self-sufficiency and sovereignty was also constrained. This was compounded by the dissolution of KUDs, a limited budget for farm modernization, limited access to agricultural credit and so on. Meanwhile, political liberalization in the form of direct elections for the President, House of Representatives (DPR), Regional Representatives Council (DPD) and regional elections had yet to lead to comprehensive agricultural policies toward food self-sufficiency, self-reliance and sovereignty, especially for rice. This was due to money and transactional politics which in turn resulted in “high-cost politics” and corruption. Meanwhile, the economy was beset by oligopolization and cartelization of food and non-food commodities to oligarchy in business and politics. Even the Bulog chairman himself disclosed the existence of “food mafia” or food cartel. The shadowy alliance between business oligarchs and unscrupulous politicians was the result of weak House oversight, law enforcement, and anti-monopoly and unfair competition law.
Food and non-food oligopolation and cartelization have been widely studied. A “high-cost economy” results in less competitive prices of food (rice, meat, sugar, salt, cooking oil, fish, wheat flour and so on) and non-food (cars, motorcycles, cement, fertilizer and so on) compared to other countries. For example, according to the World Bank, Indonesian rice is the most expensive in ASEAN.
Under these conditions, the cartelists have an opportunity to reap enormous profits when the Government imports rice from Thailand and Vietnam. After the Government imported 500,000 tons of rice, the retail price of medium-quality rice in Indonesia as of December 2022 was between Rp10,070 to Rp13,520 per kg. Meanwhile, according to Bulog chairman Budi Waseso, the price of imported rice from Vietnam was Rp8,800 per kg. This, despite the global prices of Vietnamese rice (Rp6,479 per kg), Thai rice (Rp6,510 per kg) and Indian rice (Rp5,145 per kg). Thus, from the data the price difference between how much Bulog spent and the price offered by the exporting countries (Vietnam and Thailand), the cartelists reaped Rp2,321 per kg in profit. So, multiplied by 500,000 tons, it translated to a whopping Rp1.161 trillion. Dr. Khudori even estimated it to be bigger – Rp1.5 trillion. On the other hand, the major harvest season will begin in March. As usual, according to the Agriculture Ministry, rice production is sufficient. This contradicted Trade Ministry’s statement that rice imports were necessary to maintain Bulog’s stock for market operations.
Read: Food Insecurity: The Current Crisis
Since January, the price of rice, along with other essentials such as chili and sugar, has been steadily increasing. Higher rice prices do not automatically benefit farmers, considering that the size of most farmers’ field is under 0.5 ha – many even under 0.3 ha. So what will happen to the farmers during the major harvest in March? The harvest is not a given considering that, according to various reports, Java is at risk of experiencing crop failure caused by flooding. Meanwhile, government reference price/ floor price (HPP) for unhusked and milled rice, an instrument meant to protect farmers, is set below production costs. In addition, there is price pressure due to the cheaper imported rice. This will thrust them into an even more miserable state.