Rice Policy Reform : Removing Restrictions on Rice Trade in Indonesia

Abstract

Three policy changes could make rice prices more affordable for the poor. First, the government should remove Minister of Trade (MOT) regulation 27/2017 on price ceiling. This policy has not lowered rice prices, which rose to IDR 10,646.56 per kilogram on average or 12.07% above the price ceiling between September 2016 and May 2017. Rice prices in Indonesia was approximately twice as high compared to the international reference prices in May 2017. The price ceiling unfairly puts the responsibility of lowering domestic rice prices on retailers while the benefits accrue to middlemen, rice millers, and wholesalers. Secondly, MOT regulation 103/2015 article 9 (1.b), which grants the National Logistics Agency (Badan Urusan Logistik/Bulog) a monopoly on rice imports, should be removed and the government should focus on its role as regulator to ensure fairness and transparency in the import process. Since Bulog must consider the government’s political and bureaucratic processes, it cannot time its imports based on market needs and conditions. Consequently, it spends more than it should on rice import, unnecessarily wasting up to IDR 303 billion (USD 22.78 million) between 2010 and 2017. Rice importation and distribution should be opened as business opportunities for qualified private companies, especially as the distribution chains of imported rice are shorter than those for domestic rice, so imports can quickly meet the needs of the market. Thirdly, Bulog should be fully focused on its duty in disaster relief, preparing, managing, and distributing rice to affected areas during emergencies. National Disasters and Management Agency (Badan Nasional Penanggulangan Bencana/BPNB) recorded 1,234 emergency situations during the first half of 2017, including floods, landslides, tornadoes, and earthquakes. Disasters are expected to continue to hit the country frequently, making humanitarian relief an important priority.