Jakarta, Nov 7: Indonesia's plan to tax rice imports by up to 35 per cent might be good for farmers but would spark an increase in prices which will hurt consumers, already bowed by prolonged recession, traders said. The government said the International Monetary Fund (IMF) had basically agreed with Jakarta's proposal to protect the country's farmers from imports."Traders are happy to hold back their stocks because they want to know whether the tax will be implemented. This may be good for farmers but rising prices will only hurt poor people," said one trader in Surabaya, east Java. Prices of the 25-per cent broken rice, mainly consumed by Indonesians, rose to 1,725-1,750 rupiah/kg ($0.253-0.257) this week compared with 1,675 in October, said traders. Prices could reach 2,300 rupiah/kg soon, nearing the 2,750in 1998, when the worst economic crisis in decades was at its height.
The government allowed private traders to import rice for the first time in 1998. Imports used to be the monopoly of the stateBulog commodity regulator. Farmers complain too many imports have depressed local prices. Despite years of programmes to boost domestic output, Indonesia still cannot meet growing local demand. With the tax, it will be importers who complain. "I don't think we can make money if the tax is in place. The whole situation really drives me crazy.
I've got a potential costumer who abruptly cuts our negotiations because he heard the tax would reach 50 per cent," said one trader. "Suppliers, such as Vietnam, are also worried. But I am still wondering why the government needs to impose such an import tax when supply is reported to be tight," he added. Traders in Vietnam said trade with key buyer Indonesia had virtually halted following the tax announcement.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.