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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Feast and Famine

The real reasons why food is scarce and costly

By Jose Manuel Tesoro / Jakarta


NOT SO LONG AGO, when Supandi needed rice for his extended family, he merely visited a shop in his East Java village. Now, the 30-year-old peanut vendor cycles 16 km every day to the town of Jember to buy rice from the State Logistics Agency, Bulog, which controls the import and distribution of basic commodities. Supandi has good reason to ride all that way: Traders in his village are asking a third more for the same amount. "We will chase the cheapest price," he says, "wherever it may be." These days Bulog is letting people like Supandi buy 15-kg bags; but before the fasting month of Ramadan ended, five kilos was the limit.

The International Monetary Fund may demand financial reform. The U.S. might hint at political reconstruction. But Indonesia's main worry is far more basic: how to provide nourishment for 200 million people. Erratic supplies and hoarding is making certain food items scarce, and in some areas people are going hungry. Still, basic food items are available in most of the country -- but at a far higher price than Indonesians are accustomed to paying.

The scarcity and inflation are symptoms of a food supply system in collapse, and not just beneath the weight of a weakened rupiah. Add to that years of inefficient state intervention, the El Nio phenomenon, trade difficulties and shortsighted policies. The longer prices rise, the greater the possibility that far more Indonesians will starve -- a scenario that ultimately could destabilize the entire region.

For much of the previous month, activist Tini Hadad's office has resembled a crisis center. The Indonesian Consumer Foundation, she says, was receiving up to 30 calls a day from frantic people. "Some of them cannot even talk," she says. "They just cry and say: 'How can I survive?'"

In his speech at the Mar. 1 opening of the People's Consultative Assembly, the electoral college that is expected to anoint him for a seventh term, President Suharto said that prices have gone up 16% since last April. The next day, the Central Statistics Bureau revealed prices rose almost 13% in February alone, bringing Suharto's figure up to about 29%. Since mid-January, milk, cooking oil and instant noodles have more than doubled in price. Hadad's only advice to worried families: for the moment, prioritize spending and substitute items. Mashed mung beans offer similar nutrients as milk, and tofu must do if chicken is too costly.

Even then, tofu and the Indonesian staple, tempe soybean cake, are made from beans, over half of which were imported last year. So, too, is much of the country's milk and sugar, and all of its wheat. In fact, the same goes for most of the ingredients necessary for food production and distribution, such as fertilizer, animal feed and truck parts. Based only on the rupiah's decline, prices of imports have more than tripled. According to Steve Sondakh, a director at the Hero Group, which operates 72 supermarkets across the country, feed has become so pricey poultry farmers have already slaughtered 80% of their stock. The remaining birds, he reckons, will last only a fortnight.

Then there is the prolonged drought that has left Indonesia short by up to 4 million tons of rice this year. Rice-producing countries, which treasure self-sufficiency in the grain, release only a fraction of their excess harvest on the market, around 12 million tons a year. Anticipated demand from the world's fourth-most-populous country for one-third of the available global supply is already pushing up rice prices.

The one thing Indonesia has more than enough of is crude palm oil, the main ingredient in cooking oil. In fact, Indonesia and Malaysia together produce much of the global supply. But in this case, the strong dollar has had another effect: a temptation for local companies to export their stock. In an attempt to ensure sufficient domestic supplies, the government imposed a ban on crude palm oil exports in January; it must be lifted next month under IMF conditions.

Then why is local oil so dear? Betting the ban will be lifted, producers apparently are slowing their production. If the ban is scrapped they will return to full operation. Producers may also be selling domestically at near-export prices. The difficulties in obtaining cooking oil "is an artificial crisis," says agricultural economist H.S. Dillon, who heads the Jakarta-based Center for Agricultural Policy Studies.

Most Indonesians do not understand market forces; their anger has been directed at traditional sources of suspicion -- the ethnic Chinese, who dominate the retail, wholesale and distribution trade in the country. The spate of riots and looting that swept the country in early February hurt mostly Chinese-owned businesses. "The easiest target for people are retailers," says Sondakh, who is also president of the Indonesian Retail Merchants Association. "They throw stones at stores. If they wanted to attack factories, they don't even know the address of the manufacturers."

The terror that has hit the ethnic Chinese community has actually contributed to scarcity and rising prices by disrupting the distribution of goods. "The problem for everyone in the food industry is keeping open the supply chain," says a senior food-industry executive. Chinese merchants are now afraid to buy stock; Chinese-owned transport companies also fear moving food because their trucks might be ransacked. A recent decree that punishes hoarding has also become a pretext for unscrupulous local authorities to pressure and extort money from warehouse owners and traders. Thus the breakdown in food distribution only starts with importers whose letters of credit are being ignored by trade partners. All the way down the supply line, vital pieces have gone missing.

Inflation has forced all Indonesians into the same situation -- making things that much more explosive. "Everyone is affected by this crisis," says Faisal Basri, a political economist at the University of Indonesia. He thinks locals can cope with the price rises until the middle of this year, at most, by eating or buying less food.

For poorer folk, "things on the plate are disappearing," says the food-industry executive. So they do without. The middle-class, meanwhile, are hedging against inflation and scarcity by buying food as fast as it appears on supermarket shelves -- in the process fueling the problem. "The supply is there," says Hero's Sondakh. "But the demand is outrageous."

So far, the government is engaged in ad hoc crisis control. Bulog is supposed to continue selling subsidized staples to low-income people until after the People's Consultative Assembly. Authorities have also asked companies to share the pain and sell staples at special bazaars at lower than market prices. Foreign countries, such as Japan, Singapore, Thailand and the Philippines, have pledged aid in the form of food and medicine, debt relief or guarantees on imports. The Suharto administration is also back-pedaling on promises made to the IMF to end Bulog's import and distribution monopolies, though it clearly lacks the cash to continue heavy subsidies.

Dillon suggests one long-term solution: refocus investment in agriculture. The government says it will tax palm oil companies to secure local supplies, instead of imposing a blanket ban on exports. Such reforms need time to work. But the longer the rupiah is low, the faster the food supply and distribution channels crumble. The middle class will hurt, but it will be nothing compared to the pain of lower-income people. Inflation plus scarcity: left unsolved and it is a recipe for disaster.

-- With reporting by Yenni Kwok/Jember and Dewi Loveard/Jakarta


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