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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

A SYSTEM THAT FAILS

Smuggling, trade and everything in between

By Jose Manuel Tesoro / Manado


Map The Hunger Zone

MANAJIL "ROGER" D. SALAHUDDIN THINKS of himself as a small-timer. He has been bringing cheap goods from Indonesia to the southern Philippines for just over five months. The amount of dollars he spends for his purchases often hovers in the high three figures, at most a thousand. He does not fly to Manado from Mindanao's main city of Davao. What he saves by taking the crowded, hot, day-and-a-half boat trip from his home in General Santos city to the capital of Indonesia's prosperous province of North Sulawesi goes toward padding his admittedly meager profit. "We earn any way we can," he says. His room at the Celebes Hotel in the shabby port district is still empty. But at some point during his stay (he averages about a week), it will fill up with sacks of the clothes, shoes, sandals and sheets Indonesia's steep devaluation have made far cheaper in Manado than in Manila.

Many Indonesians consider Salahuddin and other Filipino traders, called viajeros, a threat to Indonesia's economic security. For a while, police monitored the often-dim, dormitory-like hotels they frequented. Authorities threatened to raid their rooms or the nearby buildings that, though built on Indonesian soil, bore signs reading "bodega," meaning "warehouse" in Filipino. Newspapers accused the viajeros of hiding rice, flour, sugar, cooking oil, kerosene - which Indonesians consider sembako, part of the nine basic goods mostly subsidized by the government - in the sacks and packages they would ship through Indonesia's slippery sea border with the Philippines. The North Sulawesi chamber of commerce formed a fact-finding team, which reported that up to 10,000 tons of rice had been siphoned away to the Philippines in August through the province's main port of Bitung. On Aug. 17, police arrested and questioned four Filipinos who had bought rice, corn and beans from local merchants.

North Sulawesi has a buoyant economy, based largely on lucrative agricultural commodities such as copra, cloves and nutmeg. At Manado's dark and sprawling Bersehati market, one rice trader says her customers can still afford to be picky with what they eat. They choose tastier grains from Vietnam instead of the cheapest rice provided by the regional arm of the government's food distribution agency, which goes by the acronym Bulog and held a monopoly during the Suharto era. The situation in North Sulawesi is not as bad as in Java, where even Bulog rice is priced beyond the reach of many consumers, who are forced to go without food or resort to stealing it. But its relative prosperity does not mean the province is unworried about what has become a national hot-button issue - rising prices and apparent shortages of basic goods and foodstuffs. In fact, it has even more cause to be concerned. Here, smugglers, along with hoarders and corrupt officials, are the main villains in the food crisis. North Sulawesi, along with West Kalimantan bordering Malaysia's Sarawak state, have been labeled the main exit points for rice and other subsidized essential commodities.

"Trade is desired," says Suhendro Boroma, an editor at the Manado Post. "But as long as Indonesia is in the midst of an economic crisis, the export of basic goods is not permitted." Doing so, he says, is equal to committing "economic crime." The day after Independence Day on Aug. 17, his paper printed a "Sumpah Sembako." This "Sembako Pledge" began: "We Indonesians, native and of foreign descent, pledge not to sell sembako to the neighboring country." For weeks, Manado fell into a flurry of sniffing out smugglers and their local conspirators. Bitung's port administrator threatened to revoke the licenses of ships heading to General Santos or Davao if they were caught carrying sembako. The provincial governor met with the Philippine consul-general in Manado to discuss stanching the flow of subsidized goods out of the country.

The export of basic goods across the Celebes Sea is a classic border issue: something that seems criminal on one side of the imaginary line seems innocent on the other. Though the Trade and Industry Ministry in Jakarta had already issued a list of goods banned for export on July 27, the list was not yet publicized in Mindanao, or well-known even in North Sulawesi itself. In mid-August, the chamber of commerce chief, Bungky Frederick, was still demanding the government issue a list of banned goods. "Our brothers are innocent," says trader Salahuddin. "They did not know [sembako trade] was forbidden."

Foreigners are not solely responsible for the leakage of rice. Indonesia's own Bulog officials are implicated. In Jakarta, Bulog said it was flooding the market in August with rice stocks up to twice the capital's regular consumption. But prices kept rising. "If the amount is doubled, that means there should be no difficulty in rice. However, the rice kept disappearing." So says city councilor Djafar Badjeber, who blew the whistle on local Bulog officials diverting stocks to illegal distributors or out of the country. He says that the city police investigated 152 registered rice distributors, who had the right to buy rice at a cheap price from the Jakarta branch of Bulog, and discovered that only 10 met the proper legal conditions. On Sept. 4, Jakarta police caught nine people planning to send 1,900 tons of rice to Kuching in Sarawak. They said they had bought the rice from the Jakarta Bulog branch for 1,800 rupiah a kilo. In Kuching, the rice would fetch 7,000 rupiah a kilo. The case brought down the Jakarta Bulog branch chief, as a similar case in Central Java took down Bulog officials there.

If anything or anyone was ultimately behind the export of goods out of Indonesia, it was market forces. In the case of North Sulawesi, the Philippine peso had devalued half as much against the dollar as the Indonesian rupiah, making goods irresistibly attractive, and subsidized foodstuffs even more so. Between January and August this year, the volume of goods manufactured elsewhere in Indonesia that were shipped out through North Sulawesi's Bitung port jumped by more than 26 times compared with the same period last year. (The flood of toiletries northward led Unilever Philippines to complain to Unilever Indonesia that Unilever goods were competing against themselves in the southern Philippines.)

The smuggling was one of many reasons why, from late July to the end of the August, rice prices rose from being about half of the cost of imported rice to something close to parity. According to Steven Tabor, a U.S. economist advising the government on food issues, another reason was that rice traders were building up stocks in the villages, partly out of a fear there would not be enough rice, partly out of a commercial expectation that prices would rise strongly. Meanwhile, urban traders held very little stock in the cities, fearing confiscation by authorities out to nab "hoarders," or damage by civil disturbances. All these factors, including low rice stocks in May, contributed to the shortages and the subsequent rise in prices. Indonesia, says Tabor, just "could not hold prices that low for that long."

Yet the higher prices have narrowed the differential between rice sold in Indonesia and that sold abroad, drastically reducing the profits possible from rice smuggling. Higher prices have also given farmers an incentive to produce food, holding out the hope that supplies will increase in the future, along with farmers' income. On the urging of the government, fallow land all across the country, including plots in the middle of town and city blocks, is being planted with food crops. In Manado, tall stands of corn shadow parts of main thoroughfares. A harvest in late August has helped bring down rice prices by about 5%. But there are still some 17 million families in the country with incomes too small to feed themselves properly. Jakarta has put together a program to distribute 10 kilos of rice a month to the neediest families, to supplement food they can obtain from relatives or neighbors.

The Philippine consulate in Manado says that the export of foodstuffs has leveled off, except the trade in corn, which is not banned and which is booming. In the long run, the invasion of viajeros in search of cheap food and goods may improve trade between Indonesia and the Philippines. For example, Filipino traders have discovered how much cheaper ginger is in Indonesia, and now bring kilos over, sometimes all the way from Surabaya in Java. Such is the Crisis, pushing neighbors together as much as it pulls them apart.


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