INDONESIA

 

Asin other developing countries, concerns about food security during the 1980sand early 1990s resulted in policies aimed at achieving self-sufficiency infood crops, especially rice. Indonesia combined price intervention and economic incentives through subsidizedinputs, investment in irrigation, and rice marketing activities in the outerislands to encourage agricultural production, especially of staple crops.  Since then, there has been phasing outof input subsidies for pesticides. Fertilizer subsidies, the largest input subsidy, were eliminated in1998, but reinstated in 2003.

 

Agriculturaltrade in Indonesia has been heavily regulated by tariffs, import licensing,export taxes and bans, and informal export quotas.  To encourage domestic processing industries, export taxeswere levied on primary products to subsidize inputs to the processingsector.  Processed agriculturalproducts had import restrictions. Some reforms were undertaken in the mid-1980swhich reduced some import tariff rates, lowered ceilings on tariff rates, andraised the number of import items with low tariff rates. In spite of thereforms, domestically produced products corresponding to 54% of domesticproduction remain on the Restricted Goods List.  Import monopoly for most of these commodities is throughstate trading companies.  Under theAssociation of Southeast Asian Nations (ASEAN) Free Trade Agreement, Indonesia has reducedtariffs for all products included in its original commitment (7,206 tarifflines) to 5% or less for products of at least 65% ASEAN origin, but maintainsrice and sugar in the sensitive list, exempted from tariff reduction.

 

Corn

        The Ministry ofAgriculture initiated a subsidized seed program for corn in 2006 on up to 3,000MT (118 thousand bu) of hybrid corn seed.

        To assist the localstarch industries, import duties on corn and cassava starch are 10%.

 

Cotton

        Imports of cotton,textiles, and textile products can only be done by Registered Importers andProducer Importers.  The importedcotton must be used as a raw material to produce finished textile products andnot be sold directly to market.

 

Rice

        The GovernmentPurchasing Price (guaranteed) is $0.19/kg ($8.62/cwt).  The government monopoly purchasesexcess production for price stabilization, emergency conditions, post-disasterfood security situations, and to fulfill the ASEAN rice reserve agreement.  The Ministry of Agriculture alsopurchases paddy rice from farmers to prevent the price from falling under thegovernment purchasing price.

        The government ofIndonesia subsidizes seed and fertilizer (Rp 3 trillion or about $350 millionin 2006).

   Sanitary and phytosanitary (SPS)and food quality regulations have led to import restrictions.

 

Soybeans

        The government ofIndonesia announced a 10% import duty on soybeans effective January 1, 2005.

 

Sugar

        The government sets afloor price (Rp. 3,800/kg in 2005/06, about $0.18/lb).

        To control imports, theMinister of Trade grants import licenses for specific quantities of white sugarto four selected importers.

 

Wheat

        The Indonesiangovernment has anti-dumping import duties on wheat from India and China of11.44% and 9.50%, respectively. The normal import duty is 0% on wheat and 5% onwheat flour.