» Business

Regional policies behind inflation spike: Indonesian minister

Publication Date : 22-05-2014


Heads of regional administrations have been blamed for the mismatch in food supply throughout the Indonesian archipelago as some policies at provincial level have created difficulties for the central government in its efforts to control nationwide inflation.

“I have a problem now, some provinces do not want their food to be shipped outside of their own areas,” Trade Minister Muhammad Lutfi said on Wednesday during the National Coordination Meeting of Regional Inflation Control Teams, jointly held by government officials and Bank Indonesia (BI) in Jakarta.

Although regional leaders knew that their respective provinces could not absorb the food supply, they still opted to hoard the commodities, leading to shortages in other areas that eventually led to a spike in prices, the minister explained.

“For example, we have an excess supply of sugar in Java but it cannot get out [of the island] while other areas such as West Kalimantan have a shortage of supply,” Lutfi said.

“From the trade ministry’s perspective, the solution is easy: if we cannot get the foodstuffs out [of some areas], then let’s just import them from overseas. I don’t mind that,” he stated.

Lutfi expressed his frustration at the fact that the trade ministry was always blamed for fluctuations in food prices.

When speaking in the meeting, Lutfi introduced himself as “the minister who is always wrong” as he was in the spotlight when there was a spike in food prices, but also took the blame from local producers when the prices fell too low due to his import policies.

The trade ministry has come in for criticism for its policy of restricting food imports.

Last year, the move contributed to inflation in the prices of government-controlled commodities and food products, which soared to 16.7 per cent and 11.8 per cent, respectively, well above the headline inflation of 8.4 per cent.

Lutfi’s criticism of the poor coordination between provinces, which contributed to food supply mismatches throughout the archipelago, was nevertheless shared by other regional leaders attending the meeting.

Among the examples was Jakarta Governor Joko “Jokowi” Widodo, who said that he was shocked during a visit to South Sulawesi as he found that the province had a 2.6-million-ton surplus of rice, while the capital suffered a major shortage of the commodity.

“My visit to [the province of] Lampung also revealed that the area had excess supply of fruit and vegetables,” Jokowi said.

“My concern here is that if the problem is not resolved, then we may have to rely on imports, when in actual fact we could get the commodities, such as rice, from South Sulawesi,” he added.

Meanwhile, President Susilo Bambang Yudhoyono said that regional leaders must carefully monitor inflation, instructing them to refrain from introducing policies and regulations that could cause upward pressure on inflation.

“You must be careful when implementing policies. Realising that the government had recently hiked fuel prices, you all still ended up hiking toll prices, electricity prices, regional taxes — that shows that you don’t understand [the country’s inflation problems],” the President told the regional leaders.


Mobile Apps Newsletters ANN on You Tube