Price Cartels Exploiting Poor Governance

Rabu, 11 September 2013 | 09:52


The government’s poor management of commodities has caused loopholes that have resulted in the creation of cartels among several groups looking to control the market, an official from the national anti corruption agency said.“Bad management is evident in aspects such as poorly functioning animal slaughterhouses, inaccurate data on beef supplies and even transportation,” Corruption Eradication Commission (KPK) deputy chief Zulkarnain said on Monday.

Zulkarnain said the KPK was further assessing the situation across many industries to identify possible negligence or wrongdoing by major stakeholders.

“Results from the study will expose weaknesses and subsequently offer constructive feedback for the related institutions and will ultimately be for the good of the people,” he said.

Beef scandals

A KPK study published in February pointed to irregularities in the beef production industry when it found that the country produced enough meat to satisfy domestic demand without having to resort to imports.

The study also found that policies surrounding the industry’s trade system had failed to side with Indonesian livestock farmers and pointed to cartel practicesdirectly resulting in increased beef prices.

According to KPK deputy chairman Busyro Muqoddas, the country’s livestock farmers are able to fulfill the national demand for beef.

According to Busyro, there are indications that a certain group of people may have been trying to control the beef industry for their personal benefit by preventing the distribution of beef from various regions across the country into Jakarta, subsequently forcing imports to meet the capital’s demand.

The beef import industry, Busyro said, was also prone to being controlled by certain political parties due to its high potential for profit.

Following the study, the KPK urged the government to focus on resolving the beef importation issue as well as other food security issues by strengthening beef farmers’ associations, revitalizing livestock markets and optimizing regional governments’ involvement in managing trade.

The KPK also suggested investment in better transportation facilities to ease the distribution of cattle as well as improving importation policies to make them more transparent.

The Business Competition Supervisory Commission (KPPU) separately confirmed indications of ongoing cartel practices in the beef industry.

“This is an old issue that surfaced long ago. [The KPPU] is currently looking into it, but we already have strong evidence. So in about a month and a half we can make this an official case,” said KPPU Commissioner Munrokhim Misanam, as quoted by Detik.com.

Hatta Rajasa, coordinating minister for the economy, had earlier asked the KPPU to investigate cartel practices in the industry as beef prices remained high despite the government importing thousands of head of cattle ready to be slaughtered.

Soybeans

A similar issue has been identified within the national soybean supply, as the KPPU and Indonesian Chamber of Commerce and Industry (Kadin) started investigating the soaring price of the commodity in a meeting with numerous ministries and institutions last week.

According Munrokhim, several large soybean importers from a total of 22 in the country are allegedly involved in cartel practices.

“There are some big ones such as FKS [FKS Multi Agro] and Cargill [Cargill Indonesia]. For these big ones, it is indirectly shown that they are moving towards amonopoly,” he said, as quoted by news portal Tempo.co.

However, Munrokhim was at pains to emphasize that such issues were still officially only allegations and that the KPPU was still in the process of investigating it.

Munrokhim did add that examples of the monopoly include importing goods leading to prohibitive losses for otheri mporters as well as controlling commodities to achieve excessively high prices.

He said such practices could lead to importers facing legal sanctions.

The KPPU will continue investigating and reviewing the situation to gather all relevant evidence prior to drawing our conclusions of cartel practices and their impact on prices.

In its meeting last week, the KPPU said it had found initial indicators that could lead to an unraveling of the cartels, namely differences in supply data submitted by several ministries as well as soybean importers and producers.

“The reported [stock] data was not the same, raising questions. For instance, if police find different answers from several individuals, of course it would indicate foul play,” Murokhim said.

In the wake of the recent major hike in soybean prices, tofu and tempeh sellers under the Indonesian Association for Cooperatives of Tempeh and Tofu Producers (Gakoptindo) agreed to halt sales of the staple for many Indonesians in a three-day strike as they call on the government to stabilize soybean prices.

Mixed strike

Among areas that have seen the sudden disappearance of tofu and tempeh sellers is the famous traditional Beringharjo market in Yogyakarta in East Java, which saw prices for imported and local soybeans increasing from Rp 9,000 to Rp 9,500 (81 to 85 cents) per kilogram.

“Today they [tofu and tempeh sellers] are not selling. They said they will not be selling for three days until Wednesday,” said Heri, a vendor at the market whose shop is located beside a tempeh and tofu seller named Yanto.

“On Sunday, Yanto was still selling tempeh and tofu. Today, many people also came looking for tempeh and tofu as they were unaware of the sellers’ strike,” he said.

Sartini, a vegetable seller at Beringharjo, also confirmed the strike as her neighbor Abdul Rohman, another tempeh and tofu seller, told her he would not be selling until Wednesday.

“Many people were disappointed to find no tempeh and tofu,” she said.

“The seller did not give any information. They were still selling yesterday, so it also came as a surprise for us to find they have gone on a strike.”

But in Malang, East Java, sellers have continued producing and selling tempeh despite the strike as they rely on the soybean waste water to feed their cattle.

“If we don’t produce tempeh, what would my cattle eat? It’s hard to find grass around here and we will have to pay a large sum of money to buy [grass] from others,” Yono, a tempeh seller, said on Monday.

“There will be plenty of losses if I participate in the strike. I have four workers, six cattle and many customers in the market as well as makers of tempeh crackers who need tempeh,” he said.

Yono admitted that the rising prices forced him to cut down the size of the tempeh blocks he sold as well as lessening his use of soybeans to 450 kilograms from the usual of between 470 and 500 kilograms.

He has also increased his prices from Rp 12,000 to Rp 13,000 per pack.

“The prices of soybeans before Idul Fitri was about Rp 7,250 per kilogram, but today it’s Rp 9,100 per kilogram. It goes up by Rp 100 every day. If it keeps on increasing, then I will have to do the same.”

Yogyakarta Mayor Haryadi Suyuti said he would be working with related parties to find the best solution in response to the increasing soybean prices that have taken a toll on tempeh and tofu producers.

Gakoptindo chairman Aip Syarifudin said the strike began over the weekend when tofu and tempeh makers decided not to produce their goods.

“The production of tofu and tempeh takes around three days, so the absence of tempeh today means they have stopped production since Friday,” Aip said, as quoted by Merdeka.com.

According to Aip there are approximately 115,000 tempeh and tofu sellers across Indonesia.

“Maybe not all of them have gone on a strike, but about 99 percent have ceased production,” he said.

By SP/Novianti Setuningsih & Dyah Ayu Pitaloka
source http://www.thejakartaglobe.com/