There Is No Reasonable Reason To Import Rice Unless It Fulfills The Lust Of Rent-Seeker

JAKARTA - The policy of importing one million tons of rice in 2021 has been rejected by many parties. The import faucet will reportedly be opened to coincide with the main harvest and the national rice stock is in a state of surplus. Some say, this policy which is considered to be able to destroy farmers is due to the actions of rent-seekers. What is that? If so, the question is why the classic problem of rent seeking can still occur?

The Minister of Trade, Muhammad Lutfi, explained that rice imports were carried out because the government's rice reserve (CBP) at Perum Bulog was insufficient. He reminded that currently, the real stock in Bulog is only 500 thousand tons. Ideally, according to Lutfi, we need to add another 1 million tons.

"My calculation is that Bulog's stock does not reach 500 thousand. This is the lowest stock in Bulog's history," Lutfi said in a virtual press conference on Friday, March 19.

But on the other hand, the Minister of Agriculture (Mentan) Syahrul Yasin Limpo, as quoted by CNBCIndonesia, claims that there are additional stocks from the March to April harvest season. Estimated domestic production at this harvest reached 17,511,596 tons.

So that the amount of rice stock until the end of May reached almost 25 million tons. This amount is more than sufficient because the estimated demand is 12,336,041 tonnes. He is sure that the rice stock will be surplus. Practically the rice import policy plan has drawn a lot of criticism.

Minister of Trade, M. Lutfi. (Photo: Doc. Of the Ministry of Trade)

Denial

From East Java, for example, the Governor of East Java, Khofifah Indar Parawansa, said that the rice stock in East Java was sufficient and safe and even had a surplus until the end of May. For that he said that the central government does not need a supply of imported rice.

"East Java does not need imported rice supplies. We can meet food needs and are able to maintain the stability of grain prices at the farm level," said Khofifah, in Surabaya, Monday, March 22.

Based on data from the East Java Agriculture and Food Security Service, rice stocks in the local area will be in surplus until the end of May 2021. This rice surplus in East Java will occur because, until the first semester of East Java's harvest area, the assumption is calculated until April of 974,189 hectares, assuming rice production of 3,053. 994 tons.

Meanwhile, in West Java, Governor Ridwan Kamil also voiced the same thing. He proposed to the central government to postpone rice imports because he thought imports had the potential to lower local rice prices, thus threatening the welfare of farmers, especially in the near future there will be a big harvest.

"West Java's proposal to the central government is better to postpone rice imports," said Emil, Ridwan Kamil's nickname after absorbing the aspirations of farmer representatives in 27 districts/cities virtually at Gedung Sate, Bandung City, quoted from Antara, Wednesday, March 17.

Emil said, imports can be done when the domestic rice stock is in deficit. However, currently, rice stocks are still abundant, especially in West Java which is currently in a surplus condition. "If our position is in a rice crisis, I think imports make sense, but we have a surplus."

According to Emil, he did not want the rice import policy to threaten the welfare of farmers. Therefore, more mature time management is needed regarding rice imports.

Apart from Java, rice production is also reportedly a surplus in Sumatra. For example, West Sumatra and South Sumatra.

Caused By Interest-Seeker?

Senior economist at the Institute for Development of Economics and Finance (Indef), Faisal Basri, agrees that currently, Indonesia's national rice stock is in a surplus position. However, this surplus is considered to be due more to the decline in domestic rice consumption.

"From the information that I have the same rice production, there is a tendency to continue to rise even though the rise is sloping. Then consumption continues to fall," he said in a webinar entitled Reformulation of Rice Policy, Monday (22/3).

Faisal Basri revealed that the decline in national rice consumption itself was caused by two factors. First, the government's success in implementing a rice food diversification program.

Second, the number of middle-class groups continues to grow. According to him, this affects public awareness to consume food sources with healthier carbohydrates.

Faisal Basri also said that if the reason for importing rice was for stock, it was only the rent-seekers trick. "This is just the justification for rent-seekers, the stock (must be) a lot, so imports. Logically, if we get more advanced, the stock will decrease because the market is running more and more," he said, as quoted by Detik.

He also offended Trade Minister Lutfi and Coordinating Minister for the Economy Airlangga Hartarto, who accused them of manipulating the results of the coordination meeting so that rice was imported.

"This is just Lutfi's doing with Airlangga Hartarto, the one who manipulated the limited coordination meeting (Rakortas). There was no result at the limited coordination meeting (Rakortas) that he was going to import. Why are we stuck discussing this problem? Because we are not discussing the rent-seekers. The already good program is disturbed by the rent-seekers that may enjoy the profits when importing," he said.

The problem of rent-seekers is very classic and has even become a serious study since the 60s. Gordon Tullock, in a publication entitled The Welfare Cost of Tariffs, Monopolies, and Theft, explains the relationship between the granting of monopoly rights to entrepreneurs by the authorities. Tullock then explained about rent-seeker, namely specially licensed entrepreneurs, monopolies, and other facilities from the authorities.

These rent-seekers also often prevent other players from entering the market. From there, the theory of economic rent-seeking was born. In political economy studies, rent-seekers are those who pursue licensing facilities, monopolies, or through transactions with the authorities for business gain. They are anti-competitive.

The rice import trap

This rice import polemic was actually predicted by the Professor of Agricultural Economics at the University of Lampung, Bustanul Arifin. In his book Ekonomi Beras Kontemporer, published last year, Bustanul said that the rice import trap would continue for several years.

"In the next few years, the rice import trap will continue to emerge. Because in essence, the retail price of rice on the international market is much lower than the retail price of rice in the domestic market," he wrote.

Bustanul explained, rice imports, especially medium, still have to be strictly controlled by the state because it can only be carried out by Perum Bulog, and it is decided in a Limited Coordination Meeting (Rakortas) at the Office of the Coordinating Ministry for Economic Affairs. Meanwhile, imports of special and premium rice are actually easier because the private sector is quite free to import, "as long as they get recommendations and permits from technical ministries, particularly the Ministry of Agriculture and the Ministry of Trade."

According to Bustanul, it is not impossible if rice imports will still increase. "This is because the competitiveness of Indonesia's rice economy is very low in the global economic arena."

Root of the problem

In 2018, the Institute for Development of Economics and Finance (INDEF) made a critical study for policymakers so that food import economic rent-seekers could be stopped immediately. In the note, it was explained that one of the factors that made rent-seekers rampant according to INDEF was the low data validity.

The Audit Board's findings related to the management of the food import trade system clearly illustrate the low validity of food data, the lack of coordination and integration of data across inter-ministerial agencies, as well as non-compliance with Standard Operating Procedures (SOPs) and provisions of laws and regulations. Perhaps one example of the lack of data validity is the difference between the data from the Minister of Trade and the Minister of Agriculture.

"All of this has implications for the fertility of rent-seekers in food imports. Triggered by chaotic food data and tantalizing international versus local price disparities, has made rampant rent-seekers able to take advantage of the various gaps that exist," he wrote.

In addition, according to the study, the instability of food prices also contributed greatly to nourishing the practice of rent-seeking. In fact, if this problem is addressed seriously and comprehensively, it will not only reduce rent-seeking but also contribute to maximizing increased productivity in the country.

"Unfortunately for years, only the controversy over the establishment of import policies among the related technical ministries has surfaced for years," he wrote.

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