January 9, 2013

Indonesia sees Government Purchase Price key to soy self-sufficiency

Indonesia's Trade Minister Gita Wirjawan believes that the Government Purchase Price (HPP) would pave the way toward self-sufficiency in soy as it currently depends on soy imports from the US.

"I think soy self-sufficiency is much more likely than rice or sugar self-sufficiency," he said in a visit to Tempo in South Jakarta, on January 7. The draft for the HPP is scheduled for completion this month.

For this year, the National Logistics Agency has been allocated a budget of IDR1.5 trillion (US$155 million) to stabilise commodity prices. In Gita's calculations, IDR300 billion (US$31 million) will be needed to pay the HPP for soy for six months. "But when I asked permission from the Finance Minister, I was rejected," he said.

Gita says that the policy can be in the form of portion allocation. A company can import soy after purchasing local soy at certain quantities and prices. With regard to the appropriate price range, Gita is reluctant to say the amount that will encourage farmers to plant soy.

Khudori, analyst from the Indonesian Political Economy Association, disagreed with Gita. He believed that HPP for soy should follow the market price fluctuations instead of being fixed. "The roles of the government are to ensure price stability and profits for farmers," he said.