Wednesday, April 23, 2008

High Rice Price Quiz

We know that:
a. The world rice prices hit the $1,000-a-tonne level for the first time
b. Indonesia’s rice production is estimated to be about 2m tonnes higher than consumption this year thanks to improving yields and an increase in the harvested area.

What can you infer?
Yes, sell the surplus and reap the windfall profit. I heard you said you always want to help rice farmers.

But the rice consumers might suffer, so, you said, we restrict export to tame the inflation. Why didn't you tell me the same story when domestic rice price is high and we wanted to import, but you said no? Let us be consistent, if the poor --and only the poor-- could not afford rice, provide them with the direct money subsidy. Let the middle and high incomes pay the market rate.

You know what, you can not talk about agriculture revitalization --itself a long term plan--, while at the same time propose rice export restriction. After all, you want to sell the agriculture output as many as possible at the price as high as possible, no?

11 comments:

Anymatters said...

does rice product get value added tax?

dendi said...

I think the gov. concerns only short term goals, which is to maintain low price, but the gov. forgets long term goals, which is to increase productivity and to produce more rice. Why? Since election will be held next year in 2009.

dodo said...

mr rizal, I agree that the one who oppose import, but now against the export plan is inconsistent.

however, by saying implicitly that u support the export plan, isn it u're also being incosistent?

(I assume that u agreed to import using the rice consumers argument on rice import case)

thx

rizal said...

Anymatters, I don't know. Do you?

Dendi, if the government does concern on the short term goal, that is low rice price, import would have been done that time. The problem is: policymakers tend to read food security as autarky --and shut international trade as one mean to achieve such food security.

Dodo, I support international trade, that is, both export and import. Let the market work. If the price is too high/low, one should adjust production and substitute consumption. Keeping trade barriers prevents this needed and normal flexibility.

Anymatters said...

if yes, i have a tax-cut approach. if inflation rate is high and rice price increases so high, so the value added tax should be released on domestic rice/rice product price. i think is wiser than government intervens in supply side of global market.

there are poor people desperately need rice but can't afford because of some Asian governments banned or restricted rice exports, causing panic on global markets.

domestic tax and balance of trade should be managed separately and i think in mutually exclusive event. so choose the domestic tax approach.

treespotter said...

totally agreeing with you, the lack of consistency is truly worrying with this gov't.

aren't you guys supposed to be advising them?

Hafiz said...

Refering to Rizal's reply to Dendi which states import should have done the problem, I'd like to point out that not necessarily. With the international prices being higher than Indonesian prices, I don't think import would do the job, unless the Indonesian government is willing to subsidized the imported rice.

On the natural state (free market), there's a tendency for Indonesian rice prices to increase to achieve parity with the international prices.

Hafiz said...

I apologize for the double-post but:

Refering to Rizal's reply to Dendi which states import should have *solved* the problem, I'd like to point out that that's not necessarily so. With the international prices being higher than Indonesian prices, I don't think import would do the job, unless the Indonesian government is willing to subsidized the imported rice. The only real way of lowering the prices in the short run is through subsidy.

On the natural state (free market), there's a tendency for Indonesian rice prices to increase to achieve parity with the international prices.

rizal said...

Hafiz, my reply to Dendi refers to the situation some months ago when many Indonesian pundits, politicians, and government officials, refused to import rice when the domestic price is higher than the international --in defense of rice farmers, and at the cost of rice consumers.

It means to be a hypothetical ironic example for policy inconsistency with unclear objective. Hope it clarifies.

Hafiz said...

Ah, okay then. I apologize for I'm unfamiliar with local scenario. But one thing is clear, protectionists everywhere should be thrown out of the window. =)

rizal said...

Hafiz, if you understand Bahasa Indonesia, you may want to read pieces by your other barrista, Aco, here in Diskusi Ekonomi. You can find the Indonesian story of rice protectionism