REFILE-Indonesia to link soybean imports to domestic buys -govt official

Fri Mar 22, 2013 7:04am EDT

* New food law causing confusion in soybean industry

* Keep to current structure, says major trader

* Indonesia currently battling garlic and onion shortage

JAKARTA, March 22 (Reuters) - Indonesia aims to link traders' imports of soybeans to the volume of the oilseed they buy at home, an industry ministry official said on Friday, as the country moves to protect domestic farmers and promote their interests.

Indonesia is struggling to meet ambitious self-sufficiency targets in many staple foods, while trying to balance the interests of farmers and consumers, in a country where about half the population lives on less than $2 per day.

Soybean shipments to Indonesia, which meet 70 percent of its annual needs of the oilseed through imports, are likely to rise 3 percent to 1.8 million tonnes this year, say industry groups, and major buyers include FKS Multiagro, Sungai Budi Group and Cargill.

"We will link soybean import permits to the importers who are obliged to buy local soybeans," Faiz Achmad, director of the food and fisheries industry at the industry ministry, told Reuters. "A company that wants to be able to import white soybean has to buy local soybeans."

White soybeans are chiefly used by makers of soybean-based staple foods tofu and tempe.

"There will be no limitation on the number of importers, nor on import volume," he said. "Any company can import soybean as long as it buys local soybeans."

Late last year, Indonesia put in place a new food law that aims to hasten its self-sufficiency targets, but which critics fear could lead instead to greater curbs on imports and exports of staples.

Soybean traders in Southeast Asia's largest economy were confused over aspects of the new food law they saw as hazy, from the timeframe to details left to be filled in later by various government departments over the next three years.

If the government wanted to ensure the cheapest prices for Indonesian soybean consumers, it should keep the current structure and do away with the import tariff, said one influential trader.

"The unintended consequence will be a cartel, less transparency and higher prices than the international market," said the trader, who did not want to be identified because of the sensitivity of the subject. "The government is hell-bent on modifying the current structure."

Floor and ceiling prices for domestic soybeans will be set by the Trade Ministry, Achmad said, adding that a government team to monitor the soybean market would tackle any problems.

Industry groups say the ministry of trade should announce the floor and ceiling prices by April 1.

Indonesia, home to around 240 million people, mostly imports soybean from the United States, and imposes a 5 percent import duty.

Consumption is about 2.5 million to 2.7 million tonnes of soybeans each year, mostly as a protein-rich substitute for costlier meat, with the main soybean harvest in late August.

Indonesia's policies on food and agriculture trade have been criticised by trading partners, including the Organisation for Economic Cooperation and Development.

As it fights rising global food prices, Indonesia has extended the role of state procurement body Bulog beyond rice to help build bigger food stockpiles.

Last month, government advisers urged that food import tariffs replace import quotas, which they said encouraged bribes and price spikes in Indonesia.

President Susilo Bambang Yudhoyono recently urged ministers to do more to tackle inflation in staple foods.

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