* New "super body" to be established within three years
* Critics fear investment may be hit; consumers to pay
* New food hoarding rules may affect commodity traders
By Michael Taylor
JAKARTA, Nov 20 Indonesia has drafted a food law
to speed self-sufficiency efforts by creating a new "super body"
that could lead to greater curbs on imports and exports of
staples, hinder much-needed overseas investment and eventually
push up prices.
As Indonesia struggles to meet rising demand from an
increasingly affluent population of 240 million, it is now the
world's top importer of sugar, Asia's largest buyer of wheat,
and imports about 2 million tonnes of rice and corn each year.
A copy of the law seen by Reuters, which is due to be signed
off by the president by the end of 2012, shows that it covers
areas such as food safety and the stocks, trade, purchase,
prices, distribution and consumption of unspecified staples.
"In the new law we stress food sovereignty and autonomy,"
said Achmad Suryana, head of the Food Security Agency at the
country's agriculture ministry, adding that it gave priority to
securing adequate food supplies from domestic sources.
"So, food import would be secondary or even the last
resort," he said.
Consolidating many existing curbs on food items, such as
import limits and tariffs to protect domestic farmers, the new
law provides for the new body to be created within three years.
It will aim to help the government achieve self-sufficiency
in staple foods such as rice, soybeans, sugar, beef and corn.
The new law puts domestic output and demand and the control
of imports and exports at the heart of its efforts, which will
finalise the expanded role of state procurement agency Bulog
into the "super body".
As with recent changes to the country's mining laws,
however, the framework of the food law leaves many details to be
filled in or drafted later, making unclear its precise impact on
Global agribusinesses called for greater clarity on the
details of the new food body, since its objectives can be
interpreted in different ways and are opaque.
GREATER RESTRICTIONS FEARED
Critics say the new law could lead to more limits and
trading curbs on the free flow of farm commodities, hinder
overseas firms looking to invest to supply growing demand in the
archipelago and ultimately, hurt the poorest consumers.
"It is a misguided pursuit of autarky in agriculture which
misses vast opportunities for efficiency and competitiveness in
the sector," said independent analyst Kevin O'Rourke.
"I've read that the idea is to incorporate two, three of
maybe four bodies into this new super body," he added.
"Everything depends on how the president interprets the law and
guides the new food agency."
The law could also hinder food processing industries, which
have been promoted in Indonesia in recent years, he added, as
they scramble for access to the cheapest raw materials.
Major food importers include U.S. giant Cargill for soybeans
and Singapore's Wilmar for sugar.
The new law also prohibits "hoarding or storing staple
food", a clause that may create greater risk and uncertainty for
commodity traders who stockpile, traders and analysts said.
Agriculture contributes around 15 percent to the GDP of
Indonesia, Southeast Asia's largest economy, employing about 42
million people of a growing population of roughly 240 million.
As wealth levels rise and consumer tastes change and grows,
Indonesia has attempted to vary its food basket beyond rice,
while expanding and boosting yields in its home-grown
commodities with limited success.
The law is one of a series of policy announcements this
year, such as that on mining, which analysts say are linked to
increasing economic nationalism ahead of Indonesia's
presidential elections in 2014.
"The new food law provides vast scope for state involvement
throughout the agricultural sector," said O'Rourke. "It aims to
ensure adequate supplies of affordable food, but by pursuing
this through autarky, it risks accomplishing the opposite. You
can have autarky or affordability, but you can't have both."
BULOG TO GROW
After the worst U.S. drought in 56 years drove global prices
of soybean and corn to all-time highs this year,
Indonesia said it would extend the role of Bulog beyond rice to
build bigger stockpiles of beef, corn, sugar and soybean.
Last month, Bulog sounded out U.S. government officials
about securing soybean imports.
Bulog's current role is to maintain rice supplies and stocks
of between 1.5 million and 2 million tonnes, but its wider remit
could see it protect domestic farmers by setting minimum prices,
while consumers would benefit from a maximum price ceiling.
Although Indonesia sets import curbs and tariffs on
commodities, it often scraps them when global prices spike.
In the past year, food producers have protested against
soybean and corn import taxes, while farmers demonstrated
against plans to import more sugar. Beef prices doubled because
of cuts to import quotas.
The government, which is considering a wheat flour import
tariff to protect domestic mills, also had its food policies
criticised last month in a report by the OECD grouping of the
world's top economies.
"The moment you start having entities that control what can
be imported and exported in what amounts, you drive up food
inflation," said an executive at a major international
agriculture firm, who asked not to be identified.