* Anti-graft agency gives rice scheme deadline to fix flaws
* Says will launch probe if $1.7 bln scheme not fixed
* A probe would disrupt plans to expand state food buying
* President-elect has promised cleaner, more-efficient govt
By Michael Taylor and Kanupriya Kapoor
JAKARTA, Aug 29 Indonesia's powerful anti-graft
agency will launch a probe into the nation's subsidised rice
scheme unless major flaws are fixed, threatening moves to expand
the role of the state food buying agency into other staples such
as corn, beef and sugar.
With nearly a third of the rice estimated to go missing and
allegations of some rotting before it gets to poor families, the
future of the scheme and the wider issue of food security will
be an early policy test for president-elect Joko Widodo.
Widodo has promised cleaner, more efficient government when
he takes office in October and along with fixing dysfunctional
state bodies also faces tough economic decisions such as whether
to rein in fuel subsidies that have blown out the budget.
After a year-long review, the anti-graft agency (KPK) had
given the state food buying agency, Bulog, which manages the
scheme, until December to fix problems or it will launch a
full-scale probe, said KPK investigator, Roni Dwi Susanto.
A probe by KPK into Bulog's flagship rice scheme, which is
known as RASKIN and has an annual budget of about $1.7 billion,
could disrupt plans to give the agency broader power over more
commodities in the major food importer.
That would be welcome news for private traders such as
Cargill, Olam International and Wilmar
International, which would otherwise face greater
competition from an expanded Bulog.
As Indonesia's population has risen to more than 240
million, RASKIN has become one of the world's biggest rice
subsidy programmes. It said it distributed about 3.7 million
tonnes of the grain last year to about 16 million families.
Bulog Chief Executive Sutarto Alimoeso conceded that as much
as 30 percent of RASKIN rice went missing, but said the agency
had taken steps to improve the situation such as introducing
identity cards for recipients and punishment for traders who
repurchase subsidised rice.
"Bulog is now transparent," said Alimoeso, whose five-year
term is drawing to a close, but may remain CEO if reappointed by
the new president.
Investigator Susanto said the KPK has recommended RASKIN be
either stopped or revamped after it found mismanagement, and has
said it will investigate corruption allegations if no action is
taken to address the problems before December.
The KPK alleged that some families who received rice re-sold
to traders for up to five times the subsidised price, with the
grain then sold back into the programme. Others received less
than their entitlement.
When rice reached families, it was often blackened and
weevil-infested, KPK investigators said.
Transforming Bulog into a bigger body to help manage food
inflation and boost self-sufficiency was still a matter of
discussion for the next government.
"Bulog may be better if integrated with other government
food agencies to form a strong body that handles food issues
from A to Z," said Arif Budimanta, a food security adviser to
RASKIN was introduced more than 10 years ago after the Asian
financial crisis, with Bulog tasked with purchasing rice from
local farmers or overseas and then distributing it at a reduced
cost to the poor.
Bulog, an Indonesian abbreviation for State Logistics
Agency, was launched as a non-profit government agency in 1967
under late autocratic president Suharto to buy basic commodities
for the military.
The agency's food monopolies were mostly phased out under
IMF loan conditions during the Asian financial crisis, but from
2000 onwards governments have introduced more protectionist
policies and it was made a state-owned enterprise in 2003.
Some economists also said Bulog's role should not be
extended until the rice programme was operating well.
"The main rationale for RASKIN is to get rice to poor people
who can't afford it, at cheaper prices," said David Dawe, senior
economist at the U.N.'s Food and Agriculture Organisation in
"It is pretty widely acknowledged by Indonesian researchers
that (RASKIN) is not delivering that very effectively."
(1 US dollar = 11,713.0000 rupiah)
(Additional reporting by Dennys Kapa and Yayat Supriatna;
Editing by Ed Davies)