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Indonesian Conglomerates and the State Logistics Board (Bulog)

  • Date Submitted: 01/28/2010 06:16 AM
  • Flesch-Kincaid Score: 38.1 
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The price of rice

Bulog had to feed Indonesia, pacify farmers, and support Suharto’s industrialisation policy. What will happen to it now?

Jeremy P Mulholland & Ken Thomas

  Bulog, the national logistics board that controls the supply of rice and other basic commodities, has as many enemies as it does friends. Some praise it for maintaining rice supplies in difficult circumstances while keeping the price down. Others (including the IMF) criticise it for monopolistic practices. Some argue that Article 33 of the Constitution obliges the state to control the supply of basic commodities. But it has been undeniably corrupt in performing its functions.

Established on 11 May 1967, Bulog forms an important part of the New Order’s economic history. Industrialisation was the Procrustean bed of all policy in that period, particularly from the early ‘80s. To promote industry, the government aimed to increase rice production while keeping prices low for consumers so they would not demand higher wages. To stimulate production, the government improved infrastructure, especially irrigation.

Initially, the agency’s primary function was to purchase basic commodities for public servants and the military. From 1970 it was required to control the price and distribution of basic staples, especially rice and flour, important to social stability. Bulog was not alone in making rice policy. The other principal actors included the National Planning Board (Bappenas), the Co-ordinating Minister for Economics, Finance and Industry (Ekuin), the Minister of Finance, and the Minister of Agriculture. In the background stood the President, who had the final say.

Bulog had to stabilise the price of rice for both producers and consumers. It did this by setting a ceiling price for the benefit of consumers, and a floor price for producers. As far as consumers were concerned it was necessary to have adequate...


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