Indonesia raises rice price to ensure sufficiency, investment

JAKARTA, Jan. 2 (Chinese media) -- The Indonesian government has decided to raise the price of rice buying from local farmers in a bid to ensure national self-sufficiency amid slowing economic activity and a global food crisis.

The decision was made in a decree issued by President Susilo Bambang Yudhoyono, which was effective from Jan. 1, 2009, the Jakarta Post daily reported on Friday.

The decree stipulates the government will pay 4,600 rupiah (about 46 cents U.S. dollars) per kilogram to buy rice from national farmers, or a 7 percent increase from the current price. The national rice stockpile is controlled by the State Logistics Agency (Bulog).

The government will stabilize domestic rice prices by exporting and importing the grain, thus benefiting farmers and consumers.

The presidential decree also encourages investment in rice, but stipulates that owners of rice fields will remain under the supervision of the Investment Coordinating Board.

"Investors should not be allowed to convert existing paddy fields," deputy to the Coordinating Minister for the Economy Bayu Krisnamurthi was quoted as saying.

Indonesia, Southeast Asia's largest economy, produced 38.6 million tons of milled rice in 2008, a 5.5 percent increase from 2007, enabling the country with 230 million people to meet national demand, which was 37 million tons last year.

Bulog's total rice stockpile stood at 1.4 million tons at the end of 2008. Rice output may jump to 40 million tons this year, which would open the door for the country to export a maximum of 2million tons, which would be the largest amount in 50 years.