ICC REVEALS POTENTIAL PROBLEMS IN THE IMPORTATION OF SALTS.
The Indonesia Competition Commission (ICC) has revealed that there are at least 3 (three) potential problems in the current policy on importation of salts that may lead to the control of salt supply by certain importers. For that reason, ICC asks the Government to oblige the submission of data on the use of imported salts by salt importers to the Government. The purpose is so that the Government may monitor the relationship of the realization of the imports of industrial salt and its uses for industrial purposes, so as to ensure that imports are conducted for industrial purposes and preventing the entry of industrial salts in the smallholders’ salt market.
It is a well-known fact that the Government has decided to increase the import of industrial salts to 3 million tons, from the projected 4.6 million tons of demand. Such importation may not be indeed avoided, because the quality of smallholders’ salt production is not yet capable of meeting the quality of industrial needs. The problem is that the import of industrial salts is conducted in the midst of the availability of a significant national salt stock, namely above 1 million tons. In the meantime, the newly issued policy, namely Government Regulation (PP) Number 27 Year 2021 regarding the Administration of the Maritime Affairs and Fisheries Field, specifically Article 291 provides for that salt importers must prioritize the absorption of salts produced by salt farmers available in the national salt warehouses and/or warehouses of smallholders’ salts to satisfy domestic needs.
Currently, the import of salts for industrial purposes uses a per importer quota model. This is prone to lead to the control of the salt supply in the market by limited business actors. This policy may spur supernormal profits through the sales of industrial salts to edible salts along with the high price difference between the two.
ICC records that there are at least three potential problems in the policy on the importation of salts. First, there is a potential for the unused imported industrial salts to enter the edible salt market, as a result of the errors in estimating the needs for import. It is a well-known fact that the current annual national salt demand is approximately 4.6 million tons, with almost 84% or 3.9 million tons of which derives from industrial salt needs and only around 7% is for household needs. The local stock of salts is about 1.3 million tons. The analysis conducted by the Government of the projected economic growth and processing industry sector in 2021 shows an estimate of 2.49-3.01, it is still below the 2019 growth level of 3.8. Therefore, the possibility of the sectors that are in need of industrial salts the most (CAP and various foods) will also grow below that of 2019. Hence, if the need for salt imports in the sector is 2.5 million tons (2019) with a growth of 3.8 in the processing sector, then the need for imported industrial salts in 2021 will not reach 3 million tons. Consequently, the need for industrial salts in 2021 is not as much as that in 2019 and has the potential to be overestimated.
The second problem is the realized importation which might not be fully achieved. Importers conduct importation in accordance with the earmarked quota as set by the Government for internal needs. Based on the data, the realized imports conducted as of April 2021 has reached 412 thousand tons or 19.67% of the total recommendations issued amounting to 2.1 million tons. If calculated on the basis of the allocated imports of 3 million, then the realized imports as of April only reached 13.38%. If compared to that of last year, the realized salt imports reached 1.8 million tons. Therefore, there is a potential for imports that are not carried out or carried out, but not used as earmarked for industrial salts.
The third problem is the weak post-importation supervision. At the moment, there is no mechanism for monitoring the use of imported salts by importers. Therefore, it is possible that there will be remaining stock of imported salts not used by the industry and has the potential to enter the smallholders’ salt market, especially given the high price disparity. The potential for the entry of excessive imported salts into the smallholders’ salt market will be even larger if the importers do not report the use and distribution of imported salts to the Government. Such potential is increasingly larger if the importers do not use the salts in their production process, but rather they act as importers to meet the salt needs for other industries domestically.
For that reason, ICC is of the view that the Government needs to supervise industries using imported salts as well as salt importers themselves by specifically obligating the submission of data on the use of imported salts to the Government. The government also needs to improve the mechanism for appointing importers in order to ensure that the stocks of imported salts in significant portions do not fall into the control of certain groups. In addition to the above, ICC also recommends that the Government should prioritize the absorption of the existing stocks of smallholders’ salts for the domestic market and ensure that the stocks of imported salts are used in accordance with the earmarked plan in the beginning of the year and there should be no spillover into the smallholders’ salt market in accordance with the mandate of Government Regulation Number 27 Year 2021.