Fears over proposed rice monopoly

Business, Normal
Source:

The National, Friday 06th January 2012

RICE, the staple food in urban centres, is expected to become the most expensive food item in the country if an Indonesian businesswoman wins a 20-year monopoly to supply the grain food, according to PNG’s long time rice supplier Trukai Industries Ltd.
Eleana Tjandranegara is sole owner of a company called Naima Agro-Industry Ltd, which has proposed to the national government to become the sole supplier of rice to PNG by growing it in Central province.
In recent months, she had promoted the project by visiting the Mekeo/Bereina and other areas with ministers Sir Puka Temu (Agriculture) and Ano Pala (Foreign Affairs and Immigration) to gain the support of the villagers.
Land for the project will be acquired through the controversial special agriculture and business lease, which was now a subject of a Commission of Inquiry.
The National newspaper had obtained a copy of the proposed project agreement called “Central Province commercial rice project”, which revealed that Naima was seeking tariff protection of between 60% and 100%.
The duty would not apply to Naima if it were to import rice and distribute it in PNG.
Trukai’s managing director Marc Denovan spoke out for the first time yesterday since the grand scheme was first published by The National last year.
He said if the agreement went ahead, the retail price of rice was likely to increase to as much as K7 per kilogram.
Average retail price now was about K3/kg.
However, The National understands that many business and community leaders are concerned that the agreement in its current form places the financial interests of Naima ahead of the rice consuming population of PNG.
According to independent analysis of the agreement between Naima and the government, the following would be true if the agreement went ahead:
nThe normal market price of rice to increase by up to 100%.
nOne company, Naima, will have complete control of the PNG rice industry, giving it a monopoly for the next 20 years and beyond.
nNaima is exclusively permitted to import and distribute rice in PNG without tariffs, whilst other importers will have to pay a large tariff – between 60% and 100%.
nThese tariffs will make it impossible for other rice companies to compete, putting thousands of PNG jobs at risk.
nLand will be acquired by Naima for rice production, but there is no obligation for the company to grow rice in the short term and in fact the land can be used for any activities as decided by Naima.
nNaima is granted exclusive tax breaks for its company tax, its shareholders and its foreign employees.
The proposed rice project with Naima came just two months after Trukai Industries reduced its prices by 18%, with further reductions possible as world supply continued to improve and the kina strengthened against other currencies.
Denovan told The National: “We know how important rice is to the people of PNG and we believe prices need to be kept down, so that all Papua New Guineans are better off.
“We support any project that develops and expands PNG’s rice industry and Trukai have been working under agreements with the government to expand local production for a number of years.
“However, we are very disappointed that this draft agreement with Naima includes high tariff protections and an exclusivity clause that will certainly increase the price of rice.
 “Any development of the rice industry should be open to all the people of PNG without the planned extreme protections and monopoly.
“If the current draft is approved, it could force all current industry growers, manufactures and distributors out of the market.”
Trukai directly employs more than 1,000 Papua New Guineans and contributes K150 million to the PNG Government and economy every year.