JAKARTA. Sept 8: The new Indonesian government of President B J Habibie is facing a vital test as rice, the nation's staple food, becomes increasingly unaffordable despite a huge market intervention operation and imports, reports AFP.

"If the government cannot even control rising prices in essential goods, including rice, how can you expect it to be able to tackle things like corruption and cronysim as it has pledged to do?" asked economist Har-toyo Wignyowlyoto.

Hartoyo blamed the price distortion on rice Importers and main distributors, operations which he said remained in the hands of cronies and close associates of former President Suharto.

The money Is there, rice is available here and abroad, the

distribution mechanism is there, so where is the problem? Put some order at the doorway and that will produce some results — but you must have the will and the courage." he said.

Industry sources said rice imports were In the hands of a closed circle of companies controlled by the Suharto family and close associates as well as officials of the national logistic agency. Bulog, who In turn run their own companies.

Although the government forecasts a mere 6.3 per cent drop In unhusked rice production for this year to 46.3 million tonnes and plans to Import 3.1 million tonnes of rice, the price of the commodity has soared to unheard-of heights.

In the year to August rice prices have risen by 183.9 per cent for the cheaper variety and by 159.2 per cent for higher-

scale varieties. The Kpmpas dally said.

"If it depend on a real market mechanism, the price of rice should at the most range between 2.500 and 3.000 rupiah (24 and 28.6 cents) per kilogram and not 5,000 rupiah (47.6 cents) as it is now," Agriculture and Horticulture Minister Soleh Solahuddin said on Friday.

For many farmers, a day’s work would earn about 4,000 rupiah (38 cents).

"This is no longer a market-defined price, there are various elements that are Influencing rice prices, and recent government statements have only compounded the problem," said agro-economist Dibyo Prabowo of the state Gajah Mada University in Yogyakarta.

He spoke of lower production in several regions because of

!>ests and climatic factors, armers and traders hoarding their stocks In the hope of higher prices and the inefficiency of the distribution network.

Food minister A M Saefud-dln has said rice stocks are enough to cover demand in this country of some 202 million people for the next eight months.

But shortages and soaring prices have already sparked looting of rice mills and of stores selling essential goods in East Java last week. Mob Intercepted trucks carrying rice in Lombok island. Rice stocks were stolen and ready-to-har-vest. fields pillaged in other areas.

Prabowo said government forecasts of floods around the end of the year, and its inten- , tion to raise the state-set Bulog

rice-selling price, had prompted farmers and traders to hold stocks in anticipation of shortages and better prices.

Mangara Tambunan, an agro-economlst from the Centre for Economic and Social Studies. said low Bulog rice prices were not only discouraging farmers from planting rice but prompting the speculation and smuggling of rice to neighbouring countries.

Bulog buys rice from farmers to build up a national stock of about 10 to 20 per cent of the national rice supply.

It releases stocks when prices are too high and buys them up when prices are low.

But because of its low floor price, the operations have now failed to yield results.

"Bulog's market operations , should be based on a price above or similar to market prices. At

the lower prices, whatever amount of rice Bulog releases would only be absorbed by speculators and others 'naughty' individuals", Tambunan said.

Saefuddln was, however, quoted by Kompas daily as saying that releasing Bulog stocks at prices closer to market prices was Impossible because of the weak buying power of the people.

"The government's legitimacy is already in doubt and failure to address the root cause of the (rice) problem, that is monopolies and corruption, will only make it worst." Hartoyo said.

Habibie was handed the reins of power by Suharto who resigned on May 21 amidst ris-Ing public protests. His detrac-1 tors say the transfer of power should have gone through the legislature.