Provinces prepare for market crisis

Oyos Saroso H.N. and Andi Hajramurni , The Jakarta Post , Bandarlampung, Makassar | Wed, 10/22/2008 10:47 AM | The Archipelago

Lampung and South Sulawesi provincial administrations are designing a plan to anticipate ripple effects from the financial crisis in the United States that could have an impact on the commercial sector in the provinces.

"We don't want efforts that we've made to reduce the poverty rate in Lampung to be hampered by the financial crisis in the U.S. We are currently making efforts at improving the well-being of people in 250 villages across Lampung," said Lampung Governor Syamsurya Ryacudu recently.

Lampung Maritime Affairs and Fishery Agency head Untung Sugiyanto urged large-scale shrimp hatcheries engaged in partnerships with shrimp farmers in nucleus-plasma schemes to explain to them clearly and transparently the possibility of negative impacts as a result of the U.S. financial crisis.

"Please avoid a public outcry because this concerns the livelihood of up to 70,000 shrimp farmers," he said.

As of May this year, Lampung's fish and shrimp exports contributed US$162 million. The sector is ranked as the fourth largest contributor for Lampung's total exports.

According to Untung, the fishery companies usually have secured a long-term contract with the buyers.

Large-scale shrimp hatcheries in Lampung apparently are not yet affected by the crisis, such as PT Central Proteina Prima (CP Prima), the biggest windu or giant tiger prawn hatchery in Lampung. The company is currently working with 12,000 shrimp farmers.

"So far the crisis in the U.S. has not effected us although we are the biggest exporter to the U.S. and European countries. So, plasma farmers, who make up our partners, need not be worried," said CP Prima spokesman Fajar Reksoprodjo, on the sidelines of a discussion in response to the provincial administration's proposal to clarify the financial position to plasma farmers.

Lampung is well known for its volume of shrimp exports. In 2007, it exported more than 50,000 tons of shrimp.

Unlike the shrimp farmers, oil palm farmers in Lampung have been hard hit by the plummeting global price of the commodity. A kilogram of oil palm fresh fruit bunch is now priced at below Rp 500, compared to between Rp 1,500 and Rp 2,000 before the crisis.

In Makassar, the South Sulawesi provincial administration is working together with the banking sector to support sectors which would likely be impacted by the global economic crisis, such as the real estate sector.

The administration will also seek new export markets, especially for agricultural and fishery commodities.

In a meeting held at Governor Syahrul Yasin Limpo's residence in Makassar recently and attended by bankers, exporters, construction businessmen and officials from the provincial administration, they concluded that the construction sector has increasingly felt the pinch from the crisis and they were worried that negative impacts could lead to stagnation.

A cacao exporter also expressed the same views. According to head of the South Sulawesi Indonesian Cacao Association Fachrul Halim, the price of the commodity on the international market had dropped since the crisis hit the U.S.

"Last month, the price of cacao was still Rp 25,000 per kg, but now it has dropped to Rp 18,500 per kg. The drop in prices has forced farmers to stockpile, thus posing a threat to cacao exporters," he said.

In response to this point, Governor Syahrul said the administration would make efforts to seek other export markets for the province's commodities.

"We will look at Eastern European and Asian countries for new markets," he said.

Syahrul added commodities, such as cacao, would never lose markets, especially in the U.S. and Europe, because global demand was higher than supply.

Global cacao production stands at 2.5 million tons, while demand can reach 3.5 tons annually.