Earlier this month, I was invited by the Jakarta city government to speak about Indonesia’s food trade issues. When I asked what made garlic so expensive, the answer came quick and easy: COVID-19. Ninety percent of Indonesia’s garlic comes from China and since China was in lockdown, supplies dried up. Most Indonesians would have given the same answer, but that does not make it correct.
The real cause lies in Indonesia’s import restrictions. Indonesian importers need to obtain a government ‘Recommendation for Imports of Horticulture Products’ (RIPH). This document will only be issued if an importer has planted five percent of the needed garlic on Indonesian soil. The problem: importers ain’t farmers. Well, they can cooperate with local farmers but that does not solve the other problem: Garlic needs cold weather and grows well in cold climates. Tropical Indonesia has no cold season so it comes as no surprise that importers fail to plant their five percent. They lose their import license, they start a new company, apply for a new license, fail again, and so the game continues with identical players who have come to understand the rules.
Profit margins are enormous. Chinese garlic costs usually Rp7,200 per kilogram and is sold in Indonesia for Rp26,600/kg. Right now, Indonesian retail prices are at staggering Rp 75,000/kg. China may have raised their wholesale prices during COVID-19, but the prospect of windfall profits keeps established importers from diversifying their sources. It works as long as the licensing system is restrictive enough to keep other importers and garlic from other countries out of the market.
Garlic illustrates the case made by the Center for Indonesian Policy Studies (CIPS): import restrictions harm Indonesian consumers. Other food items are equally scarce and expensive. When sugar became scarce earlier this month, consumers and small businesses were burdened with unaffordable sugar prices. Onions cost about 10 USD per kilo. CIPS is tracking food prices in a monthly index (see infographics) and compares them to neighboring countries. I