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Thursday, January 15, 1998 Published at 11:56 GMT



Despatches
image: [ BBC Economics correspondent James Morgan ]James Morgan
BBC Business

One of the key items agreed between the IMF and Indonesia was the decision to break up the national clove monopoly which has been controlled by President Suharto's son, Tommy, since it was established seven years ago. Our economics correspondent James Morgan reports on the significance of this move:

The first impression of Indonesia is the pervasive smell of cloves. The country's smokers consume the local variety known as keretek, clove-flavoured cigarettes which became popular when the Dutch tried to establish a global monopoly in the spice and brought it to their Far Eastern possessions.

Until recently however the cloves were imported from Zanzibar because of their superior quality. But local production has increased and today 80,000 tons a year are grown at home.

All of this has had to be sold to the Clove Suport and Trading Board under the control of the president's son, Tommy.

This monopoly was, said its members, designed to increase the welfare of the farmers.

The farmers did in fact receive more than the world price but the main result was a doubling of the price paid by cigarette manufacturers thereby increasing the welfare of the Suharto family.

The profits might total about 300 million dollars a year. Ending the clove monopoly therefore strikes at the very heart of Indonesia's system of Asian values.





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