Grainne Mccarthy and Kate Linebaugh, Jakarta – Just when Indonesia's Badan Urusan Logistik Nasional (Bulog) was being praised for operating multi-million dollar open tenders for the purchase of food commodities, the government fired its chairman in a move which could send the agency back to its corrupt ways, according to traders.

The government replaced Beddu Amang – long-time Bulog insider and its chairman for the past three years – with trade and industry minister Rahardi Ramelan. Beddu said he would be retained as an "expert" in the office of Senior Economics Minister Ginandjar Kartasasmita. Rahardi will be backed up by food minister AM Saefuddin and cooperatives minister Adi Sasono.

The government didn't explain the move, although sources in Jakarta say Beddu's ouster came partly because he is perceived as being linked with the corrupt Bulog of the past, but more likely because his moves to open up food purchases to international tender stepped on the wrong ministerial toes.

Traders also said failed negotiations over a 400,000 metric ton portion of Indonesia's purchase of Thai rice, were indirectly linked with Beddu's removal. "Frankly, Beddu for all his unpopularity in the past, wasn't the right guy for Bulog, but in the last month he has done some great things," said one rice trader in Jakarta. "As far as the trade is concerned, we're not happy about his replacement. Before you know it, (Bulog) may go back to the old style."

H.S. Dillon, Jakarta-based executive director of the Center for Agricultural Policy Studies, agreed. "The major problem now, I fear, with what they are doing is that the trade will construe this government has no clear policy," he said. "This is going backwards."

Long associated with corruption, Bulog was often held up as the prime example of all that was bad about Indonesia under former president Suharto. It was widely criticized for awarding lucrative import and distribution rights to Suharto's associates – in particular the Salim Group of ethnic-Chinese billionaire tycoon Liem Sioe Liong.

Under the International Monetary Fund's bail-out package in January, Bulog's monopoly on the import and distribution of essential goods was removed. But under the most recent revision in June, the IMF and the government admitted that Bulog still controlled much of the trade, and that opening it up to the private sector was more difficult than anticipated.

Bulog's short-lifeline drove the government's decision, according to minister Adi. "Bulog's role will be reduced over time as an open market system becomes more effective," he told reporters, noting the agency will be consolidated under the trade ministry. Recently the agency, under Beddu's leadership, has undergone massive reforms, holding international open tenders for the purchases of sugar, wheat and soybeans. Such tenders were unheard of under former president Suharto.

Commodities sources in Jakarta say this very policy has irked some government officials, keen to direct the buy tenders into Indonesian hands. The sources say this very policy will damage the trade. "One thing about Bulog people is they might be corrupt, but they know the market; now Rahardi wants to run this so he can give contracts to his own people," one person close to Bulog said. Rahardi didn't comment on the decision, or take questions from reporters.

Another rice trader said some members of the cabinet were eager to channel rice imports through a favored Indonesian businessman. "(The businessman) is trying to take the place Salim had in the past saying 'Salim milked the system for so long, let us have something as well'," the trader said.

Another knowledgeable agricultural expert, who didn't want to be named, agreed. "It's very much a part of that," he said. "We know that Suharto was deciding on who would be the importers and all that, Beddu was trying to have a situation where they didn't have to buy from Indonesian importers."

Having worked with the agency for some 25 years, Beddu clearly benefited from the old way of doing business. He made light of his removal from Bulog Wednesday, saying a rice tender – originally set for Wednesday – had been postponed due to high international market prices and not due to the fact that he was to lose his position.

In any case, whatever behind the scenes political wrangling may be going on, the Bulog development comes at a time when Indonesia least needs an upheaval in its food distribution channels. Although the government has insisted it only needs to import 3.1 million tons of rice this year to meet the shortfall in domestic supply, traders and analysts say this is far too optimistic. Many say the country will have to import closer to 4.5 million tons.

Despite the fact that this year's rice crop looked promising – particularly compared with last year's – traders said output is extremely low. And rice prices are rising domestically. As Indonesia grapples with its worst economic crisis in 30 years, increases in prices for essential commodities – particularly rice – are highly sensitive.