Comments on “The Performance of The Indonesian Agriculture Sector by Prof Anne Booth”

1. Comments on “The Performance of The Indonesian Agriculture Sector by Prof Anne Booth” By Parulian Hutagaol, Departement of Economics, Faculty of Economics and Management IPB

2. 1. Introduction (1) • Prof Booth has made great effort to discuss the Indonesian agricultural sector’ s performance from the early era of the Suharto until recent time. • I find the discussion quite illuminate. • Yet, I am quite surprised that she have spent no much effort to discuss performance of rice self- sufficienciency program, except to point out the extent of growth rate of production rice • This is rather peculiar, given the fact the program has been a key program in the agricultural/rural development since 1969

3. 1. Introduction (2) • In addition, it has, since the beginning, attracted criticisms from various segments of Indonesia and international community (scholars, politicians, NGOs , etc) for its remarkable impact, not only on rice production, but also on other social, economic and environment spheres • I think discussion about performances of the Indonesian agricultural sector would be not adequte if not taking into account these criticisms.

4. 1. Introduction (3) • Nevertheless, my attention is not to fill this gap. • Rather, I wish to draw more attention and effort to discuss the last question that Prof Booth has thrown up (“What of the future?”) by extending the identified issues. • Accordingly, I would like to extent on the issue of prospect of food self sufficiency in Indonesia • The government has recently reemphasized the importance of achievement of rice self- sufficiency for Indonesia and promise to produce surplus of 10 million tons in the very near future

5. 2. Is it realistic and appropriate to continue to pursue rice self-sufficiency ? • There are some reasons to conclude that rice self sufficiency no longer realistic and appropriate for Indonesia • It is more appropriate for Indonesia to pursue food diversification for food security. • This is not only due to presence of technical and financial constraints for raising production, but also due other factors, notably poverty and global food market dynamism

6. 3. Technical and financial constraints for raising rice production? • For self-sufficiency, annually Indonesia needs extra production of about 0.5 million tons of rice. • Some constraints to increase production • Rapid declining supply of rice land and water, notably in rice growing areas not only in Java, but also outside • Very slow rate of production technology by farmers • Degradation in irrigation system • Lack of financial capacity to maintain and extend irrigation system • Trends of global climate making agricultural production process become riskier

7. 4. High Poverty Level as Another Factor Making Rice Self Sufficiency Not Appropriate for Indonesia (1) • Around 30 millions Indonesians living below poverty line. • These poor people have a very limited purchasing power and that makes them become very vulnerable to any food price fluctuation • Pursuing rice self sufficiency means Indonesians becoming relying only on rice supply for feeding themselves. • Presence of constraints for raising production implies the domestic rice market is very prone to price fluctuatioan

8. 4. High Poverty Level as Another Factor Making Rice Self Sufficiency Not Appropriate for Indonesia (2) • Thus, the pursuing of rice self sufficiency is against the interest of the Indonesian poor. • Harship imposes by increase of rice price to the poor is often exaggrated by the fact that alternative food often not much available at local market. This is because production of food is focused much more on rice. • This is the reason why news paper often report occurence of hunger in poor communities when the price of rice gets high

9. 5. Global Food Market Dynamism as Another Factor Making Rice Self Sufficiency Not Appropriate for Indonesia (1) • Over the last decade, there has been a tendency of price fluctuation to worsen in the international market for food and that makes the prices become less and less predictable. • This tendency is due to a variety of factors of which global climate change, convertion of food to biofuel dictated by trend of the international oil price, and speculative activities in the food future market are of significant

10. 5. Global Food Market Dynamism as Another Factor Making Rice Self Sufficiency Not Appropriate for Indonesia (2) • Such trend of international food price votality makes it become not appropriate to put Indonesians to rely heavely on a single food (rice) for their household consumption. • The fact that the domestic production of rice is highly prone to risk of failure makes effect of the international price volatility can be very damaging to Indonesians, especially the poor

11. 6. Diversified food, not rice self sufficiency for the national food security • One may conclude that for Indonesia the rice self sufficiency is not an appropriate way for building sustainable food security. • Continuing to pursue rice self sufficiency would be dangerous for Indonesia. • Accordingly, multi-staple food self-sufficiency strategy is a much more effective way to realize sustainable food security in this country

12. 7. Further on benefits of multi-food self sufficiency strategy (1) • Foundation for this strategy is multi-food crops agriculture (farming). • This strategy gives farmers the freedom to make farming decision in choosing types of food crop that they want to farm. • Meanwhile, government supports be allocated not only for rice, but other food crops. This will provide good environment for famers in employing a multi-food-crop farming strategy

13. 7. Further on benefits of multi-food self sufficiency strategy (2) • Diversification of food crops on farm level be beneficial for the farmers, especially the poor ones: • It will minimize the risk of production and market failure • It will maximize use of more abundant family resource, such as family labor • All these will increase income of the farmers; hence reduce poverty

14. 7. Further on benefits of multi-food self sufficiency strategy (3) • At the national level, this new strategy will make Indonesia to have a more secured supply of food from domestic production. • This, in turn, will make Indonesia better able to cope with the trend of price instability in the international food market

15. 7. Further on benefits of multi-food self sufficiency strategy (3) • Diversification of food consumption makes average Indonesian consumers more able to protect themselve from unfriendly food market trends. It allows them to employ food substitution strategy when facing situasion where price of particular foods gets high, while the food others’ price are not. • Thus, the national food security will be well maintained even when prices of food in the international market get soared

16. 8. On the issue of Indonesians’ rigid preference for rice consumption (1) • This issue does not appear hold true. Generally, Indonesians eat not only rice, but other foods. Often they eat cassava, corns and tuber in various form of cooked food. • This implies that, in general, they do not mind to take secondary food crops, other than rice, for their staple food. • What does hold true is the fact that secondary food crops’ contribution in Indonesians’ staple food is much less than that of rice food crop

17. 8. On the issue of Indonesians’ rigid preference for rice consumption (2) • Thus, the relevant question is why do Indonesians eat much more rice than other food made up from secondary food crops? • I think this is because of rice self-sufficiency program which makes rice become available at cheap price everywhere and everytime. • In other words, this program has made rice become relatively cheaper than non-rice food and also make rice become more convenience choice of staple food for consumers.

18. 8. On the issue of Indonesians’ rigid preference for rice consumption (3) • Therefore, to reduce Indonesians’ dependence on rice for food consumption is not impossible to exercise as commonly argued . • This would require only a simple strategy. Stop implementing the rice self-sufficiency program. • This is not to say to stop rice production. Rice production must continue, but let farmers deciding whether to plant rice or other food crops.

19. 8. On the issue of Indonesians’ rigid preference for rice consumption (4) • In addition, the government should make rice production become an integral part of the national food diversification program. • Government supports for rice and other food crops production should be designed such that so as to achieve sustainable food security in which the role of rice is relatively balanced with that of non-rice food.

20. 9. On the issue of close linkage of rice food and politics Indonesia (1) • It is widely believed that rice shortage at national wide could lead to political disaster. • The fact that rice shortage problem had been part of social political problems leading to the overthrown the Sukarno government in mid-1960s had been claimed as unquestionable evident to support this faith. • But, such a faith on the close link between rice shortage can be persistent only if the society has rigid pereference for rice consumption.

21. 9. On the issue of close linkage of rice food and politics Indonesia (2) • As discussed above, such rigid preference for rice consumption does not really exist in Indonesia. • It is also doubtful to take the case of politic turmoil in which rice shortage was only a part in the late years of the Sukarno regime as unquestionable evident for the existence of a close link between rice shortage and politic problem in this country

22. 9. On the issue of close linkage of rice food and politic problem Indonesia (3) • Rice shortage was only one out of many problems that occured in this era. • However, it is not yet clear how much rice problem had contributed to the political turmoil that caused the Sukarno regime to fall. • We should not presume answer to this question. Research should be conducted if we want to find out it.

23. 10. Rent seeking as motivating factor for implementing rice self-sufficiency program (1) • Annually, the government pour a huge resource for implementing this program. • For instance, for fertilizer subsidy alone the government spends annually sum of more than Rp15 thrillon. • Despite the expenditure of such huge subsidy for fertilizers for rice production, farmers are often reported by news papers to have difficulty to obtain fertilizers for their rice. So, where have the subsidized fertilizers gone ?

24. 10. Rent seeking as motivating factor for implementing rice self-sufficiency program (2) • Despite this fact of missing subsidized fertilizers, it is reported that the national rice production has increased as expected. • This is really surprising. If farmers can increase rice production without government subsidy, why the government must spend a huge budget for the fertilizers subsidy? • Would this not imply that groups other than the rice farmers have manipulated the rice self-sufficiency program for their own benefits?

25. 10. Rent seeking as motivating factor for implementing rice self-sufficiency program (3) • Fertilizers subsidization is only one of many avenues for rent seeking activities in rice production in this country. • Development and maintenance of irrigation system as well as importation of rice are only a few more of the arenas for the exploitation of rent from this program.

26. 10. Rent seeking as motivating factor for implementing rice self-sufficiency program (4) • The possibility of exploiting huge rent from this program must have made these groups to be strongly motivated to depend this program. • Therefore, the wide persistence of myths about rigid preference for rice consumption and strong linkage of rice problem with politics may have been the result of these groups’ effort.

27. 11. Closing Remarks (1) • In pursuing sustainable national food security, implementing food diversification program is the best way for Indonesia • However, making its implementation effective would require Indonesia to abandon its long standing rice self sufficiency program. • Conventional arguments depending this long-standing program of rice self sufficiency are not really tenable.

28. 11. Closing Remarks (2) • The possibility of exploiting huge rent from this program makes the rent seekers to have motivated to work hard to depend it. • Therefore, their existence must be a standing block for the implementation of food diversification program in this country. • This is the real challenge for implementing this new program, not the so-called rigid taste for rice consumption

29. Thank You