Agriculture Reference
In-Depth Information
management that had strong leadership and effective organizational command
to implement the policy.
However, as the Indonesian economic policy shifted toward more open-
ness, adopting deregulation policies in international trade, banking, and fi-
nance, the closed and centralized management system within BULOG started
losing its effectiveness and acceptability. From the early 1990s, its performance
attracted increasing criticism. The pressures on openness and democracy dur-
ing the later part of the Suharto regime raised concern for reforms in the
bureaucratic structure of the public administration. (Mellor et al. 2003). The sta-
bilization policy became very expensive, given its declining impact on food
prices, as the share of rice in consumer-spending fell significantly.
The objective of this chapter is to examine the success and failure of
BULOG in implementing rice price stabilization in Indonesia. The chapter ad-
dresses the agency's legacy in the past three decades, focusing on its involvement
in food and agricultural trading activities that protected farmers and consumers
significantly. It explores how a changing environment in the economy and poli-
tics of the country, as well as dynamics in international trade relations, affected
Indonesia's food security and recovery at large. The changing organizational for-
mat of BULOG raises the serious challenge of clearly defining the balance be-
tween the commercial function and public responsibility as a stabilizing agent.
This reform process should provide important lessons for future reform options
for BULOG and for food marketing paratastals in other developing countries.
BULOG's Legacy over the Past Three Decades
During the first two decades of its operation, BULOG had been widely cited as
a success story in stabilizing rice and other food prices. The agency established
a legacy as a powerful and effective public institution contributing to the achieve-
ment of political stability. This stabilization strategy was effective primarily be-
cause the support systems for production, distribution, and marketing were fa-
cilitated by the national government. As this power and privilege turned into a
centralistic, monopolistic food stabilization strategy, it gradually got infected
with inefficiency and corruption; and with that came increasing pressure from
the donors and civil society to transform BULOG into a more transparent and
accountable agency. The objective of this section is to examine the contrasting
evidence of BULOG's roles in stabilizing prices, ensuring food security, and
contributing to the country's agricultural and economic development. I will
compare and contrast the first 20 years of success with the troubling experiences
of the most recent decade.
BULOG's Formation and Successful Years
The creation of BULOG as a food marketing parastatal was one of the key com-
ponents of government intervention in agricultural and rural development of In-
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