Agriculture Reference
In-Depth Information
In public policy debates on stabilization strategies, BULOG was very ef-
fective in gaining support from academics in Indonesian universities on the im-
portance of state intervention on food affairs for the country. One example of
this support was acceptance of the “big country” argument, which was used to
justify state control, including monopoly, over international trade. The under-
lying idea was that, because Indonesia's share in total world trade was large, its
trading and distribution could affect the world market of rice, which has tradi-
tionally been very thin and volatile. To substantiate such arguments, several stud-
ies were conducted over the years. A recent government estimate suggests that
each additional ton of rice import could increase the world price of rice by as
much as US$50 per ton (Silitonga et al. 1997) 1 . Support for a price stabiliza-
tion program in Indonesia also came from the analysis of internationally re-
puted economists.
Troubled Years
Table 6.1 presents production and import volumes of rice since 1990, provid-
ing insights into the troubled years of the first half of the 1990s, the period of
uncertainty during the economic crisis at the end of the 1990s, and the transi-
tional period of policy reforms in the early twenty-first century.
Two contrasting events—a year of surplus and a year of large deficits—
contributed to the beginning of troubled years for BULOG as a price stabiliza-
tion agency. The first event was when the country had a surplus in 1992/93 that
was reduced by subsidizing exports, resulting in a large increase in BULOG's
costs, which raised serious questions about its long-term role in the rice econ-
omy. The cost of rice price stabilization increased significantly compared to its
benefits.
The second event started during 1993/94, when rice production faced a se-
rious decline because of a bad drought. The price level of rice had to be stabi-
lized by imports of rice from the international market. The adaptation of a “self-
sufficiency on trend” approach that the country pursued suceeded only partially
in reducing the total costs of price stabilization. BULOG acted cautiously by
importing 3 million tons of rice in 1995, even though rice production in that
year was almost back to normal. This new dependence on rice imports provided
a serious threat to enforcing food policy for the country, especially in the eyes
of common people, who were accustomed to viewing BULOG as the responsi-
ble agency for rice price stabilization.
In retospect, the period between the late 1980s and early 1990s marked a
transition in the performance of Indonesian agriculture. The agricultural GDP
grew only by 3.4 percent per year in 1986-1997, as the agricultural sector de-
clined among the government's priorities. Agriculture became to be considered
1. Some recent studies, however, argue that the world rice markets have matured, in terms
of size and reduced volatility and are likely to stay that way (Dawe 2004).
Search WWH ::




Custom Search