Agriculture Reference
In-Depth Information
1996, before trade liberalization. Between 1995 and 1997, rice imports aver-
aged 1.5 million tons per year, but between 1998 and 2001, rice imports averaged
3.3 million tons. Rice imports were highest in 1998 and 1999, and with the re-
sumption of good weather, fell in 2000 and 2001. The amount of rice imports
reached more than 3 million tons in 2002 as a result of flooding and low pro-
ducer prices. In 2003, when rice quality dropped because of a delay in the plant-
ing season and high rainfall in the harvest season, the growing demand for rice
was met by an import of around 2 million tons. In 2006, rice production in-
creased to 54.4 million tons of dried and unhusked rice, and imports declined
to about 1 million tons.
Indonesia faces a serious challenge in formulating its food and agricultural
policy. On one hand, Indonesia would like to comply with regional best prac-
tices to reform its agricultural trade. But on the other hand, Indonesia and other
developing countries are dissatisfied with the high levels of agricultural pro-
tection in industrialized countries.
4
The public suspicion that the IMF is an
agent representing the interests of developed countries has grown significantly,
because the IMF is more concerned about the micro level of domestic policy,
rather than structural adjustment at the macro level. The Indonesian people ob-
serve that IMF concerns have extended to the export ban on logs, sugar liber-
alization, palm oil reforms, and other agricultural commodities. As a result, In-
donesians perceive the IMF as having a hidden agenda of forcing the interests
of developed countries. The IMF has even been accused of representing a new
breed of imperialism for developing countries.
In addition, removal of the fertilizer subsidy to comply with trade liberal-
ization at the peak of the economic crisis was also controversial. On one hand,
Indonesia was willing to remove the ineffective fertilizer subsidy, to reduce the
budget deficit, and to maintain fiscal sustainability, given that the main con-
sumers of cheap fertilizer were not small farmers but large-scale plantations and
agribusinesses. On the other hand, most people in Indonesia were not so eager
to remove subsidies at home once they learned that developed countries were
increasing supports and subsidies for their own producers. Indonesians argued
4. Agricultural subsidies in developed countries, especially among Organisation for Eco-
nomic Co-operation and Development (OECD) members, are now higher than at the end of the
Uruguay Round of WTO talks, in spite of falling commodity prices. This wide variation in the rate
of support and protection across commodities in the OECD countries is an important source of dis-
tortion in global commodity markets (Tabor, Sawit, and Dillon 2002). Gross farm receipts were still
on average 52 percent higher in 2000 than they would have been without any support (OECD 2001).
For 1998-2000 the average percentage of producer subsidy equivalent was nearly 15 percent for
eggs, poultry, and wool, between 40 and 50 percent for wheat, coarse grains and sheep meat, and
more than 50 percent for rice, sugar, and milk. Sugar and milk receive the highest levels of support
in each producing country. Japan, Korea, and the United States provide high levels of support for
rice. In 1998-2000, prices received by OECD producers and paid by consumers were, on average,
over twice the level of world market prices for sugar and milk and about five times higher than the
world market price for rice.
