Agriculture Reference
In-Depth Information
pected to succeed, although procurement prices continue to be announced at the
harvest time around the English New Year.
Transformation from parastatal into private trade in food marketing might
be complemented by a high-quality rural development and a quite rapid pace of
upward diversification from low-value paddy in Java, Bali, and other parts of
western Indonesia to high-value products of horticulture, estate crops, inland fish-
eries, and livestock. Otherwise, increasing production and the yield to maintain
food security in the country can be achieved by expanding the cropping intensity
in the existing irrigated rice system of eastern Indonesia, completing the existing
irrigation system, and expanding irrigation facilities suitable for rice in the tidal
swampland regions. This process poses a real challenge for future studies to ex-
amine the effects of rice prices on the substitution of rice area for horticulture
crops, inland fisheries, and floriculture or tree crops. Empirical evidence on the
effects of low rice prices on crop diversification into low-risk secondary food
crops has to be complemented by a thorough examination on the actual effects of
higher rice prices on the allocation of higher-value agricultural activities.
Finally, lessons learned from the success and failures of BULOG in im-
plementing food policy include that no system works forever, and flexibility is
very important for adjusting to external and internal changes. As the external
environment changes and internal pressures continue, institutions and policies
that used to work properly in the past can become outdated or even dysfunc-
tional. Indonesia shall adjust incrementally to such forces of change, but even-
tually incremental change is not enough. It then becomes necessary for In-
donesia to make a good start for bigger reforms in food policy and improve
institutions involved directly and indirectly in the process—a difficult but es-
sential process. However difficult the changes may be, the status quo is clearly
not an option.
Postscript: The Debate over Food Security in 2006—An Update
on the Role of BULOG
C. Peter Timmer
In late 2006, a remarkable debate took place in Indonesia over the nature of food
security, the role of rice prices in the country's increased poverty levels, and
whether the ban on imports, in place since January 2004, had contributed to the
sharp rise in domestic rice prices. The debate was ignited by a report from the
World Bank (2006) that linked the sharp increase in poverty levels between Feb-
ruary 2005 and February 2006 to the 30 percent real increase in rice prices dur-
ing that period. The report argued that the removal of fuel subsidies in late 2004
had been more than compensated for by the unconditional cash transfers to the
poor, so the culprit was higher rice prices. Because world prices for rice had
been stable in terms of the Indonesian rupiah over that period, the cause of the
sharply higher rice prices was the import ban on rice.
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