Agriculture Reference
In-Depth Information
This report, which was published in late October in the World Bank's an-
nual Review of Asian Economies, caused a firestorm of protest in Indonesia. One
cartoon in Kompas, the country's leading newspaper, showed a combine har-
vesting small farmers—the combine was labeled “World Bank.” Even normally
level-headed academics decried the World Bank's analysis, claiming it ignored
many local “realities.”
Those realities, it turns out, were the total politicization of the issue of food
security and the capture of the debate by a shrill group of NGOs and organiza-
tions ostensibly speaking on behalf of small rice farmers. Anyone attempting
to bring facts and data to the debate—that showed, for example, that two-thirds
of rice farmers were net purchasers of rice over the course of a year—was vil-
ified in the press. The Minister of Agriculture aggressively defended his claim
that there were millions of tons of surplus rice in the country just waiting for
someone to buy it. And he promised a massive increase in the rice harvest due
to start in February 2007, so there was still no need to import rice (beyond the
210,000 tons imported as an “emergency measure” to replenish BULOG's
stocks in October, a decision that had intensified the food security debate).
Lost in the recent debates has been any clear recognition that food secu-
rity is primarily an economic issue, one for which a substantial analytical and
empirical literature exists, for Indonesia and in general. 13 The universal con-
clusion from this literature is that only good economic policies can ensure food
security on a sustainable basis for both the country as a whole and the millions
of households individually. From this economic perspective, the food security
“time bomb” in Indonesia's future—referred to in an article in the Jakarta Post
on May 4, 2002—is not potential reliance on rice imports. Instead, the time
bomb is poverty and the failure to restructure Indonesia's economy in a way
that stimulates rapid growth of productivity in both rural and urban areas, lead-
ing to higher incomes.
Indonesia's rice economy is now mid-way in a painful transition. It started
as a sector heavily regulated by a centralized Ministry of Agriculture and sta-
bilized by a well-financed food logistics agency (BULOG). It needs to become
an open, market-oriented sector that depends on farmer and consumer deci-
sionmaking to allocate resources efficiently. The transition has stalled, however,
because the large gap between domestic and world prices that emerged during
the financial crisis in 1997 and which had narrowed between late 1998 and
2004, has widened again since then. Thus, Indonesia's rice prices remain sub-
stantially above world prices—in contrast to the long-run parity seen from the
mid-1970s to the mid-1990s. This is not a market-oriented rice economy.
The key question at this juncture is how to complete the transition to such
a rice economy while recognizing the constraints on policy initiatives that face
13. This general literature is reviewed in Timmer (2000, 2005), and in the Indonesian con-
text in Timmer (1994).
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