Agriculture Reference
In-Depth Information
heavily on rice imports for its food security, including taking the lead in form-
ing a free-trade zone for rice in East and Southeast Asia (possibly to include
Bangladesh and India). Substantial investments in rural infrastructure to im-
prove efficiency of rice marketing would be needed so that traders and farmers
would buy and store nearly all of the harvest. Continued development of rural
capital markets would also be needed to ensure that the financial liquidity tra-
ditionally provided by BULOG procurement in defense of the floor price would
be available from the formal banking system at reasonable rates to farmers and
traders (Timmer 1997).
Greater variability in seasonal prices would be permitted, so that these
farmers and traders could earn adequate returns on their investments. Such vari-
ability would not be a problem for most consumers, because rice has declined
to a small and manageable share of their budget expenditures. In the case of
large increases in rice prices in world markets (much less likely with a large
Asian free-trade zone) or localized shortages, subsidies to poor consumers could
be targeted through special logistical efforts.
15
Variable tariffs on rice imports
were also discussed as a mechanism for stabilizing rice prices in Indonesia
without the need for a costly logistical agency.
These discussions about improving the efficiency of the rice economy
were put on hold during the financial crisis, but there is substantial merit to the
market-oriented rice economy seen at the end of this transition. It remains a
highly desirable goal, both for its effect on efficiency in the agricultural sector
and the sustainability of the country's food security. But there are also sub-
stantial political barriers in the way of this outcome.
One worrisome element in the current policy debate has been the small de-
gree of understanding about how the previous rice price policy was designed
and implemented as the core component of the country's approach to food se-
curity, what its true costs were (and how fast they were rising because of cor-
ruption and loss of focus at BULOG), and what the implications might be for
price stabilization if BULOG (already converted into a commercially oriented
state enterprise) is given monopoly control over rice imports. Thus, the politi-
cal discussions were being conducted in a near vacuum of institutional mem-
ory and experience with earlier policy design and implementation.
That vacuum was released in early December in a series of press briefings
and seminars that were presented on the topic of the future of food policy in In-
donesia (Timmer n.d.; Hudiono 2006). In the short run, the press and academic
commentators began to accept the economic rationale for immediate imports to
15. BULOG had already experimented with such a program during the drought in 1991—
the pilot activity was called “Special Market Operations” (OPK, discussed earlier). This also be-
came the name of a similar program used during the financial crisis to target cheap rice to poor con-
sumers, still with BULOG as the implementing agency, a program that has evolved into the poorly
targeted and expensive RASKIN program of rice distribution to the poor.
