Discussion of Indonesian National Report : A Socio-economic and Policy Analysis of the Roles of Agriculture in Indonesia

Motivation…  Synthesis report rich in policies  Entry point to discuss policy issues beyond Indonesia  Danger: trivialize or over-simplify synthesis report

A country in the cross-roads of agricultural transformation Some basic features  Rapid Growth in GDP  Rapid industrialization and a declining share of agriculture  Integration in international financial markets  Relative openness  Remarkable progress in poverty reduction and reduction in undernourishment

Indonesia GDP, Agriculture and Population Undernourishment Sources:* World Bank-WDI 2002, ** FAOSTAT, *** SOFI-FAO 2002

Poverty Rates in Indonesia Economy, Period Fall in Poverty Rates Change in poverty due to growth Change in poverty due to changes in inequality Residual Indonesia, Indonesia, Indonesia, Source: Everyone’s Miracle?, Ahuja et al., 1997 Note: A positive figure is a reduction in the poverty rate; a negative figure is an increase. Source: Adapted from the World Bank

Poverty Rates in Indonesia Period Period Fall in Poverty Rates Change in poverty due to growth Change in poverty due to changes in inequality Residual Source: Everyone’s Miracle?, Ahuja et al., 1997 Note: A positive figure is a reduction in the poverty rate; a negative figure is an increase. Source: Adapted from the World Bank

Big Role of Agriculture  High share of labour force in agriculture  Rural poverty predominant  Rural labour force largely unprepared for the transition  Evidence that agricultural growth has a bigger effect on poverty reduction  The historical role of agriculture in national and household food security ….cont…

.. a lot going on in Ag’s favour… …cont… …cont…  Perceptions in population that farming is important as a way of life, social cohesion, safety net.  Self sufficiency supported by active policy has deep roots  (“..domestic agriculture, especially paddy farming cannot be substituted.. ( p. 6)  Agriculture can be of benefit to the environment (smallholder rice)  Agriculture has not played a large buffer role in times of crisis  World rice prices are distorted downwards

In the light of all this…the report proposes…  Extremely important to keep the rice sector going in the foreseeable future.  Drastically reduce the scope of land conversion to non-agricultural uses (p. 13)  Continue fertilizer subsidies  Continue strict import controls for rice  Continue active price policy in favour of the rice sector  “ Adjust the level of imports according to local need ”

…more….  Establish a special credit scheme for agriculture  Imrove incentives through infrastructure, information, institutions.  Promote industry with priority to “linkages” industry ( agro-related).

Points for Discussion  Need more perspective in both the role of agriculture and policy recommendations.  Population trends ( urban/rural)  Global food availability trends  Potential role of international trade  Changes in diets and food systems ( distribution, processing, retail)  Need to consider alternative “adjustment paths ” including” exit strategies” for small farmers.

Indonesia: Population Forecasts Population Total (1000)237,711261,897282,851 Rural (1000)116,725108,891102,782 % Rural

Individual Modules   The poverty module is technically well- substantiated but only one aspect