The Indonesian agricultural sector Twelve questions and some tentative answers

How fast has output been growing? Over 45 years ( ) growth of output has been estimated at 3.6 per cent per annum. Between 1968 and 1992 growth was 4.8 per cent per annum, fast by international standards Fuglie’s estimates indicate that around half the growth was due to TFP growth

What is driving changes in cultivated area? Cultivated area almost doubled between 1961 and 2006 Considerable growth in irrigated land; in Java and bali this was the result of irrigating land which had been rainfed Rapid growth of land under smallholder treecrops Growth in area controlled by large estates was mainly due to palm oil cultivation

Can output growth continue without serious environmental consequences? Arable land is estimated to account for only about 21 per cent of total land area in Indonesia Much of the rest is forest land, but by the early 21st century it has been estimated that almost 40 million hectares is now in a degraded condition Can this be replanted with treecrops or foodcrops?

How many farm households are there? In 2003, the Agricultural Census reported that there were 25 million farm households but the definition was very wide. 54 per cent were in Java but holdings were small. 75 per cent were under 0.5 hectares Over 45 per cent of all farm households did not cultivate sawah, and six per cent did not cultivate any land at all. Income was from agricultural labour only, or from off-farm sources.

How do farm households earn their income? Valuable data on sourcse of farm household income are given in the income surveys carried out in 1984, 1993 and 2003 Percentage of household income from agricultural sources has been steadily falling In 2003 ther were wide variations across provinces in the percentage of farm household income derived from the farm holding; only 19.6 per cent in DIY and 68 per cent in Papua

How fast have farm incomes been growing? In nominal terms farm incomes increased more than five-fold between 1993 and But we must adjust for rapid inflation over this decade One method is to look at changes in farm incomes relative to changes in the poverty line by province between 1993 and Wide variations between provinces but in Central and East Java and South Sulawesi farm incomes grew more slowly than the poverty lines

Does land ownership determine income status? By the 1980s, there was mounting evidence that households controlling larger holdings were diversifying their sources of income away from agriculture and into non- agricultural activities In 1993 there was a steady tendency for the percentage of household income derived from agriculture to fall as the household income increased.

Have all agricultural households benefited from growth? After more than four decades of robust agricultural growth and considerable growth in off-farm employment opportunities, poverty levels are still high in many parts of rural Indonesia What are the characteristics of the rural poor? Many control only very small parcels of land, although some “landless” households are quite well off if they have managed to diversify into other activities

Is the distribution of land becoming more polarised? Increase in the Gini coefficient of land holdings mainly due to growth in micro holdings SAM data show that even those agricultural households controlling over one hectare of land have on average lower per capita expenditures than all categories of the urban population.

How much government support do farmers receive? During the Suharto era, foodcrop farmers received support via subsidised inputs and free irrigation water Cooperatives established during the 1970s and 1980s were not used by the majority of farmers 2003 Agricultural Census found that 85 per cent of farmers were using their own resources for purchasing inputs; under three per cent received government credit

Why has agrarian reform failed? 1960 legislation based on a “land to the tiller” model but many rural households were not tenants, but farmed very small plots. Impossible to give every household in Java even one hectare of land let alone two (the minimum mentioned in the law). During the Suharto era, the emphasis was on transmigration rather than redistribution, but many in Java still cultivate tiny plots of land

What of the future? The increasing diversity of agricultural production, and the rapid growth of very small holdings pose considerable problems for extension services which currently appear to serve only a small minority of farmers Many of the policies pursued during the Suharto era benefited farmers controlling irrigated land and village officials. What should be put in their place?

Policies must be based on realities Rural poverty the result of a number of economic and demographic factors; no single policy solution will address all aspects of the problem. Need to address the problem of degraded land; community control essential? Conflicts over land should be adjudicated through a special court system?