food security situation and policy in indonesia
TRANSCRIPT
Center for Agrifood Policy and Agribusiness Studies Padjadjaran University
FOOD SECURITY SITUATION AND POLICY IN INDONESIA
Ronnie S. Natawidjaja Irlan A. Rum
Country Report Content
• Current rice production, utilization and food security situation in Indonesia
• Public policies on rice and food security in Indonesia
• Benefit Cost Analysis on different policy to achieve rice self sufficiency
• Conclusions
• Rice is not just only the main staple or a commodity, it is nationally recognized cultural symbol of prosperity which carried into modern-day
• Lumbung which is the traditional rice barn found in every island and among all ethnic groups, is extensively used as a symbol of guarantee for food security
• From the political economic view, the government felt need to demonstrate its ability to control rice market in order to gain public confident.
The Political Economy Context
Self-sufficiency has become the political objectives
• The argument has gained even stronger support from the Parliament and interest groups following the food price crisis in 2008.
• New Food Law 2012 strongly stated that Food Security in Indonesia has to be based on local food availability and food sovereignty
• Indonesian policy of self-sufficiency has been defined as at least 90% self-sufficient in trend and allows BULOG to import about 10%.
• According to the New Food Law No. 18/2012, Food Security has been defined as a situation when “individual” at all times, have physical, social and economic access to sufficient, diversified, safe and nutritious food that meets his/her dietary needs, food preferences and religious believes for an active and healthy life.
• The law also emphasizes that the food security condition should be developed based on primarily domestic production and the ability to define own food preference (food sovereignty) based on local specific need and resources.
The Food Law 18/2012
• Food security is often misunderstood as “securing (protecting) our food need” rice self sufficiency strategy seen as the only solution to the problem.
• These misunderstanding on definition of food security have been exploited for mainly a political gain. With a population of 230 million, fear of not having enough food and depended to other country is a popular issue
• The self sufficiency on rice has becoming a must for every cabinet The Ministry of Agriculture spent most of its budget for program to improve rice production by all mean possible even if only work temporarily for a short period.
The Main Issue of Food Security
• The objective of the paper is to provide background information and political economic view from the country level perspective.
• We conducted key informant interview with the rice market stakeholders and Food Security in general
• Successfully interviewed 13 key informants all together:
the Chamber of Commerce (Food and Agribusiness Section)
Special staffs to the minister and the director of the Agency for Food Security
The management of BULOG
Large rice trader and modern millers
Farmer leaders
Modern retailers, and
The Food Station which manages the largest Rice Wholesale Market in Indonesia, Cipinang Central Market, Jakarta.
Objective and Research Method
Rice Production in Indonesia
Sources: BPS
8
Year
Area Harvested (000 Ha) Yield (Ton/Ha) Production (000 Ton)
Java Outside
Java National Java
Outside
Java National Java
Outside
Java National
2000 5,754 6,040 11,794 4.09 2.95 3.52 29,120 22,779 51,899
2001 5,701 5,789 11,490 4.86 3.29 4.08 28,312 22,148 50,461
2002 5,608 5,913 11,521 4.92 3.32 4.12 28,608 22,882 51,490
2003 5,376 6,112 11,488 5.01 3.56 4.28 28,167 23,970 52,138
2004 5,714 6,209 11,923 5.08 3.60 4.34 29,636 24,453 54,088
2005 5,708 6,131 11,839 5.08 3.60 4.34 29,764 24,387 54,151
2006 5,704 6,083 11,786 5.25 3.86 4.56 29,961 24,494 54,455
2007 5,671 6,477 12,148 5.37 4.12 4.75 30,466 26,691 57,157
2008 5,742 6,585 12,327 5.63 4.25 4.94 32,347 27,979 60,326
2009 6,066 6,777 12,843 5.68 4.33 5.01 34,483 29,358 63,840
2010 6,358 6,895 13,253 5.58 4.13 5.01 36,374 30,095 66,469
Rice Utilization in Indonesia
Sources: BPS, MOA
9
Year Household Consumption (000 Ton) Feed & Waste Seed Processing
Java Outside Java National (000 Ton) (000 Ton) (000 Ton)
2000 18,153 12,652 30,805 3,218 329 0
2001 17,070 11,975 29,045 3,105 307 15
2002 17,387 12,278 29,665 2,673 290 203
2003 17,607 12,516 30,123 2,709 291 206
2004 17,643 12,625 30,268 2,783 315 207
2005 18,235 13,135 31,370 2,864 408 214
2006 18,283 13,255 31,538 2,876 358 23
2007 19,294 14,080 33,374 3,027 445 65
2008 20,297 14,910 35,207 3,195 427 65
2009 20,277 14,994 35,271 3,408 454 69
2010 21,376 16,034 37,410 3,399 513 60
Rice Production and Consumption in Indonesia (Milled Rice)
MilionTonnes
25
30
35
40
45
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Consumption Production
Averages Food Expenditures per Capita by Food Items (percent of total expenditure)
Sources: BPS,
11
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
1999 2002 2003 2004 2005 2006 2007 2008 2009 2010
Rice
Prepared food
Miscellaneous food items
Spices
Oil and Fats
Oil and Fats
Fruits
Vegetables
Eggs & Milk
Meat
Fish
Tubers
Tobacco and betel
Monthly Rice Production in Indonesia 2004-2008 (Thousand Tons)
Sources: BPS,
Peak of the 1st Harvest
Peak of the 2nd Harvest
Rice Import and Export
Sources: BPS, Bulog, MOA
13
Year Rice Imports
(000 Ton)
Rice Export
(000 Ton)
Net
(000 Ton)
2000 1,354 1 -1,353
2001 637 4 -633
2002 1,786 4 -1,782
2003 1,425 1 -1,424
2004 236 2 -234
2005 189 43 -146
2006 438 1 -437
2007 1,405 2 -1,403
2008 286 1 -285
2009 450 0 -450
2010 686 0 -868
Indonesia Rice Import Million Tones
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Rice Value Chain in Indonesia
15
Source: Natawidjaja et.al, 2009
Rice Value Chain: Cost, Value Add, and Margin
Source: The rice value chain analysis was calculated based on primary data collected in October 2010 directly from farmers and various actors on the chain starting from Subang District, the main production center of West Java North Coastal area to the market center of Jakarta area.
16
No. Chain Actor and Activities Traditional Channel Modern Chanel
Medium Premium Premium
IDR Share IDR Share IDR Share
I FARMER 62.9% 55.0% 45.9%
Total Cost 1,451 61.5% 1,467 60.7% 1,467 55.3%
Profit Margin (Value Add) 2,200 64.0% 2,660 52.3% 2,660 41.9%
Selling Price 3,651 4,127 4,127
II LOCAL COLLECTOR 2.7% 2.1% 1.8%
Total Cost 142 6.0% 142 5.9% 142 5.3%
Profit Margin (Value Add) 17 0.5% 17 0.3% 17 0.3%
Selling Price 3,810 4,286 4,286
III LARGE RICE MILLER 20.5% 29.5% 27.9%
Total Cost 436 18.5% 475 19.7% 523 19.7%
Profit Margin (Value Add) 754 21.9% 1,739 34.2% 1,991 31.4%
Selling Price 5,000 6,500 6,800
IV RICE WHOLESALER/DISTRIBUTOR 1.7% 2.7%
Total Cost 26 1.1% 26 1.1%
Profit Margin (Value Add) 74 2.1% 174 3.4%
Selling Price 5,100 6,700
V RICE AGENT AT CONSUMER AREA 5.2% 4.0%
Total Cost 67 2.8% 67 2.8%
Profit Margin (Value Add) 233 6.8% 233 4.6%
Selling Price 5,400 7,000
VI RETAIL KIOSK/TRAD. RETAIL MARKET 6.9% 6.7%
Total Cost 240 10.2% 240 9.9%
Profit Margin (Value Add) 160 4.7% 260 5.1%
Selling Price 5,800 7,500
VII SUPERMARKET/MODERN RETAILER 24.4%
Total Cost 520 19.6%
Profit Margin (Value Add) 1,680 26.5%
Selling Price 9,000
FINAL CONSUMER PRICE 5,800 7,500 9,000
TOTAL COST 2,362 100.0% 2,416 100.0% 2,651 100.0%
TOTAL VALUE ADD 3,438 100.0% 5,084 100.0% 6,349 100.0%
Province with Highest Poverty Level in Indonesia 2009
Source: BPS
17
Province
Absolute Number of Poor
(000)
Percentage of People
Below Poverty Line
Urban Rural Total Urban Rural Total
Papua 28.2 732.2 760.3 6.10 46.81 37.53
Papua Barat 8.6 248.3 256.8 5.22 44.71 35.71
Maluku 38.8 341.2 380.0 11.03 34.30 28.23
Gorontalo 22.2 202.4 224.6 7.89 32.82 25.01
Nusa Tenggara Timur 109.4 903.7 1,013.1 14.01 25.35 23.31
Nusa Tenggara Barat 557.5 493.4 1,050.9 28.84 18.40 22.78
Aceh 182.2 710.7 892.9 15.44 24.37 21.80
Lampung 349.3 1,209.0 1,558.3 16.78 21.49 20.22
Sulawesi Tengah 54.7 435.2 489.8 10.09 21.35 18.98
Sulawesi Tenggara 26.2 408.2 434.3 4.96 23.11 18.93
Bengkulu 117.6 206.5 324.1 19.16 18.28 18.59
Jawa Tengah 2,420.9 3,304.8 5,725.7 15.41 19.89 17.72
DI Yogyakarta 311.5 274.3 585.8 14.25 22.60 17.23
Jawa Timur 2,148.5 3,874.1 8,022.6 12.17 21.00 16.68
INDONESIA 11,910.5 20,619.4 32,530.0 10.72 17.35 14.15
Correlation between Poverty Level and Food Expenditure by Province
Source: BPS
18
Vulnerability to Food Insecurity Map of Indonesia
Source: : Indonesian Food Security Council and WFP, 2009.
19
Priority I (Dark Red)
Priority II (Red)
Priority III (Light Red)
Thirty Most Vulnerable Districts to Food Insecurity by Provinces
Source: : Indonesian Food Security Council and WFP, 2009.
20
Policy instrument support the Food Security Policy :
Rice trade policy (border control)
Input and food subsidies
Price stabilization policy
Government procurement and reserve stock policy, and
Rice for the poor policy (Raskin)
Policy Instrument Supporting Food Security Policy
Current Rice Self Sufficiency Policy
• Rice is 90% self-sufficient in trend, allows BULOG to import about 10%.
• There is no clear rule about what determines the need for rice imports, how much imports are necessary, and when to import.
• Multiple authorities on rice import decision generated heated debates and greater uncertainty in the rice market, further increasing rice prices during critical times to the disadvantage of the poor.
Current Rice Self Sufficiency Policy
• Domestic market is isolated, no direct link to international rice market and import is facilitated by BULOG
• The current rice policy has resulted in more stable but much higher rice prices than the international rice price levels
• At the time of the lowest stock (Nov-Jan), domestic market is vulnerable to issue, gossip and speculation.
Domestic Rice Price in Indonesia and International Prices
Source: BULOG 24
Government Subsidy and Budget to Secure the National Food Security
Source: Coordinating Ministry of Economy 25
Milllion IDR
Government Purchase Price and the Actual Market Price for Rice and Paddy
Source: BULOG 26
Government Rice Stock Holding
Source: BULOG
27
Rice for the Poor Distribution
Source: BULOG
28
Year Rice Distributed Number of Recipient
(ton) (Household)
2000 1,350,000 7,500,000
2001 1,501,274 8,700,000
2002 2,349,600 9,790,000
2003 2,059,276 8,580,313
2004 2,061,793 8,590,804
2005 1,991,897 8,300,000
2006 1,624,500 10,830,000
2007 1,736,007 15,781,884
2008 3,342,500 19,100,000
Benefit Cost Ratio of the Current Policy
• The Total Benefit:
Total value of rice production at domestic price
• The Total Cost:
Cost of rice production
Cost of seed and fertilizers subsidy
Cost of government rice procurement
Cost of rice import by BULOG
The Benefit Cost Ratio = 1.00
Benefit Cost Ratio of the Current Policy
B/C Ratio
0.86
0.88
0.90
0.92
0.94
0.96
0.98
1.00
1.02
1.04
1.06
1.08
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Average Benefit Cost Ratio = 1.00
Full Rice Self-Sufficiency Policy
• Rice is 100% self-sufficient, no trade is allowed. So, domestic rice market is completely isolated
• There is little saving from not importing the rice, since the need for rice import is actually quite small
• To match the growing demand of rice and compensating for rice land conversion, government need to spend additional budget to keep certain amount of land available for rice production
The Benefit Cost Ratio = 0.98
Benefit Cost Ratio of Full Rice Self-Sufficiency Policy
• The Total Benefit:
Total value of rice production at domestic price
Total saving from buying rice import
• The Total Cost:
Cost of rice production
Cost of seed and fertilizers subsidy
Cost of government rice procurement
Cost of rice land expansion (to keep up with demand)
The Benefit Cost Ratio = 0.96
Benefit Cost Ratio of Full Rice Self-Sufficiency Policy
B/C Ratio
Average Benefit Cost Ratio = 0.98
0.86
0.88
0.90
0.92
0.94
0.96
0.98
1.00
1.02
1.04
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Rice Self-Sufficiency Policy with Quota
• Rice is 90% self-sufficient in trend, allows for import about 10% through quota.
• Fixed rice import quota is set before the end of each year according to production and consumption prediction.
• The National Food Authority is mandated by the Food Law No. 18/2012 can decide on the amount of import quota needed and put into transparent bids to avoid corruption.
• Indonesia will still be able to maintain its self-sufficiency policy but with more efficient, less harmful results and consistent with international market price trends
Benefit Cost Ratio of Rice Self-Sufficiency Policy with Quota
• The Total Benefit:
Total value of rice production at domestic price
Total saving from price adjustment to international market
• The Total Cost:
Cost of rice production
Cost of seed and fertilizers subsidy
Cost of government rice procurement
Cost of rice imported
The Benefit Cost Ratio = 1.042
Benefit Cost Ratio of Rice Self-Sufficiency Policy with Quota
B/C Ratio
Average Benefit Cost Ratio = 1.042
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Rice Self-Sufficiency Policy with Tariff
• Rice is 90% self-sufficient in trend, allows for a controlled import through tariff;
• Tariff barrier is a preferred mechanism from the trade agreement perspective;
• Tariff is set at 32% to achieve an import target similar to the amount controlled by quota;
• However, the challenge with the mechanism is on a border control and high cost of monitoring for the tariff policy to be effective.
Benefit Cost Ratio of Rice Self-Sufficiency Policy with Tariff
• The Total Benefit:
Total value of rice production at domestic price
Total saving from price adjustment to international market
Income from tariff
• The Total Cost:
Cost of rice production
Cost of seed and fertilizers subsidy
Cost of government rice procurement
Cost of rice imported
The Benefit Cost Ratio = 1.043
Benefit Cost Ratio of Rice Self-Sufficiency Policy with Tariff
B/C Ratio
Average Benefit Cost Ratio = 1.043
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Conclusion
• Politically, rice self-sufficiency policy is a must for Indonesia. However, there are better alternatives policies to achieve the objective;
• The best and more pro-trade is self-sufficiency policy with a tariff mechanism. The challenge is on a border control and high cost of monitoring for the tariff policy to be effective;
• The second best is self-sufficiency policy with a quota mechanism. The policy gives the same Benefit Cost ratio with tariff policy. However, this policy is less preferred from the trade agreement perspective;
• The full 100% rice self-sufficiency policy is the most expensive and less effective policy to achieve the policy objective.
Policy Suggestion
• Food Security Policy in Indonesia is still over weighted by the political issue rather than real ground to earth problem of accessibility to food, energy and nutritional issue
• To move forward, there is need of serious effort to fully implement and widely socialized the Food Law 18/2012 to local government and stakeholder members on the perspective of access to food, diversification, local specific food, safety, nutrition aspect, and food preferences
• Need strong policy to slow down conversion of productive agriculture land to non agriculture
• Short term Subsidy Policy should be able to be converted as much as possible to the long term investment in supporting Food Security of the country.