input policies in indonesia- bustanul arifin
TRANSCRIPT
The Roles of Input Policies in Transforming Agriculture in Indonesia
Bustanul [email protected]
Professor of Agricultural Economics at UNILA Professorial Fellow at InterCAFE and MB-IPB
Senior Economist with INDEF-Jakarta, Indonesia
International Conference on “Agricultural Transformation in Asia: Policy Options for Food and Nutrition Security”, September 24-26 of 2013, in Siem Reap, Cambodia
Research Objectives
1. Identify key drivers of changes in seed and fertilizer policies in modern history of Indonesian agriculture,
2. Examine policy process on agricultural inputs (fertilizer and seed) to contribute to agricultural development on Indonesia, and
3. Formulate strategies to improve policy environment for promoting sound input use.
Agricultural Inputs and Production Performance• The use of fertilizer and (high-yielding) seed grow very
rapidly since the Green Revolution Era in the 1970s. • Five Efforts: seed, fertilizer, plant density, irrigation and
drainage, and pest and disease management. • Seven Efforts: Five Efforts+ marketing and financing• Farm Formula (Rumus Tani): Fertilizer to rice price ratio • Policy priority of agricultural inputs: food crops, related
to policy strategy for food self-sufficiency & food security.
• After 1980s: Cash crops also obtained attention in order to increase foreign earnings from export commodities: rubber, coffee, cocoa, coconut, oil palm, tea, clove etc.
Transformation—Major Agric Policy
Soekarno(1945-1966)
Soeharto I(1966-1985)
Soeharto II plus(1986-2003)
Yudhoyono (2004 – now)
Share of Agric-PDB >30% 20-30% 15-20% <15%
Share of Agric-labor >50% 45-50% 40-45% <39%
Agricultural Growth Low (<3%) High (6%) Low (3-4%) Low (3%)
Agric Major Policy Mass Guidance Green Revolution Green Revolution Agric Revitalizing
Agric Input Policy Introducing modern inputs
Agric inputs for self-sufficiency
Response to drought & crisis
Organic input grows rapidly
-Fertilizer Subsidy Not specific, but guidance on use
Started in 1971 Price subsidy
Removed -1998 but re-introduced
Compound-NPK, No subsidy
-Seed Subsidy Modern seed was known
Package of agric inputs plus credit
Package of agric inputs plus credit
Private sector grows rapidly
Policy process Top-down: Food, & Peasant first
Top-down: Oder-& Command
Dialog with some stakeholders
Democratization: Dynamic drivers
Historical: Structural Transformation in Indonesia
Source: Synthesized by the author
Structural Transformation: Incomplete Process?
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20100
2
4
6
8
10
12
0
5
10
15
20
25
30
Agriculture value added per worker (constant 2000 US$)GDP per capita (constant 2000 US$)Agriculture, value added (% of GDP)GINI indexPoverty headcount ratio at rural poverty line (% of rural population)Poverty headcount ratio at urban poverty line (% of urban population)
Source: BPS
Production Performance of Strategic FoodsStrategic Foods 2008 2009 2010 2011 2012
RiceHarvested Area (ha) 12.327.425 12.883.576 13.244.184 13.203.643 13.445.524
Productivity (ton/ha) 4,89 5,00 5,01 4,98 5,15
Production (ton dry paddy) 60.325.925 64.389.890 66.411.469 65.756.904 69.056.126
MaizeHarvested Area (ha) 4.001.724 4.160.659 4.131.676 3.864.692 3.957.595
Productivity (ton/ha) 4,08 4,23 4,43 4.56 4.90
Production (ton dry grain) 16,317,252 17,629,748 18,327,636 17,643.250 19.387.022
SoybeanHarvested Area (ha) 590.956 722.791 660.823 622.254 567.624
Productivity (ton/ha) 1,31 1,25 1,24 1,37 1,48
Production (ton dry bean) 775.710 974.512 907.031 851.286 843.153
SugarHarvested Area (ha) 436.505 441.040 435.000 430.000 440.000
Productivity (ton/ha) 6,11 5,70 5,11 5,27 5,22
Production (ton sugar) 2.668.428 2.517.374 2.300.000 2.270.000 2.300.000
Source: BPS (various issues)
Use of Fertilizer by Cropping Farms Cropping Farms No
FertilizerChemical Fertilizer
Organic Fertilizer
Chemical+ Organic
Total
Rice Farm Households 1,225,700 10,155,465 94,112 3,516,860 14,992,137Percentage (%) 8.18 67.74 0.63 23.46 100.00Maize Farm Households 1,010,330 2,472,889 134,648 3,096,828 6,714,695Percentage (%) 15.05 36.83 2.01 46.12 100.00Soybean Farm Households 215,717 492,888 85,173 370,699 1,164,477Percentage (%) 18.52 42.33 7.31 31.83 100.00Sugarcane Farm Households 2,819 131,633 4,324 56,683 195,459Percentage (%) 1.44 67.35 2.21 29.00 100.00
Source: BPS, 2009
Use of Seeds by Cropping FarmsCropping Farms Farm Households
Percentage of Farms (%)
Percentage of Total *)
Rice 14,992,137 84.08 Hybrid 430,996 2.87 2.42 High-Yielding 10,947,289 73.02 61.40 Local Seed 3,613,852 24.10 20.27Maize 6,714,695 37.66 Hybrid 3,651,210 54.38 20.48 Composite 341,377 5.08 1.91 Local Seed 2,722,108 40.54 15.27Soybean 1,164,477 6.53 High Yielding 452,029 38.82 2.54 Local Seed 712,448 61.18 4.00Sugarcane 195,459 1.10 High Yielding 134,726 68.93 0.76 Local Seeding 60,733 31.07 0.34Total Farm Household 17,830,832
Source: BPS, 2009
*) This does not add to 100% as a farm household usually grows more than one crop
Fertilizer Shortage during Planting Season
1. Production : Supply of gas vs. individual performance 2. Distribution: Min. of Agriculture vs. Min. of Trade3. Institution: Demand for fertilizer (RDKK) is not easy4. Price: Disparity between MRP(HET) vs. actual5. Subsidy: Gas subsidy vs. price subsidy6. Trust: Price audit on cost of production vs. HET rise
Expenditures on Fertilizer Subsidies
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
IDR/kg
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000IDR billion
Expenditure on fertiliser subsidies (right scale) Ceiling price for urea (left scale)
International price of urea (left scale)
Source: OECD (2012), Ministry of Agriculture (2011)
Allocation of national ag. spending (actual), 2001-09
State Budget: Spending on input subsidy• Increase in public spending on agriculture has gone to subsidize inputs (fertilizer, seeds, food for the poor). Credit remains low.• In 2009 fertilizer subsidies were 4.5 times its 2001 level, while irrigation remained at the same level. This needs policy changes.• Previous studies suggest that the relationship between public spending and growth in the agriculture sector. Spending on public
goods has positive impact on growth, spending for private goods might have negative impact on growth (World Bank, 2009).
Change in national ag. spending (actual) by type, 2001-09
Source: World Bank staff calculation using MoF and SIKD dataNote: 1) Sub-national 2007 spending was from budget data; 2) Sub-national 2008-09 spending was estimated; 3) Post 2009 sub-national spending on agriculture data is not available 4) More detailed notes on categories of agriculture sector spending
2001 2002 2003 2004 2005 2006 2007 2008 20090
20
40
60
80
100
3035 29
3032
20
21
26 2629
34 3332
28
34
39
27 26
4029 32 28 25
3119 17 16
4 712 12
1928 31
Fertilizer subsidies Other subsidies Agriculture R&D Irrigation
Percent
PresidentDPR-House of RepresentativeDPR-House of
Representative
MediaMedia AcademicsAcademicsNGOsNGOs DPR-SenateDPR-
Senate
Fertilizer Industry
Seed Industry
Farmer Organizations
Farmer Organizations
Ministry of State Owned
Enterprise
Ministry of Trade
Ministry of Industry
Ministry of Agriculture
Coordinating Ministry of
Economics Affairs
BULOGFood Security
Agency
Consumer Groups
Consumer Groups Chambers of
Commerce and Industry
Chambers of Commerce and
Industry
Ministry of Finance
Provincial, DIstrict Food Security Agency Provincial, District
BULOG
Governor, Mayor
Provincial, District Agricultural Services
Actors in the Policy Process of Agricultural Inputs and Food Security in Indonesia
PresidentDPR-House of RepresentativeDPR-House of
Representative
MediaMedia AcademicsAcademicsNGOsNGOs SenateSenate
Fertilizer Industry
Seed Industry
Farmer Organizations
Farmer Organizations
Ministry of State Owned
Enterprise
Ministry of Trade
Ministry of Industry
Ministry of Agriculture
Coordinating Ministry of
Economics Affairs
BULOGFood Security
Agency
Consumer Groups
Consumer Groups Chambers of
Commerce and Industry
Chambers of Commerce and
Industry
Ministry of Finance
Provincial, DIstrict Food Security Agency Provincial, District
BULOG
Governor, Major
Provincial, District Agricultural Services
66
5
5
5
444
3
3
3
32
2
2
2
111
1 1
3 1
Influence Level of Actors in the Policy Process of Agricultural Inputs and Food Security
Concluding Remarks: Policy Implications• Agricultural input policies in Indonesia have led to substantial
increase in input use, hence contributing to agricultural development and structural transformation;
• Unbalanced use of fertilizer imply inefficiency and dynamic disequilibrium, hence agricultural performance;
• Key drivers of changes in seed and fertilizer policies:– 1950s-1960s: spirit to achieve self-reliance, BIMAS & INMAS– 1970s-1980s: Green Revolution, subsidy, infrastructure development– 1990s-2000s: Severe droughts, Asian Crisis, IMF intervention– 2004-present: Subsidy dependency, “democratization”, inefficiency
• Policy process has entered into more complex economic (and political) interests and decentralized government and autonomy.
Policy Recommendation for the Future• Continue sharpening the formulation, organization and
implementation of input subsidies to improve policy accuracy;• Determine an exit strategy for the input subsidies by integrating
efficiency improvement and bureaucratic reforms;• Evaluate crucial level of moral hazard among fertilizer users by
determining he degree of fungibility of subsidy given to farmers;• Improve institutional arrangements of agricultural input subsidy,
i.e. how the demand for fertilizer and see and farm level (RDKK) could be monitored by government agencies at central and local.
• Shift to more decentralized subsidy mechanism, by conducting a thorough assessment on distinctiveness and location-specific;
• Revive the roles of agricultural extension agents (PPL), rural cooperatives (KUD) and other civil society initiatives.