14 - Has Indonesian Food Policy Failed?

Summary

INTRODUCTION

Food policy goes far beyond simple agricultural production, encompassing issues such as food and nutrition security, poverty alleviation, women's participation, structural transformation and value addition. Food policy also has a macroeconomic dimension, as it has implications for inflation, fiscal policy, and affects the trade balance. Failure to manage food policy has the potential to disrupt politico-socio-economic stability.

This chapter discusses whether Indonesian food policy has failed, mainly focusing on rice policy, but also looking at cocoa, sugar and salt policies as an illustration. The same shortcomings and challenges apply to many other food commodities and hence some of the policy recommendations can be generalized, with minor adjustments depending on the food commodity.

While significant long-standing food policy challenges remain, such as striking a balance between consumer and producer welfare, in recent years many changes have been introduced. They are (i) the omnipresent use of enforcement officials (both military and civilian) to “discipline” the market (including “food mafias” or hoarders); (ii) the extensification of agricultural production by opening new rice fields outside Java and increasing the crop plantation index to increase production; (iii) putting a binding cap on retail prices of some food commodities to counter high prices; and (iv) the crowding-out of private investment by state-owned enterprises and the lack of market competition. While there have been significant improvements in some aspects of food policy, such as the development and rehabilitation of irrigation systems and dams (Kompas 2018b) and the use of Area Sampling Frames methodology to more accurately produce rice production statistics according to international best practices, these seem to be overshadowed by the continuing shortcomings.

This chapter discusses four main topics: (i) food policy goals; (ii) the performance of these goals; (iii) why they may have failed or succeeded; and (iv) policy recommendations.

FOOD POLICY GOALS

At the highest strategic level, the Nawacita — the vision and mission of President Joko Widodo and Vice-President Jusuf Kalla for their 2014–19 term — mandates that “food sovereignty” should be the ultimate goal of food policy in Indonesia. A passage in the Nawacita explains how to achieve food sovereignty. First is increasing on-farm production by improving irrigation systems, opening new rice fields and restoring soil fertility. Second is providing financial and capital access to farmers and micro, small and medium enterprises (MSMEs). Third is increasing the value-added of farmers’ products through post-harvest technology and capturing longer value chains.