Indonesia lacks clear plan for agricultural sector<\/p>\n
Fitri Wulandari, Dow Jones\/Jakarta<\/p>\n
Indonesia's new administration has promised sweeping changes in
\nthe country's agriculture sector, but the government is yet to
\nspell out clearly how it would turn that into action, raising
\nconcerns that eventually the change of government could mean
\nlittle to sector.<\/p>\n
The Ministry of Agriculture has said it will focus on
\nimproving food security, developing agro businesses and improving
\nfarmers' welfare with an aim to increase revenue from agriculture
\nand agro-based industries to US$12 billion in 2009 from an
\nestimated $7.8 billion in 2004.<\/p>\n
\"Output of agricultural produce and processed products are
\nexpected to increase, boosted by value-addition,\" said Minister
\nof Agriculture Anton Apriyantono.<\/p>\n
But industry players say the government is yet to lay out a
\nclear policy for the sector that can absorb 40 percent of
\nIndonesia's 102.8-million-strong work force in 2004. Without
\ndrastic changes, the sector will continue to face the same
\nproblems that limited productivity and expansion under the
\nprevious administrations, they said.<\/p>\n
\"We need more action, not just political statements,\" said
\nKris Hadisubroto, chairman of Indonesian Association of Oleo-
\nChemical Producers (Apolin), an edible oil industry lobby group.<\/p>\n
Underscoring the problems faced by the industry, agriculture's
\nshare in the country's total gross domestic product shrank to 15
\npercent in 2003 from 15.6 percent in 2000, according to the
\nCentral Statistics Agency (BPS).<\/p>\n
The sector grew just 3.23 percent on year in the first nine
\nmonths of 2004, compared with an overall GDP growth of 4.89
\npercent during the same period.<\/p>\n
Altering policies that block the growth of the agriculture
\nsector should be high on the government's agenda, said Zulhefi
\nSikumbang, chairman of Indonesian Cocoa Association (Askindo). He
\ncited the case of a 10 percent value-added tax imposed on
\nagriculture commodities sold to the domestic processing industry
\nas an example.<\/p>\n
\"Agriculture will go nowhere unless the government eliminate
\nthis unfavorable tax policy,\" Zulhefi said. The cocoa processing
\nindustry has been the hardest hit by the tax, he said.<\/p>\n
The tax has discouraged the growth of the domestic agro
\nprocessing industry because it increases the cost of raw
\nmaterials, in turn forcing growers to export most of their
\nproduce in raw form, without any domestic value addition.<\/p>\n
Indonesia's agriculture sector has the scope to develop as a
\nsignificant player in the economy with the plantation sector as a
\nmajor source of growth, because of the strong demand for
\nplantation crops, said Bustanul Arifin, an economist with
\nJakarta-based Institute for Development of Economics and Finance
\n(Indef).<\/p>\n
\"The plantation sector (mainly palm oil and rubber) will be
\nthe backbone of agriculture in 2005 and beyond,\" he said.<\/p>\n
The government has already set out a plan to increase
\nplantation output by 5 percent every year in the next five years,
\nbut again, there are no details on how this will be achieved.<\/p>\n
Exports of agriculture products in the first nine months of
\n2004 rose to $1.96 billion from $1.86 billion in the same period
\nof 2003. The government expects exports of agriculture products
\nto reach $9 billion by 2009.<\/p>\n
In what could be an indirect benefit to the sector, however,
\nthe change of government has raised hopes that the economy would
\ndo better in 2005, which in turn could ensure exchange rate
\nstability, crucial to the growth of the plantation sector.<\/p>\n
\"Steady exchange rates ... will revive private sector
\n(investments), including in the agro industry,\" said Derom
\nBangun, the chairman of Indonesian Palm Oil Producers Association
\n(Gapki).<\/p>\n
A weak currency as had been seen in recent years, may bode
\nwell for commodity exporters but would also raise raw material
\ncosts, sometimes more than negating the benefits of increased
\nexports, he noted.<\/p>\n
Averaging Rp 8,985 against the dollar in November, the rupiah
\nhas weakened 7 percent since last year.<\/p>\n
Despite a steady growth in area in recent years, the
\nplantation sector continues to face serious productivity issues
\nbecause of the existence of a large number of small farmers who
\nown uneconomical plots of land.<\/p>\n
\"You can't ask them to replant or (increase the size of their
\nland holding) to boost production,\" as many of them are poor
\nfarmers, said Suharto Honggokusumo, executive director of the
\nIndonesian Rubber Association (Gapkindo).<\/p>\n
According to Rachim Kartabrata, executive secretary of
\nIndonesian Coffee Exporters Association (AEKI), there has been
\nlittle assistance from the government to help farmers manage the
\nplantations.<\/p>\n
\"The farmers need more training and financing to improve their
\nfarming techniques and they hardly get it,\" said Rachim.<\/p>\n
That, has resulted in stagnant, if not declining, output.<\/p>\n
Indonesia's coffee bean output in 2005 is likely to be
\nunchanged from the 360,000 tons produced in 2003-2004, while
\ncocoa bean output may fall to 375,000 tons from an earlier
\nprojection of 385,000 tons in 2004, according to latest
\nestimates.<\/p>\n
Oil palm and rubber could be the only exceptions where output
\ncould see a rise in 2005.<\/p>\n
Gapki has projected Indonesia's CPO output around 11.6 million
\ntons to 11.8 million tons of in 2005, up from a projected 10.8
\nmillion tons in 2004.<\/p>\n
Similarly, the International Rubber Study Group (IRSG)
\nestimates Indonesia's rubber output to reach 2.16 million tons in
\n2005, a 9 percent increase from a projected 1.98 million tons in
\n2004.<\/p>",
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