Indonesia won't make progress without agriculture<\/p>\n
Hyginus Hardoyo, Jakarta<\/p>\n
Many have hopes that the next president of Indonesia, Susilo
\nBambang Yudhoyono, who has been awarded a doctorate in
\nagricultural science, will work to promote the competitiveness of
\nthe farm sector.<\/p>\n
Susilo, a retired Army general who holds an MA degree from
\nWebster University in the United States, successfully defended
\nhis dissertation on the development of rural areas and analysis
\nof fiscal policies at the Bogor Institute of Agriculture (IPB)
\nlate last month.<\/p>\n
In his thesis, Susilo asserted that fiscal and other policies,
\nincluding raising wages and lowering subsidies, could help boost
\nagricultural development and create new job opportunities.<\/p>\n
This news is comforting because Susilo, as the next president,
\nshould have the technical competence to analyze and resolve the
\ncountry's economic problems.<\/p>\n
Susilo should have a better perspective on how to develop
\nagriculture, the principal source of livelihood for the majority
\nof people, with the support of a competitive manufacturing
\nindustry.<\/p>\n
Indonesia, basically an agrarian country, should command
\nstrong comparative advantages in farm commodities. Unfortunately,
\nhowever, it remains a major importer of rice, sugar, soybean,
\ncorn and many other food commodities.<\/p>\n
There have long been two schools of thought about appropriate
\ndevelopment strategies for this country. One of them advocates
\nleapfrogging straight to industrialization at the expense of
\nagriculture, while the other is in favor of focusing development
\non agriculture to support a competitive manufacturing sector.<\/p>\n
The latter school argues that for a country like Indonesia,
\nthe agricultural sector should be used as the basis for
\nsupporting industrialization. The agricultural sector could
\nproduce foodstuffs-- the basic needs of the people -- and at the
\nsame time function as an instrument for price stabilization.<\/p>\n
Indonesia should have a comparative advantage in the
\nplantation (tree-crop) industry to generate the foreign exchange
\nthat is badly needed to import technology for the manufacturing
\nsector.<\/p>\n
Based on these arguments, the second school argues that
\nindustrialization in Indonesia will not succeed without a strong
\nagricultural sector.<\/p>\n
During Soeharto's New Order era, agricultural development was
\nput at the top of development programs, the backbone of the
\nnational economy. The adoption of this strategy temporarily ended
\nthe debate and controversy over the direction of the country's
\ndevelopment path.<\/p>\n
Among the remarkable advances achieved under this approach
\nwere self-sufficiency in rice in 1984, albeit heavily subsidized.<\/p>\n
However, with Indonesia's impressive economic growth
\neventually driven mostly by manufacturing and services, the
\nposition of agriculture in the economy declined, even though its
\ncontribution to total output is still significant.<\/p>\n
For example, the agriculture sector's share of gross domestic
\nproduct declined from over 50 percent of GDP in 1960 to only
\nabout 20 percent in 1997, when the economic crisis erupted.<\/p>\n
In general, however, agriculture was only able to grow based
\non protectionism, government intervention and a heavy dose of
\nsubsidies. Without these supports, agricultural development
\nslowed down and the bargaining power of farmers worsened
\nsteadily.<\/p>\n
Domestic farm commodities also become much less competitive.
\nSo, as Indonesia has begun to open its markets in line with trade
\nliberalization under the auspices of the World Trade
\nOrganization, local farm produce, such as rice and sugar, has
\nincreasingly been edged out of the market.<\/p>\n
However, when the financial crisis hit the country,
\nagriculture emerged as the savior of the economy, continuing to
\ngrow and absorb jobless workers that were thrown out of bankrupt
\nmanufacturing companies. As the costs of farm commodities are
\ndenominated entirely in rupiah, farm produce has benefited
\ngreatly from the steep depreciation of the local unit against the
\nAmerican dollar.<\/p>\n
This reinforced school of thought that supported agricultural
\ndevelopment, which had been neglected during the boom years of
\nmanufacturing industry before 1997.<\/p>\n
The agricultural sector, including fresh water and sea
\nfishing, and agrotourism, is now considered to be one of the
\nsectors with the most potential for accelerating economic growth.<\/p>\n
As an agrarian country in which more than 50 percent of the labor
\nforce still works in agriculture, Indonesia will not be able to
\nmake much progress in improving public welfare without rapid
\nagricultural development.<\/p>\n
However, without proper planning and strategic steps applied
\nconsistently to boosting food production, Indonesia will continue
\nto be a major net importer, a situation that could threaten the
\ncountry's national security.<\/p>\n
We have to realize that developed countries, which produce
\nlarge food surpluses, do not want Indonesia to be self-sufficient
\nin food. With its large population, Indonesia constitutes a large
\nmarket for heavily subsidized food products from the major
\nproducing countries.<\/p>\n
As things stand at the moment, most Indonesian farm products
\nare uncompetitive within the ASEAN Free Trade Area (AFTA).<\/p>\n
In order to give agricultural development a clear direction,
\nthe new government needs to launch an integrated development
\nstrategy focused on food production.<\/p>\n
Susilo has partly answered those challenges through his
\npromise to use agriculture as a platform for the economic
\ndevelopment in the country during his term in office.<\/p>\n
It remains to be seen, however, whether Susilo will be able to
\nmake Indonesia competitive in the agricultural sector.<\/p>\n
The author is a staff writer for The Jakarta Post. He can be
\ncontacted at hardoyo@thejakartapost.com<\/p>",
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