Agribusiness does not help the rural poor

Agribusiness does not help the rural poor

Tejo Pramono, Researcher, Center for Agricultural Policy Studies (CAPS),
Jakarta

Minister of Agriculture Bungaran Saragih has expressed his
concern over our poverty problem and has suggested that
facilitating agribusiness would go a long way toward a solution.
Alleviating poverty, he writes, is one of the main instruments to
achieve other developments, such as food, health and education
security; also a better livelihood, environment and political
participation (The Jakarta Post, Feb. 20).

Moreover, the minister suggested an economic political
campaign on agribusiness: It should become the new architecture
for a global economic structure based on the comparative
advantage in natural resources. He writes that the developed
countries have a comparative advantage on technology and do not
have a comparative advantage in natural resources.

The argument looks reasonable, but such a neoliberal view
ignores the history of the development of agribusiness. Hence, it
might not alleviate poverty but may, instead, unwittingly sustain
or even increase it.

Agribusiness was long implemented during the Dutch colonial
period, which led to the opening of sugar cane, rubber, coffee,
and cocoa plantations. The Dutch took over people's land and
forced peasants to grow certain commodities. Through the
aristocrats, appointed as regents, the Dutch operated their
agribusiness activities.

Agribusiness became popular in the local economy and also
became a favorite subject of study at university level, such as
at the Bogor Institute of Agriculture. Particularly during the
1980s agribusiness was encouraged to contribute to high economic
growth, which was then accounted for largely by industry. With
large investments, agribusiness run by private companies opened
up extensive plantations and also operated in forest and marine
resource utilization.

Such practices indeed contributed to economic growth,
following the increase in value and increased exports of
agricultural commodities. Yet, this was at the cost of the loss
of livelihood of many people, apart from environmental
destruction.

Public savings were channeled to large agribusiness companies
rather than to the people's economy -- some of the companies are
now under the control of the Indonesian Bank Restructuring
Agency. Credit for the poor was allocated in very small amounts:
As banks would not lend without collateral the poor depended on
informal loan sharks. The productive assets of plantation areas,
forest and coastal areas were also given to the large
agribusiness companies. And worse, large agribusiness companies
still control the entire line of business, from on-farm to off-
farm activities, leading to a virtual oligopoly.

There is some cooperation between agribusiness companies and
farmers, namely contract farming. But almost all of the contracts
in farming, according to the experience of the smallholder system
show the disadvantaged position of farmers.

Theoretically, agribusiness is usually based on comparative
advantage, although this theory, by David Ricardo, has been
criticized for its failure to address inequalities in the
relations between agents of production.

Agribusiness plantation labor wages are the lowest in the
country; hence they will not alleviate poverty. Also unaddressed
is the lack of ownership of production factors, such as land.

The first step in agricultural development should provide the
poor access to such ownership. During the period 1983 to 1993,
the number of landless households increased from 5.032 million to
9.054 million.

While household ownership of land was less than 0.3 hectare
per household during the same period, landless homes increased
from 9.5 million to 10.9 million -- and this was well before the
economic crisis.

Thus, the agribusiness approach in developing agriculture and
alleviating poverty is no longer relevant. Instead, what is
needed is agrarian reform, especially to give the poor access and
ownership to productive assets -- mainly land.

Land ownership would lead to employment opportunities, thus
giving the poor access to credit and helping their confidence to
speak out on issues that affect their interests.

The agrarian law was enacted in 1960 but has faced political
controversy, as the reform of land ownership has hit the
interests of privileged groups.

Today, cooperation of the Ministry of Agriculture with tens of
millions of peasants and the poor in gaining political support
for agrarian reform would be a concrete program in combating
poverty. Food supply would increase, along with increasing
productivity and welfare of the poor.

The writer also coordinates the advocacy division at the
Institute of Agriculture Development (Lembaga Pembangunan dan
Pengembangan Pertanian) affiliated to the Islamic Nahdlatul Ulama
organization in Jakarta.