Doubts raised over RI's agricultural liberalization

Doubts raised over RI's agricultural liberalization

The Jakarta Post, Jakarta

Poor farm productivity and a flood of imported agricultural
goods call into question Indonesia's low tariff policy just as
the country has agreed to join China, Japan and India in free
trade pacts, according to a World Bank discussion panel.

Indonesia has liberalized its agricultural sector while most
other countries are maintaining high trade barriers, participants
in Thursday's discussion said.

"Tariffs are really low, I have not seen anything like that in
any other country," World Bank economist Mona Haddad said during
a workshop on trade organized by the World Bank.

She said that aside from Malaysia, Indonesia owned among the
lowest and most simple tariff rates, and yet its agricultural
goods faced a bulwark of trade barriers protecting markets in
both developing and developed countries.

Haddad said the situation was unfair but added that "if we
were to raise tariffs, what makes sense to Indonesia is to ask
what would increase (farm) productivity rather than to merely
react to this unfairness".

On top of unfavorable trade conditions, farmers' inability to
increase their productivity to match a fast growing population
has forced Indonesia to turn to overseas producers to meet its
food demands.

Indonesia has seen a steady flow of rice imports drag rice
prices down, which has become a disincentive for paddy farmers to
plant rice. But the more paddy farmers who shift to other crops
will widen the supply-demand gap, increasing the need for more
rice imports.

In 10 years rice imports increased by more than tenfold to 5.8
million tons in 1998, making Indonesia one of the world's biggest
rice importers.

The supply gap in sugar is even more stark, with annual
consumption at about 3.3 million tons, exceeding output by 1.6
million tons.

A stream of cheaper imported sugar, however, has brought a
number of local sugar mills to the brink of collapse.

"How the increase in trade liberalization has not raised
productivity, we don't know yet," Haddad added.

Doubts over Indonesia's liberalized agricultural sector come
on the heels of three agreements creating free trade areas
between ASEAN markets and China, Japan and India.

But to what extent these deals will tear down agricultural
trade barriers remains uncertain, considering the issue is being
heavily debated in talks at the World Trade Organization (WTO).

Developing countries charge their developed counterparts with
foot dragging. Rather than lowering tariffs, developed countries
continue to subsidize their farmers to penetrate developing
markets with cheaper products.

At the same time trade barriers in the form of high and
complex import tariff rates and health and environmental
standards block agricultural products from developing countries
entering developed countries.

Indonesia's agricultural sector generates about 18 percent of
the country's gross domestic product (GDP), which measures the
total value of goods and services a country produces every year.

And about half of Indonesia's total labor force works in the
agricultural sector, according to Haddad.

Bayu Krisnamurthi of the Bogor University of Agriculture said
that although Indonesia's present liberalized agricultural sector
was hurting farmers, increasing tariffs might not necessarily be
the right answer.

"The question we must ask is on whose side are we, the
consumers or the producers?" he told participants.

Underpinning the low import tariff policy was the need for
food security, he said, explaining that the country's political
elite did not want to risk social unrest sparked by food
shortages.

He added that much of the problems plaguing the agricultural
sector were compounded by domestic inefficiencies.

According to him, the government should raise import tariffs
temporarily to allow the local agricultural sector to restructure
itself.