Economists warn Rini over pro-farmer policy

Economists warn Rini over pro-farmer policy

JAKARTA (JP): Economists have welcomed plans by Minister of
Industry and Trade Rini Soewandi to improve the well-being of
farmers and create more jobs, but warned her not to oppose an
international trade ruling.

Center for Strategic and International Studies (CSIS)
economist Pande Radja Silalahi said that any policy contradictory
to World Trade Organization (WTO) regulations would only harm the
country's international image.

"We should side with the farmers without breaking
international trade regulations," Pande told the Jakarta Post
over the weekend.

He explained that if the government wanted to improve the
well-being of farmers, it should restrict itself to only playing
a facilitator's role by providing and supervising the
distribution of fertilizer, developing roads to improve the
transportation of produce, building trading warehouses to
accommodate surpluses and disseminate market information
properly.

In her first formal media conference since she was appointed a
minister in the Cabinet of President Megawati Soekarnoputri, Rini
said that the top priorities in her policy over the next couple
of years were to improve the well-being of farmers and create job
opportunities.

"We always take into account two things: the welfare of the
farmers, and the creation of job opportunities," the former top
corporate executive said.

The 1997 economic crisis has made many Indonesians unemployed.
The country's labor force was estimated at 95.7 million people in
2000, of which 5.8 million were jobless. At least 45.3 percent of
those employed work in the agriculture sector.

Rini did not provide any details of the policy.

But the statement raised fears that the administration would
grant special treatment to farmers, including protectionism, in
order to elevate their economic welfare.

Indonesia is a member of WTO and has pledged to lower import
tariffs for virtually all commodities and products, including
agricultural goods such as rice.

There has been growing calls for the government to impose a
high import tariff on rice to protect local farmers from cheaper
imports.

Meanwhile, economist Faisal Basri also warned the government
that the country would pay "a heavy price" if it moved against
the international trade ruling.

Both Faisal and Pande, however, said that the main problem
confronting the country's agriculture sector was not low tariffs,
but inefficient production.

"Arable land owned by Indonesian farmers has no economic scale
and our farmers are still employing traditional tilling methods,"
Pande said.

Basri concurred, saying that by raising the import tariff on
rice, even up to 60 percent as demanded by non-governmental
organizations (NGOs) and agriculture associations, would only
hurt the farmers.

"Between 30 percent and 40 percent of Indonesian farmers are
net rice consumers who have to buy rice as their harvests did not
meet their family's needs," Basri said.

Basri said close to 40 percent of Indonesian farmers had 0.2
hectares or less of rice fields, while only 5 percent had more
than one hectare.

"If the government raises the import tariff on rice to 60
percent, the number of poor would increase by 20 percent because
they could not afford to buy rice anymore," he said.

Meanwhile, deputy secretary-general of the Indonesian Cacao
Association (Askindo) Zulhefi Sikumbang urged the government to
also focus on commodity traders and not only farmers.

"The policy (of only prioritizing farmers) would kill
commodity traders who are already facing cash flow problems
because of the current economic crisis," he said.

According to Zulhefi, the policy would provide only short-term
benefits to farmers.

"Under the current situation, only foreign traders who have
strong financial support can survive. Later on, they will dictate
the prices of commodities," he said.

"Cacao trading is fully controlled by foreign investors now,"
he said.

Indonesia exported about 300,000 tons of cacao in 2000, 80
percent of which was done by traders from the United States, the
Netherlands and Singapore.(03)