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)