Sat, 08 Jan 2011

From: The Jakarta Globe

By Faisal Maliki Baskoro
The government has pledged to speed up development of a large-scale food production area and curb farmland conversion in a bid to slow rising food prices.

“We will go all out in tackling this problem. Last year, the food estate development encountered several problems related to spatial planning, but we have sorted this out,” said Hatta Rajasa, coordinating minister for the economy.

Papua will host the Merauke Integrated Food and Energy Estate, a 480,000-hectare agricultural estate that is scheduled for completion by 2014.

The $5 billion project is expected to produce almost two million tons of rice, two million tons of corn, 167,000 tons of soybeans, 2.5 million tons of sugar and 937,000 tons of palm oil per year while also providing grazing space for 64,000 cattle.

Hatta also said the government would stop the conversion of farmland into other uses and open up more land to increase production of rice and other crops.

“No more conversion of farmland into other uses. There were too many conversions last year,” he said.

“We invite local investors to develop the agricultural sector. State logistics agency Bulog said it has a rice reserve of 1.5 million tons, which will help ensure food supply.”

Economists such as Juniman at Bank Internasional Indonesia have hailed the decision to expedite the food estate.

“The development of food-producing centers outside Java is essential for our country’s food sustainability, but it all comes back to the government’s will, which so far has lacked realization,” he said.

“The Food and Agriculture Organization has said that 2010 and 2011 will see increases in food prices in line with global economic growth. The government should have prepared for this earlier.”

Maintaining food price stability has been one of President Susilo Bambang Yudhoyono’s top priorities.

The government said it would carry out market operations - selling crops such as rice, sugar and chili at lower than the market price - and has called for households to plant chilies, one of Indonesia’s favorite spices, in their backyards.

Hatta said the government would keep intervening in the market to keep inflation in check, but Juniman described its recent moves as a panic mode.

“The government is panicking because food prices are skyrocketing,” he said.

“Increasing food prices can trigger higher inflation and higher core inflation. Inflation was high in December, and if this month the government can’t reduce inflation, manufacturers may increase prices and this could slow down economic growth.”