Farm sector should get more attention: Analyst

JAKARTA (JP): The new cabinet should pay more attention to the development of the agricultural sector than the last one did to reduce the country's dependence on imported commodities, according to a noted agricultural analyst.

Bungaran Saragih of Bogor Agricultural University said the development of the agribusiness sector should get top priority.

"A strong agribusiness sector will not only help the country cope with the unemployment problem but will also encourage farming activities," he told The Jakarta Post in an interview.

He said research activities should also be improved in order to improve the quality of the nation's commodities.

"You can't expect small-scale farmers to do research for the advancement of agricultural technology... Nor can you expect them to build facilities needed for agribusiness activities," he said.

Developing agribusinesses, he said, was the most appropriate way to ensure an even distribution of wealth and resources, generate more jobs and narrow the socioeconomic gap.

He said that in the past the government focused only on the development of farming activities. This resulted in agribusiness activities, such as the development of processing industries, being neglected.

Farming activities and their processing industries could not be separated, he said.

With insufficient processing industries, farmers could not receive the added value of their commodities, he said.

"Ironically, however, these areas are out of the farmers' reach, meaning that they are deprived of a significant piece of the cake," he said.

In addition to the agroindustry, he said, the government should upgrade and develop new technologies for use in the farming sector.

He said that with a strong farming sector, Indonesia could benefit from its rich natural resources to produce export- oriented commodities.

Bungaran said that in the past agribusiness was overshadowed by the government's fixation with the property and industrial sectors.

"What happened was the government's macroeconomic policies were not friendly with agribusiness development," he said, explaining that the government's previous foreign exchange rate policy had caused imported products to be cheaper than the local ones due to the overvaluation of the rupiah.

He said that the high lending rates charged by local banks also discouraged businessmen from entering the agribusiness sector.

The monetary crisis which hit Thailand in July and forced the Indonesian government to float the rupiah in August triggered a sharp depreciation of the currency against the U.S. dollar.

The fall in the rupiah by over 70 percent since July caused prices of imported products to increase by more than 300 percent.

As a result, many local industries, which relied on imported commodities went burst as the imported raw materials were already too expensive for them, he said, citing feedmill producers, which mostly used imported corn for their production, as an example.

Such casualties could have been prevented if the government had had a good policy for managing and supervising farming activities, he said.

Indonesia ironically imports several important commodities such as wheat, corn, soybeans and even rice.

The country imports 1.3 million tons of corn and one million tons of soybeans per year.

Bungaran noted that Indonesia was already one of the world's largest wheat importers, bringing in 3.5 million tons of wheat per year.

The outgoing chairman of the State Logistics Agency (Bulog) Beddu Amang said last month that Indonesia would need at least Rp 13.5 trillion (US$13.5 million) to import 1.1 million tons of sugar, 700,000 tons of soybeans, 4.25 million tons of wheat and 3.3 million tons of rice in 1998/1999 fiscal year.

Besides those commodities, Indonesia also imports meat, milk and milk products, corn, and others.

Bungaran said there were also many other constraints in the development of the country's agribusiness sector such as poor infrastructure, poor seedling and a lack of government incentives.

"The government should, for example, provide as friendly fiscal, monetary and technical incentives to the agribusiness sector as it does to other sectors," he said.

Such incentives, he said, would encourage further investment and development of agribusiness.

The government's monetary policy must simplify procedures for banks loans at reasonable interest rates to help agribusiness.

Fiscal policies should include exemptions for agribusinesses from income tax, export tax and capital goods import tax, he said. (gis)