Government intervention in agriculture criticized

MEDAN, North Sumatra (JP): An agricultural economist lashed out yesterday at the government, saying that much of its intervention in the agricultural sector had no clear basis and was difficult to justify.

Lucky Sondakh of Sam Ratulangi University, in Manado, North Sulawesi, said here that government intervention in the agricultural sector came mostly in the form of regulations originating from "unclear decision-making procedures and confusing justification criteria."

"In the last five years, there have been many examples of trade policies for agricultural commodities that appear to have been made without using a rational economic assessment at all," he said at the 13th congress of the Indonesian Economists Association.

Agricultural commodities which have been subject to such policies include cloves, oranges and cooking oil. The policies came in various forms of restrictions and export tax policies, he said.

"These are examples where criteria of economic and social feasibilities are dominated by another criteria which is difficult to understand but nonetheless accepted by economists," he said.

The agricultural sector is currently subject to various forms of government intervention such as farm price supports, input subsidies, production quotas, export tax and floor prices. These measures are applied to facilitate what the government sees as a need for food price stability, self-sufficiency and raising government revenues.

Noer Sutrisno, an expert assistant to the Head of the National Logistics Agency (Bulog), defended the need for government intervention in the agricultural sector, saying that commodities in this field have special characteristics which do not apply to other products from the manufacturing sector.

He said: "There is an asymmetrical flow of information in the agricultural sector, which means that prices on the market do not always reflect the same level of efficiency, nor do producers respond appropriately."

He pointed out that agricultural commodities are also subject to natural changes and the social background of subsistence farmers involved in their production.

Government intervention in the trade of agricultural commodities, he said, is always preceded by the market's failure to solve problems caused by surpluses in either supply or demand.

"If a large country like Indonesia depends solely on the market mechanisms, the risks are too big... Thus government's intervention in the trade of agricultural commodities is unavoidable," he said.

Noer said the level of such intervention, which is governed by Bulog, depends on the current supply and demand situations on the market.

"Not all food-commodities are regulated by the government. Only the strategic ones are," he said. (pwn)