Government intervention in agriculture criticized

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)