Govt 'pricing policy' causes low production

BOGOR, West Java (JP): The country's failure to increase its rice and food crop production has been caused by two government policies -- one concerning the exchange rate of the rupiah and the other the pricing of rice, a noted agricultural analyst said on Saturday.

Bungaran Saragih of Bogor Agricultural University said that before the monetary crisis began in July last year the government was always trying to maintain the rupiah's value at an artificially high level, so that rice prices on the world market were lower than the domestic price.

"Since 1985, the government has also imposed a policy of setting a low floor price for rice with the aim of keeping food prices low, so that wages for industrial laborers can be kept low.

"Thus, the low rice-price policy could support the government's policy of supporting the country's industrialization," he said after the launching of his book titled 'Agribusiness, a New Paradigm of Agriculture-based Economic Development'.

Bungaran said the low rice-pricing policy is unfair because it consequently results in the provision of subsidies for foreign farmers and local consumers at the cost of domestic farmers.

"So, at the macroeconomic level, local farmers are affected by the government's exchange-rate policy, and at the microeconomic level by its rice floor-pricing policy."

Bungaran said that the current government should pay more attention to the development of the agribusiness sector to reduce the country's dependence on imported commodities.

"A strong agribusiness sector will not only help the country cope with the unemployment problem but will also encourage farming 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.

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

For example, he said, the windfall profit from the country's exports of crude palm oil (CPO) and cigarettes were only enjoyed by traders, not by oilpalm farmers and tobacco farmers.

Bungaran also spoke out in support of a people-oriented economy, the enemies of which he said were idle megaprojects, mega-companies and hi-tech industries.

The previous administration, he said, had established "mega- companies and encouraged megaprojects".

The government also adopted the wrong approach to industrialization, he said, which had resulted in the majority of people failing to benefit from increasing development.

"Industrialization has failed to improve the people's welfare," he said.

Economist Sri Edi Swasono of the University of Indonesia, echoed Bungaran's view said that the reform era and the economic crisis had served to provide an appropriate stimulus for Indonesia to develop a populist economy.

Speaking in the same meeting, Sri Edi said that the current export-oriented system, which had been maintained for 32 years by former president Soeharto, had proved unsustainable and resulted in the prolonged crisis.

"The economic collapse has brought a new awareness of how important a people-oriented economy is," he said.

He said the worst sin committed by the New Order regime under Soeharto was the establishment of an economy dominated by a small group of people, which caused the gap between rich and poor to widen considerably.

Meanwhile, Bungaran said in order to increase the country's agricultural production, the government must end its cheap rice policy and, instead, allow farmers to sell their rice at prices similar to those on the international market.

"The government must also reduce its intervention in agricultural production and avoid market distortion for agricultural products. Let farmers, in consultation with their own associations, decide what they want to plant and what technology they will use. If the government has no resources to help farmers, then it should simply leave them alone," he said. (gis)