Govt 'pricing policy' causes low production

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)