Govt urged to turn back to agribusiness to beat crisis

JAKARTA (JP): The government should focus on developing the agricultural sector to reduce the country's dependence on imported commodities and to cope with rising unemployment, a noted agriculture analyst said yesterday.

Executive director of the Center of Agricultural Policy Studies H.S. Dillon said the development of the agricultural sector should be a top priority because it was an important opportunity to lead the country out of its economic crisis.

"A strong agricultural sector would not only help the country cope with the unemployment problem but would also encourage farming activities to produce export-oriented commodities," Dillon said in an interview aired by Trijaya FM, a private radio station.

He said growth in the agricultural industry would help millions of households throughout the country.

Studies have shown that the agricultural industry has a multiplier effect of more than 1.5 on other industries, meaning that a 1 percent increase in agroindustrial output would generate a 1.5 percent growth in other sectors of the economy, he said.

Dillon said that in past years, agribusinesses had been overshadowed by the government's preoccupation with the property and industrial sectors.

"What has happened is that the government seems to have been obsessed with industrialization, forgetting that 60 percent of the country's population lives in rural areas and works in the agricultural sector," he said.

He said unfriendly agricultural policies, such as huge subsidies on imported commodities, had discouraged people from developing agribusinesses and had led the country into a high dependence on imported commodities.

"Over the past five years, we have witnessed the largest influx of food imports ever, turning us into a deficit country in terms of food crops and live animals. Indonesia, which is known for its rich natural resources, ironically imports several basic commodities," he said.

He noted that last year alone, Indonesia imported at least 2.5 million tons of rice or about 5 percent of the country's total consumption, 900,000 tons of corn (6.6 percent of total consumption), 830,000 tons of soybeans (60 percent) and 1.6 million tons of sugar (30 percent).

Indonesia is already one of the world's largest importers of wheat, bringing in 4.5 million tons of wheat per year.

Besides these commodities, Indonesia also imports meat, milk and milk products.

The fall in the rupiah's value by some 70 percent since July has caused prices of imported products and commodities to increase more than 300 percent.

As a result, many local industries relying on imported commodities have gone bust because imported raw materials are too expensive.

The importation of basic commodities has also been a drain on the government's foreign exchange reserves.

Such a disaster could have been prevented if the government had designed good policies for managing and supervising farming activities, Dillon said.

He said the rupiah's sharp depreciation should actually serve as an opportunity to increase Indonesia's export share in the international market and that the government should take advantage of the situation by developing the agricultural sector.

He added that the government should provide incentives to promote further investment in agribusinesses and encourage farmers to boost their production.

He noted that the government's recent decision to raise floor price of unhusked rice 17 percent did not help farmers much due to sharp increases in production costs. (gis)