Govt urged to turn back to agribusiness to beat crisis

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)