Redesign farm policy

President Megawati Soekarnoputri's widely criticized current tour of Europe could still go a long way in serving national interests if her attendance at the second World Food Summit in Rome leads her to full awareness of how vital food security is and how urgent is the need to restore agricultural development on top of her government policy agenda.

Heartening indeed is that an early sign of reckoning is already on the horizon. Agriculture minister Bungaran Saragih, who is accompanying Megawati, asserted that the President has approved a plan to increase import tariffs on food commodities and other farm produce to protect Indonesian farmers.

The Indonesian delegation to the Food Summit seems to have increasingly realized that like air and water, food is too vital a commodity to be left entirely at the mercy of the market mechanism.

It is an irony that at a time when the International Monetary Fund has been flexing its financial muscle to pressure Indonesia into opening wide its agricultural market, food producers in the United States and Europe are enjoying huge subsidies that enable them to dump their cheap produce on the international market, including Indonesia.

Only last month U.S. President George W. Bush signed a US$170 billion farm bill that grants heavy subsidies and other forms of farm support to such export crops as wheat and soybean, whereas farmers account for only about 2 percent of the American population.

The World Bank has estimated that farm-support policies in the developed countries grouped in the Organization for Economic Cooperation and Development cost about $330 billion a year, or around 1.3 percent of their gross domestic product, even though agriculture accounts for less than 5 percent of their national income. The financial support is more than five times higher than their average spending on overseas development assistance and twice the value of farm exports from developing countries.

The governments that generously grant such huge farm subsidies are the very ones which have staunchly preached to developing countries that government intervention distorts market and resource allocation and spreads benefits unevenly. When the Uruguay Round implementation in agriculture is supposed to have been completed for developed countries, their subsidized food exports have been undermining the markets and farm development in the least developed countries.

The Indonesian government is, however, well advised to realize that trade policy (tariff protection) is only one element, and in fact not the most important one, of a comprehensive agricultural development program needed to enhance food security, reduce poverty and protect the environment.

Even the tariff measure alone would pose a dilemma in view of the country's heavy reliance on imports for such food commodities as rice, sugar, corn and soybean and meat.

First of all, high tariff barriers would be rendered meaningless without an efficient and honest customs service and would instead increase margins for smugglers.

Sharply increasing import tariffs at a time when dependence on imports is still very high would steeply raise food prices and strengthen inflationary pressures until domestic production can expand to reduce the domestic deficit.

Since high food prices would inflict the heaviest burden on poor households as food usually accounts for more than 60 percent of their spending, well-managed social safety net programs are needed.

Most important is that there should be a national political consensus to support the policy and to make consumers willing to pay high food prices. It is such political consensus that has enabled governments in developed countries to allocate huge sums of taxpayers' money to support their farmers. It is also a similar political commitment that has made consumers in Japan and South Korea willing to pay unusually high prices for their food.

However vital food security is, the blunt reality is that food-crop farmers never find themselves among the highest earners in the rural areas, especially in Java where the average farmer household ownership of farmland is very small. Food security therefore should only be part of a broad-based rural development program because the ultimate goal is to increase rural household incomes from farm and off-farm activities.

It is indeed high time to revisit our rural development program, notably its agricultural component, even though it is not an easy task given the severe state budget restraints.

But if the government is really serious about its commitment to placing rural development, notably food security, on top of is policy agenda, that policy should be translated into the promotion of a conducive regulatory and economic environment to encourage farm production.

Most important too is that the government should improve ministerial coordination and cooperation with local administrations in mobilizing resources into such basic infrastructure as irrigation, transportation and processing facilities, rural financial networks and farm research stations designed to meet area-specific conditions.