When agribusiness benefit farmers?

Agribusiness has yet to benefit the Indonesian farmers even though it has been cited as one of the main agendas of agricultural development. The issue was the central theme of this year's Agricultural Day over the weekend. H.S. Dillon, an agricultural policy analyst and international commodity negotiator based in Jakarta, examines the issue.

JAKARTA (JP): In the past five years Indonesia has been mesmerized by the magic of agribusiness. Several academics have touted it a "paradigm shift", with agricultural bureaucrats falling over each other to jump on the bandwagon. They have joined academics in chanting the agribusiness mantra, and attributing it to the power to cure all rural ills. In short, they regard agribusiness as a panacea. But how far off the mark are these people?

What is being termed a paradigm shift is actually more a reflection of myopia on the part of bureaucrats and academics. The farmer or owner of a farming business has always had to adopt a systems approach -- he or she has to secure inputs, manage the production process, and market the produce. Only academics and bureaucrats have been wearing blinders, due either to narrow discipline, overspecialization or to the compartmentalization and protection of turf.

What is the logic of traditional Indonesian agriculture? With a proliferation of small farms -- despite the existence of markets, the distribution chain is controlled by middlemen and small-scale processors. With low productivity in most of the commodities, few forward or backward linkages to other rural or urban enterprises exist.

Juxtapose this to the first form of agribusiness introduced to Indonesia -- the plantation. This was, and continues to be, a single enterprise performing a sequence of activities, from primary production to marketing. Plantations, either private or government-owned, have been virtual enclaves, with relatively few growth linkages to the small farm sector. The employment they have generated is more akin to indentured labor, filled mostly from outside the local communities. They have not transferred any notable skills and technology to small farmers in their surroundings.

What drives modern day agribusiness? First and foremost, the corporations are in business to garner returns and not for charity -- profit is the survival rule. Second, their overriding mission is to provide safe, high quality food at competitive prices. Of course, many of them specialize in providing inputs such as machinery and support services somewhere along the food chain.

Third, they will source globally, not only for commodities, but also for inputs and services such as finance, technology, and human resources. Finally, Indonesian agribusiness is geared more toward meeting the demand of middle-class consumers than to enhancing the productive capacity of small farmers. Indonesian agribusiness has continued to rely upon imports to meet the strong surge in demand for quality food during the last four years. In other words, Indonesian agribusiness is passing the small farmer by.

But before the Indonesian farmer benefits from a market-driven agricultural system, the constraints on the small farmer have to be broken. The farmer's produce has to meet the specifications, timeliness, and the volumes demanded by agribusiness. This requires access to credit, inputs, and technical advice -- resources which should be provided by the government, not by agribusiness. Therefore, the Indonesian farmer will only begin to benefit from agribusiness when the agricultural bureaucracy will be able to:

a) meet the farmers' demand for more sophisticated technology, not just for rice, but for livestock, fisheries and tree plantations, and for the effective delivery of such technologies, and,

(b) fulfill the farmers' expectations that agricultural credit markets will work reasonably, that their land will be properly tilted, that agro-inputs will be available at kiosks, that rural roads will be built, irrigation systems maintained and that government oversight will ensure that their produce manages to reach the consumer's table efficiently.

When will all of this come about? Not until leadership of the agricultural bureaucracy -- given to rhetoric, and pontificating in meetings, seminars, and conferences than working with the farmers -- starts treating the Indonesian farmer as an equal partner rather than a subordinate, and champions the cause of the small farmer against all vested interests.

The fact the agricultural bureaucratic leadership has not managed to get its act together to formulate and implement bylaws protecting the Indonesian farmer based on the Bill on Crop Cultivation Systems passed five years ago, is nothing short of scandalous. In other words, not before this agricultural bureaucracy leadership transforms itself from being part of the problem to becoming part of the solution.