FOOD SECURITY SITUATION AND
POLICY IN INDONESIA
Ronnie S. Natawidjaja
Irlan A. Rum
Center for Agrifood Policy and Agribusiness Studies
Padjadjaran University
Country Report Content
• Current rice production, utilization and
food security situation in Indonesia
• Public policies on rice and food security
in Indonesia
• Benefit Cost Analysis on different
policy to achieve rice self sufficiency
• Conclusions
The Political Economy Context
• Rice is not just only the main staple or a commodity,
it is nationally recognized cultural symbol of
prosperity which carried into modern-day
• Lumbung which is the traditional rice barn found in
every island and among all ethnic groups, is
extensively used as a symbol of guarantee for food
security
• From the political economic view, the
government felt need to demonstrate
its ability to control rice market in order
to gain public confident.
Self-sufficiency has become
the political objectives
• The argument has gained even stronger support from
the Parliament and interest groups following the food
price crisis in 2008.
• New Food Law 2012 strongly stated that Food
Security in Indonesia has to be based on local food
availability and food sovereignty
• Indonesian policy of self-sufficiency has been defined
as at least 90% self-sufficient in trend and allows
BULOG to import about 10%.
The Food Law 18/2012
• According to the New Food Law No. 18/2012, Food Security
has been defined as a situation when “individual” at all
times, have physical, social and economic access to
sufficient, diversified, safe and nutritious food that meets
his/her dietary needs, food preferences and religious
believes for an active and healthy life.
• The law also emphasizes that the food security condition
should be developed based on primarily domestic
production and the ability to define own food preference
(food sovereignty) based on local specific need and
resources.
The Main Issue of Food Security
• Food security is often misunderstood as “securing
(protecting) our food need”  rice self sufficiency
strategy seen as the only solution to the problem.
• These misunderstanding on definition of food security
have been exploited for mainly a political gain. With a
population of 230 million, fear of not having enough food
and depended to other country is a popular issue
• The self sufficiency on rice has becoming a must for
every cabinet  The Ministry of Agriculture spent most
of its budget for program to improve rice production by
all mean possible even if only work temporarily for a
short period.
Objective and Research Method
• The objective of the paper is to provide background information
and political economic view from the country level perspective.
• We conducted key informant interview with the rice market
stakeholders and Food Security in general
• Successfully interviewed 13 key informants all together:
 the Chamber of Commerce (Food and Agribusiness Section)
 Special staffs to the minister and the director of the Agency for Food
Security
 The management of BULOG
 Large rice trader and modern millers
 Farmer leaders
 Modern retailers, and
 The Food Station which manages the largest Rice Wholesale Market
in Indonesia, Cipinang Central Market, Jakarta.
Rice Production in Indonesia
Area Harvested (000 Ha)
Year
Yield (Ton/Ha)
Production (000 Ton)
Java
Outside
Java
National
Java
Outside
Java
National
Java
Outside
Java
National
2000
5,754
6,040
11,794
4.09
2.95
3.52
29,120
22,779
51,899
2001
5,701
5,789
11,490
4.86
3.29
4.08
28,312
22,148
50,461
2002
5,608
5,913
11,521
4.92
3.32
4.12
28,608
22,882
51,490
2003
5,376
6,112
11,488
5.01
3.56
4.28
28,167
23,970
52,138
2004
5,714
6,209
11,923
5.08
3.60
4.34
29,636
24,453
54,088
2005
5,708
6,131
11,839
5.08
3.60
4.34
29,764
24,387
54,151
2006
5,704
6,083
11,786
5.25
3.86
4.56
29,961
24,494
54,455
2007
5,671
6,477
12,148
5.37
4.12
4.75
30,466
26,691
57,157
2008
5,742
6,585
12,327
5.63
4.25
4.94
32,347
27,979
60,326
6,777
12,843
5.68
4.33
5.01
34,483
29,358
63,840
6,895
13,253
5.58
4.13
5.01
36,374
30,095
66,469
2009
2010
6,066
Sources: BPS
6,358
8
Rice Utilization in Indonesia
Household Consumption (000 Ton)
Feed & Waste
Seed
Processing
National
(000 Ton)
(000 Ton)
(000 Ton)
Year
Java
Outside Java
2000
18,153
12,652
30,805
3,218
329
0
2001
17,070
11,975
29,045
3,105
307
15
2002
17,387
12,278
29,665
2,673
290
203
2003
17,607
12,516
30,123
2,709
291
206
2004
17,643
12,625
30,268
2,783
315
207
2005
18,235
13,135
31,370
2,864
408
214
2006
18,283
13,255
31,538
2,876
358
23
2007
19,294
14,080
33,374
3,027
445
65
2008
20,297
14,910
35,207
3,195
427
65
2009
20,277
14,994
35,271
3,408
454
69
2010
21,376
16,034
37,410
3,399
513
60
Sources: BPS, MOA
9
Rice Production and Consumption
in Indonesia (Milled Rice)
MilionTonnes
50
45
40
35
30
25
2000
2001
2002
2003
2004
2005
Consumption
2006
2007
Production
2008
2009
2010
Averages Food Expenditures per Capita
by Food Items (percent of total expenditure)
0.70
Rice
0.60
Prepared food
Miscellaneous food items
0.50
Spices
Oil and Fats
0.40
Oil and Fats
Fruits
0.30
Vegetables
Eggs & Milk
0.20
Meat
Fish
Tubers
0.10
Tobacco and betel
0.00
1999
2002
2003
2004
2005
2006
2007
Sources: BPS,
11
2008
2009
2010
Monthly Rice Production in Indonesia
2004-2008 (Thousand Tons)
Peak of
the 1st Harvest
Peak of
the 2nd Harvest
Sources: BPS,
Rice Import and Export
Year
Rice Imports
(000 Ton)
Rice Export
(000 Ton)
Net
(000 Ton)
2000
1,354
1
-1,353
2001
637
4
-633
2002
1,786
4
-1,782
2003
1,425
1
-1,424
2004
236
2
-234
2005
189
43
-146
2006
438
1
-437
2007
1,405
2
-1,403
2008
286
1
-285
2009
450
0
-450
2010
686
0
-868
Sources: BPS, Bulog, MOA
13
Indonesia Rice Import
Million Tones
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Rice Value Chain in Indonesia
Source: Natawidjaja et.al, 2009
15
Rice Value Chain:
Cost, Value Add, and Margin
Traditional Channel
No.
Chain Actor and Activities
Medium
IDR
I
II
III
IV
V
VI
VII
FARMER
Total Cost
Profit Margin (Value Add)
Selling Price
LOCAL COLLECTOR
Total Cost
Profit Margin (Value Add)
Selling Price
LARGE RICE MILLER
Total Cost
Profit Margin (Value Add)
Selling Price
RICE WHOLESALER/DISTRIBUTOR
Total Cost
Profit Margin (Value Add)
Selling Price
RICE AGENT AT CONSUMER AREA
Total Cost
Profit Margin (Value Add)
Selling Price
1,451
2,200
3,651
142
17
3,810
436
754
5,000
26
74
5,100
67
233
5,400
RETAIL KIOSK/TRAD. RETAIL MARKET
Total Cost
Profit Margin (Value Add)
Selling Price
240
160
5,800
Premium
Share
62.9%
61.5%
64.0%
2.7%
6.0%
0.5%
20.5%
18.5%
21.9%
1.7%
1.1%
2.1%
5.2%
2.8%
6.8%
6.9%
10.2%
4.7%
IDR
1,467
2,660
4,127
142
17
4,286
475
1,739
6,500
26
174
6,700
67
233
7,000
240
260
7,500
Share
55.0%
60.7%
52.3%
2.1%
5.9%
0.3%
29.5%
19.7%
34.2%
Modern Chanel
Premium
IDR
Share
45.9%
1,467
55.3%
2,660
41.9%
4,127
1.8%
142
5.3%
17
0.3%
4,286
27.9%
523
19.7%
1,991
31.4%
6,800
2.7%
1.1%
3.4%
4.0%
2.8%
4.6%
6.7%
9.9%
5.1%
SUPERMARKET/MODERN RETAILER
Total Cost
Profit Margin (Value Add)
Selling Price
520
1,680
9,000
FINAL CONSUMER PRICE
TOTAL COST
TOTAL VALUE ADD
5,800
2,362
3,438
100.0%
100.0%
7,500
2,416
5,084
100.0%
100.0%
9,000
2,651
6,349
24.4%
19.6%
26.5%
100.0%
100.0%
Source: The rice value chain analysis was calculated based on primary data collected in October 2010 directly from farmers and
various actors on the chain starting from Subang District, the main production center of West Java North Coastal area to the market
center of Jakarta area.
16
Province with Highest Poverty Level
in Indonesia 2009
Percentage of People
Below Poverty Line
Province
Absolute Number of Poor
(000)
Papua
Urban
28.2
Rural
732.2
Total
760.3
Urban
6.10
Rural
46.81
Total
37.53
8.6
248.3
256.8
5.22
44.71
35.71
Maluku
38.8
341.2
380.0
11.03
34.30
28.23
Gorontalo
22.2
202.4
224.6
7.89
32.82
25.01
Nusa Tenggara Timur
109.4
903.7
1,013.1
14.01
25.35
23.31
Nusa Tenggara Barat
557.5
493.4
1,050.9
28.84
18.40
22.78
Aceh
182.2
710.7
892.9
15.44
24.37
21.80
Lampung
349.3
1,209.0
1,558.3
16.78
21.49
20.22
Sulawesi Tengah
54.7
435.2
489.8
10.09
21.35
18.98
Sulawesi Tenggara
26.2
408.2
434.3
4.96
23.11
18.93
117.6
206.5
324.1
19.16
18.28
18.59
2,420.9
3,304.8
5,725.7
15.41
19.89
17.72
311.5
274.3
585.8
14.25
22.60
17.23
2,148.5
3,874.1
8,022.6
12.17
21.00
16.68
11,910.5
20,619.4
32,530.0
10.72
17.35
14.15
Papua Barat
Bengkulu
Jawa Tengah
DI Yogyakarta
Jawa Timur
INDONESIA
Source: BPS
17
Correlation between Poverty Level and
Food Expenditure by Province
Source: BPS
18
Vulnerability to Food Insecurity
Map of Indonesia
Priority II
(Red)
Source: : Indonesian Food Security Council and WFP, 2009.
19
Priority III
Priority I
(Light Red)
(Dark Red)
Thirty Most Vulnerable Districts to
Food Insecurity by Provinces
Source: : Indonesian Food Security Council and WFP, 2009.
20
Policy Instrument Supporting
Food Security Policy
Policy instrument support the Food Security
Policy :
 Rice trade policy (border control)
 Input and food subsidies
 Price stabilization policy
 Government procurement and reserve
stock policy, and
 Rice for the poor policy (Raskin)
Current Rice Self Sufficiency Policy
• Rice is 90% self-sufficient in trend, allows BULOG
to import about 10%.
• There is no clear rule about what determines
the need for rice imports, how much imports
are necessary, and when to import.
• Multiple authorities on rice import decision
generated heated debates and greater
uncertainty in the rice market, further increasing
rice prices during critical times to the
disadvantage of the poor.
Current Rice Self Sufficiency Policy
• Domestic market is isolated, no direct link
to international rice market and import is
facilitated by BULOG
• The current rice policy has resulted in
more stable but much higher rice prices
than the international rice price levels
• At the time of the lowest stock (Nov-Jan),
domestic market is vulnerable to issue,
gossip and speculation.
Domestic Rice Price in Indonesia
and International Prices
Source: BULOG
24
Government Subsidy and Budget to
Secure the National Food Security
Milllion IDR
Source: Coordinating Ministry of Economy
25
Government Purchase Price and
the Actual Market Price for Rice and Paddy
Source: BULOG
26
Government Rice Stock Holding
Source: BULOG
27
Rice for the Poor Distribution
Year
Rice Distributed
(ton)
Number of Recipient
(Household)
2000
1,350,000
7,500,000
2001
1,501,274
8,700,000
2002
2,349,600
9,790,000
2003
2,059,276
8,580,313
2004
2,061,793
8,590,804
2005
1,991,897
8,300,000
2006
1,624,500
10,830,000
2007
1,736,007
15,781,884
2008
3,342,500
19,100,000
Source: BULOG
28
Benefit Cost Ratio of the Current Policy
• The Total Benefit:
 Total value of rice production at domestic
price
• The Total Cost:
 Cost of rice production
 Cost of seed and fertilizers subsidy
 Cost of government rice procurement
 Cost of rice import by BULOG
 The Benefit Cost Ratio = 1.00
Benefit Cost Ratio of the Current Policy
B/C Ratio
1.08
1.06
1.04
1.02
Average Benefit Cost Ratio = 1.00
1.00
0.98
0.96
0.94
0.92
0.90
0.88
0.86
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Full Rice Self-Sufficiency Policy
• Rice is 100% self-sufficient, no trade is allowed.
So, domestic rice market is completely isolated
• There is little saving from not importing the rice,
since the need for rice import is actually quite
small
• To match the growing demand of rice and
compensating for rice land conversion,
government need to spend additional budget to
keep certain amount of land available for rice
production
 The Benefit Cost Ratio = 0.98
Benefit Cost Ratio of
Full Rice Self-Sufficiency Policy
• The Total Benefit:
 Total value of rice production at domestic price
 Total saving from buying rice import
• The Total Cost:
 Cost of rice production
 Cost of seed and fertilizers subsidy
 Cost of government rice procurement
 Cost of rice land expansion (to keep up with
demand)
 The Benefit Cost Ratio = 0.96
Benefit Cost Ratio of
Full Rice Self-Sufficiency Policy
B/C Ratio
1.04
1.02
Average Benefit Cost Ratio = 0.98
1.00
0.98
0.96
0.94
0.92
0.90
0.88
0.86
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Rice Self-Sufficiency Policy with Quota
• Rice is 90% self-sufficient in trend, allows for import
about 10% through quota.
• Fixed rice import quota is set before the end of each
year according to production and consumption
prediction.
• The National Food Authority is mandated by the Food
Law No. 18/2012 can decide on the amount of import
quota needed and put into transparent bids to avoid
corruption.
• Indonesia will still be able to maintain its self-sufficiency
policy but with more efficient, less harmful results and
consistent with international market price trends
Benefit Cost Ratio of
Rice Self-Sufficiency Policy with Quota
• The Total Benefit:
 Total value of rice production at domestic price
 Total saving from price adjustment to international
market
• The Total Cost:
 Cost of rice production
 Cost of seed and fertilizers subsidy
 Cost of government rice procurement
 Cost of rice imported
 The Benefit Cost Ratio = 1.042
Benefit Cost Ratio of
Rice Self-Sufficiency Policy with Quota
B/C Ratio
1.40
1.20
1.00
Average Benefit Cost Ratio = 1.042
0.80
0.60
0.40
0.20
0.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Rice Self-Sufficiency Policy with Tariff
• Rice is 90% self-sufficient in trend, allows for a
controlled import through tariff;
• Tariff barrier is a preferred mechanism from
the trade agreement perspective;
• Tariff is set at 32% to achieve an import target
similar to the amount controlled by quota;
• However, the challenge with the mechanism is
on a border control and high cost of monitoring
for the tariff policy to be effective.
Benefit Cost Ratio of
Rice Self-Sufficiency Policy with Tariff
• The Total Benefit:
 Total value of rice production at domestic price
 Total saving from price adjustment to international
market
 Income from tariff
• The Total Cost:
 Cost of rice production
 Cost of seed and fertilizers subsidy
 Cost of government rice procurement
 Cost of rice imported
 The Benefit Cost Ratio = 1.043
Benefit Cost Ratio of
Rice Self-Sufficiency Policy with Tariff
B/C Ratio
1.40
1.20
Average Benefit Cost Ratio = 1.043
1.00
0.80
0.60
0.40
0.20
0.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Conclusion
• Politically, rice self-sufficiency policy is a must for Indonesia.
However, there are better alternatives policies to achieve the
objective;
• The best and more pro-trade is self-sufficiency policy with a
tariff mechanism. The challenge is on a border control and high
cost of monitoring for the tariff policy to be effective;
• The second best is self-sufficiency policy with a quota
mechanism. The policy gives the same Benefit Cost ratio with
tariff policy. However, this policy is less preferred from the
trade agreement perspective;
• The full 100% rice self-sufficiency policy is the most expensive
and less effective policy to achieve the policy objective.
Policy Suggestion
• Food Security Policy in Indonesia is still over weighted by the
political issue rather than real ground to earth problem of
accessibility to food, energy and nutritional issue
• To move forward, there is need of serious effort to fully
implement and widely socialized the Food Law 18/2012 to
local government and stakeholder members on the
perspective of access to food, diversification, local specific
food, safety, nutrition aspect, and food preferences
• Need strong policy to slow down conversion of productive
agriculture land to non agriculture
• Short term Subsidy Policy should be able to be converted as
much as possible to the long term investment in supporting
Food Security of the country.