RSS Feed (xml)

Powered By

Skin Design: Kisi Karunia
Base Code: Free Blogger Skins

Powered by Blogger

Friday, 13 April 2007

Agricultural Development Plan of Republic of Indonesia 2005-2009


After the 1998-1999 economic crisis, the agriculture sector is now in a phase of accelerated growth.

Agricultural sector is a prime mover of national and most of regional economic development through its role in GDP’s growth and export earning, providing food and raw material for industry, creating job opportunity and increasing income for the people.

The agriculture sector has proven to be more resistance to external shock than other sectors.

The agriculture sector has been playing a role as a buffer of the national economy, particularly in supplying food, export earning, job opportunity and poverty alleviation.

To maintain program sustainability and to keep growth momentum as well as utilize development result, agricultural development program and activities plan is formulated.


1.1. Performance 2000-2004

Agricultural Sector Performances

a. GDP Growth :
1983-1997 (before crisis) : 1.57 % per annum
1998-1999 (during crisis) : 0.88 % per annum
2000-2003 : 1.83 % per annum
2003-2004 : 3.23 percent

b. Agricultural Production

Productions of paddy, corn, groundnut, cassava and sweet potato have increased by 0.53, 3.38, 3.22, 2.81 and 2.35 % per annum.

Production of Soybean has decreased by 18.48 percent per annum.
Paddy production:54.06 million tons (increase by 3.69 %) Corn: 11.16 million tons (2.54 %); Soybean : 721 thousand tons (7,40 %); Cassava : 19,263 million tons (3.99 %); Sweet potato has decreased by 5.13 %

During the same period
2000-2003 : growth rate of broiler and layer were 23.4 and 10.27 % per annum, respectively

During crisis those commodities had experienced contraction of 28.23 % and 8.92 % per annum respectively.

C. Export and Import

The average export value was US $ 5.1 billion
Average import value was US $ 4.6 billion
Average balance of payment surplus of US $ 0.5 billion
Import had been drastically declined, in such the average balance of payment surplus of US $ 1.4 billion

Export has been increasing so that balance of payment surplus has reached US $ 2.2 billion

June 2004
Import value of paddy had been decreasing from 1.4 million tons ( US $ 291 million) to only 0.17 million tons (US $ 0.4 million).
Import value of corn had been decreasing from US $ 160 million to only US $ 80 million.
Import value of soybean has been increasing from US $ 370 million in 2003 to be US $ 383 million in 2004.

d. Farmers Welfare
In 1998, multi dimensional crisis caused the increased of number of poverty to 26 % (32 million persons) of rural population and 22 % (18 million persons) of urban population.
In 2004, number of poverty has drastically decreased to 19.5 % (25 million persons) of rural population and 12.6 % (13 million persons) of urban population.
Absolute number of poor farm household had been decreasing from 26 million persons in 1999 to 20.6 million persons in 2002.

e. Food Security
In 2003, food import dependency (calorie) was in the range of 0 percent for poultry meat, eggs, sweet potato and cassava to 2.2 percent for rice.

The higher import dependency was for sugar 1.69 percent, soybean 1.51 percent and corn 1.25 percent.

The higher import dependency was for sugar 1.69 percent, soybean 1.51 percent and corn 1.25 percent.

Thus, in general national food security is strengthened.
Food security at household level

Energy supply, having significantly declined from 2002 cal/capita/day in 1996 to 1852 cal/capita/day.
In 2002, energy supply has significantly increased to 1986 cal/capita/day.

Protein supply, having declined from 54.41 gram/capita/day in 1996 to 48.67 gram/capita/day in 1999, protein supply was then increased to 54.42 gram/capita/day in 2002.

The above performance is among other due to contribution of various policies, programs and activities implemented by all institutions under the Ministry of Agriculture, supported by various related institutions and stakeholders in general.

2.2. Implementation of Agricultural Development Management
Development reformation which demands good governance, requires agricultural management adjustments.

The adjustment of development planning mechanism is shifted from top-down planning to be based on top-down policy and bottom-up planning integration.

Before decentralization era, agricultural development planning process was carried out by central, was mechanistic and less participative

Agricultural development program and budgeting break down is formulated in line with government by providing more opportunity for the community to participate

Monitoring and evaluation system (MES)

MES is established as an instrument of program implementation control.

MES does not evaluate physical and financial substances aspects only, but it also covers performance in line with evaluation standard using logical framework performance (input, output, outcome, benefit and impact).

EMS is designed to be compatible to formulate government institution performance report (LAKIP).


3.1. Changes on Strategic Environment

a. International Changes on Strategic Environment
(1) Liberalization and Unfair International Trade
Awareness of international trade role for the benefit of community welfare has stimulated various neighboring countries establish regional economic cooperation body which has an interest to build common strong economic.

Through economic integration, it is hoped that trade barriers either in the form of tariff or non-tariff barriers among the members can be reduced or eliminated, so that trade mobility of goods and services as well as investment among countries within the area become borderless.

After ratifying General Agreement on Tariff and Trade and World Trade Organization
Indonesia has to follow the rule that has been ratified.

Indonesia has reduced all of agriculture commodities import tariff.

Commitment to abolish economic and trade policies which distorted market, in fact were not followed by all countries.

Indonesian farmers faced unfair competition with other countries’ farmers who were protected through tariff and non-tariff as well as indirect and direct subsidy.

Government has to apply protection subsidy while at the same time promote strategic agricultural products such as rice, sugar, corn and soybean.

Protection policy that could be implemented, among others: application of import tariff and import management, production input subsidy, output price regulation and interest subsidy for farming credit scheme.

For promotion policy
Government facilitates efforts to improve productivity, business efficiency and quality; as well as agricultural product standardization and increasing market access through promotion activities both in domestic and abroad.

(2) Production system and management change
A radical change in market structure and job opportunity which have an implication on the new market formation :
Basic human need will be fulfilled and people preferences have shifted to secondary and tertiary needs, so that the future tendency is that services market will grow faster than goods market;

People income will be higher, which in turn they will prioritize their satisfactory needs, so that market segmentation will move toward smaller individual groups
Shifting in demand among individual in the same goods and services market.

Strong competition to obtain market share
Businessmen will develop Supply Chain Management (SCM), which integrate all business actors from all segments of supply chain vertically into joint business (cooperation) based on agreement and standardization of specific process and product for every supply chain.

Key of product competitiveness among supply chain is efficiency on every supply chain segment and functional relation among segments in maintaining consistency of every actor in filling agreement and standard use.
Vertical integration among supply chain segments and horizontal integration among actors within one segment, for instance integration among producers, integration among distributors, and integration among collectors within one same supply chain, are needed.

International agreement on protection to intellectual property right (IPR)

Domestic enterprises which use foreign IPR and trade mark have to pay for royalty based on mutual agreement.

Multi-national enterprises will expand to domestic market, either through direct investment or franchising

Franchising and trade mark leasing in the field of domestic consumption product, such as fried chicken and hamburger will increase consumption pattern change and create tight competition with national original products.

Franchising and trade mark leasing could benefit in increasing agricultural product market share and competitiveness
It has also positive impact for the development of domestic agribusiness.

(3) Strengthening Food Security and Poverty Alleviation
One important commitment of Rome Declaration in 2002 is emphasized on the importance of agriculture and rural development in eliminating poverty and hunger.
Agricultural and rural development plays a key role in strengthening food security, because 70 percent of the poor in the world are living in the rural and engage in agriculture sector.

Poverty alleviation and hunger elimination can only be done through rural and agriculture development sustainability which could increase agriculture productivity, food production and people purchasing power.

(4) Progress in Technology Invention and Application
The fast progress is occurred in the field of crops and animal biotechnology which is supported by progress of biology molecular science.

Success of transformation and organism regeneration of genetically modified organism (GMO) have opened opportunity for the germ source based industrial development.

The utilization of GMO in relation to food security and food safety is still controversial.

The absent of strong and convincing conceptual and empirical knowledge has resulted in hesitation of decision maker to apply GMO.

Most countries apply permissive policy or precautionary policy to the use of GMO.
This controversy has caused difficulties for developing countries, in facing the pressure from donor countries, organization and multinational cooperation related to the use of GMO.

In the field of agriculture equipment and machinery, to face competition, robotic farming machinery has been developed.

In the field of post harvest, advanced technology such as product quality sensing without damaging product by using image analyzer for high commercial value agricultural product has also been developed.

Fast expansion of using satellite in the data collection, including Geographical Information
System (GIS), could be used in land use planning research related to agricultural commodities distribution and production, natural resource management as well as poverty alleviation.

b. National Changes on Strategic Environment

(1) Demand for Food and Industry Raw Material
Increasing demand for agricultural products, in term of quantity, quality and diversity
Increasing labor force
Increasing demand for land for non-agriculture use (residential, industrial, economic infrastructure)

Land fragmentation and declining acreage landholding per household which in turn will increase poverty in agricultural sector in the future.
The economic gap between rural-urban is remaining high

Number of poor people in the rural remains higher than urban people
This condition provides our understanding that poverty and vulnerable problems handling in the next 5 years remain to be the main priority.

(2) Natural Resources Scarcity and Quality Degradation

Main problems faced in the agricultural development are:
Land conversion
Land rent gap among regions (Java vs. outside Java; urban vs. rural, paddy land vs. dry land)
High rate of urbanization growth

Due to decreasing paddy field in down stream area, while the number of farmers increasing, has stimulated increasing farming intensity in up-stream area, and has caused river basin quality degradation.

Declining irrigation canal efficiency has caused food productivity leveling off in paddy field.
Combined impact of decreasing arable land and irrigation canal efficiency has caused declining national food production capacity.

(3) Development Management: Regional Autonomy & People Participation
The dominant government role in the past has shifted to only become facilitator, stimulator and promoter of agricultural development.

Agricultural development during the regional autonomy era will depend on the people creativity in each region.

Policy formulation process will also change from top down and centralistic toward bottom-up and decentralized approach.

Total reformation demands governmental institution reconstruction based on good governance principles with three main characteristics, i.e., credibility, accountability, and transparency.

Development policy democratization and KKN prevention through good governance will reduce high economic cost and market distortion (monopoly) due to policy blunder.
Economy will be more efficient while business growth will be based on real competitiveness rather than due to government protection and support.

3.2. The Problems
Scarcity and Declining Natural Resources Capacity

Weak and Inappropriate Target of Technology Transfer System
Inadequate Access to Business Services, Particularly Capital

Long Marketing Chain and Unfair Marketing System
Low Quality, Mentality and Skill of Farmers
Weak Farmers Institution and Bargaining Position
Macro Economic Policy, Which is not yet Supporting Agriculture

3.3. The Challenges
Optimization of Agricultural Resources Uses
Food Security Improvement and Provision Industrial Raw Materials

Reducing Unemployment and Alleviating Poverty
Implementation of Sustainable Development

Trade Globalization and Investment
Agro-industry Development up to the Village Level

Central and Regional Program Synchronizations Inline with Regional Autonomy
Good Governance

3.4. The Targets

There are three main targets of agricultural development which must be reached in the next five years namely:

the improvement of national food security covering improvement of production capacity of agricultural commodities and decreasing the dependency to food import around 5-10 percent of domestic demand

the improvement of value added and competitiveness advantage of agricultural commodities covering the improvement of the qualities of agricultural products, the improvement agricultural product processing diversification and the increase export and export surplus of agricultural product

the improvement of farmer welfares covering the increased on labor productivity in agricultural sector and lower poverty incidences.

a. Specific target GDP according to sub sector is as follows
Food crops sub sector GDP will increase from RP 77.0 trillion in 2005 to RP 79.0 trillion in 2009.
Horticulture sub sector GDP will increase from RP 46.0 trillion in 2005 to RP 53.0 trillion in 2009.

Estate crops sub sector GDP will increase from RP 48.0 trillion in 2005 to RP 61.0 trillion in 2009.

sub sector GDP will increase from RP 28.0 trillion in 2005 to RP 33.0 trillion in 2009.

b. Investment
In the period of 2005-2009, with GDP target as mentioned previously, agricultural sector needs investment of RP 77.07 trillion or RP 14.40 trillion per year.

Food crops sub-sector needs investment of RP 30.05 trillion or RP 5.08 trillion per year on the average.

Horticulture of RP 9.92 trillion or RP 1.98 trillion per year on the average
Estate crops of RP 20.52 trillion or RP 4.10 trillion per year on the average and livestock of RP 16.12 trillion or RP 3.22 trillion per year on the average.

c. Employment Creation
In the period of 2005-2009, labor absorption on agricultural sector is projected to increase from 41.3 million peoples in 2005 to 44.5 million in 2009.

Labor absorption in agricultural sector in 2005 is greater than that of 2004 which reached 39 million peoples.

Job opportunities created by agricultural sector in 2009 will be 97.47 percent of job opportunities in agricultural sector

d. Food Securities
In the period of 2005-2009, the growth of food crops production is projected to increase around 0.35 - 6.50 percent per year.

Production of paddy will increase from 55.03 million tons in 2005 to 57.71 million tons in 2009.
Corn production will increase from 11.82 million tons in 2005 to 13.97 million tons in 2009.
Soybean will increase from 777 thousand tons in 2005 to 1.0 million tons in 2009.

Groundnut production will increase from 832 thousand tons in 2005 to 850 thousand tons in 2009.
Cassava will increase from 19.57 million tons in 2005 to 19.90 million tons in 2009.
Sweet potato production will increase from 1.88 million tons in 2005 to 1.91 million tons in 2009.

In the 2005-2009 period, horticulture production is projected to increase around 2.74 - 8.96 percent
Potato will increase from 1.05 million tons in 2005 to 1.21 million tons in 2009.

Chili production will increase from 1.1 million tons in 2005 to 1.24 million tons in 2009.
Shallot production will increase from 819 thousand tons in 2005 to 1.1 million tons in 2009.

Cabbage production will increase from 1.4 million tons in 2005 to 1.61 million tons in 2009.
Tomato production will increase from 730 thousand tons in 2005 to 873 thousand tons in 2009.
Carrot production will increase from 373 thousand tons in 2005 to 438 thousand tons in 2009.

Production of fruits
Banana will increase from 4.53 million tons in 2005 to 6.07 million tons in 2009.

Mango production will increase from 1.68 million tons in 2005 to 2.23 million tons in 2009.
Orange production will increase from 1.62 million tons in 2005 to 1.84 million tons in 2009.

Durian production will increase from 824 thousand tons in 2005 to 1.15 million tons in 2009.

Papaya production will increase from 665 thousand tons in 2005 to 848 thousand tons in 2009.

Pineapple production will increase from 739 thousand tons in 2005 to 932 thousand tons in 2009.

Avocado production will increase from 298 thousand tons in 2005 to 390 thousand tons in 2009

Estate crops production is projected to increase around 0.79 - 7.09 percent per year

Palm oil will increase from 13.15 million tons in 2005 to 16.74 million tons in 2009.
Natural rubber production will increase from 1.95 million tons in 2005 to 2.34 million tons in 2009.

cocoa production will increase from 637 thousand tons in 2005 to 778 thousand tons in 2009.
Coffee production will increase from 753 thousand tons in 2005 to 892 thousand tons in 2009.

Coconut production will increase from 3.29 million tons in 2005 to 3.39 million tons in 2009.
Pepper production will increase from 101 thousand tons in 2005 to 130 thousand tons in 2009.

Production of seasonal crops
Tobacco will increase from 234 thousand tons in 2005 to 307 thousand tons in 2009.

Sugarcane production will increase from 2.16 million tons in 2005 to 2.85 million tons in 2009.
Livestock production is projected to increase around 0.08-10.25 percent per year

Beef meat will increase from 392 thousand tons in 2005 to 441 thousand tons in 2009.
Buffalo meat production will increase from 46 thousand tons in 2005 to 47 thousand tons in 2009.

Horse meat production will increase from 1,598 tons in 2005 to 1.604 tons in 2009.
Goat meat will increase from 71 thousand tons in 2005 to 77 thousand tons in 2009.

Lamb meat production will increase from 87 thousand tons in 2005 to 98 thousand tons in 2009.

Pork meat production will increase from 191 thousand tons in 2005 to 209 thousand tons in 2009.

Poultry meat will increase from 1.52 million tons in 2005 to 2.01 million tons in 2009.
Egg production will increase from 1.14 million tons in 2005 to 1.60 million tons in 2009.
Milk production will increase from 657 thousand tons in 2005 to 971 thousand tons in 2009.

The agricultural development target for 2005-2009
Food consumption diversification shall consider Balanced Dietary Pattern (BDT):
Increasing food consumption diversification.

Decreasing dependency at one specific staple food. (BDT) target in 2009 is 96.6 percent.
BDT: grain 52.6 %, oil and fat 10 %, tuber 5.7 %, animal source food 11.2 %, oily seed 3 %, pulses 4.8 %, sugar 5 %, vegetable and fruit 5.7 %, and other food sources 3 %.

e. Value Added and Competitiveness
Agricultural trade balance is projected to increase from US $ 3.9 billion in 2005 to US $ 7.7 billion in 2009 or increase by 17.11 percent per year.

The total foreign currency obtained from agriculture sector is projected to increase from US $ 7.8 billion in 2005 to US $ 12.3 billion in 2009.
On the period of 2005-2009, it will increase the production efficiency reflected by decreasing the growth of production cost per unit by 5 percent per year.

f. Farmers Welfare
In the period of 2005-2009, labor productivity on agricultural sector is projected to increase from RP 4.80 million in 2005 to RP 5.08 million per capita per year or increase by 1.4 percent per year on the average.
The percentage of poor people in rural areas will decrease from 18.90 percent in 2005 to 15.02 percent in 2009


4.1. National Medium-term Development Plan:
(1) Agricultural revitalization
(2) The improvement of investment and non-oil export
(3) Macro economic stabilization
(4) Poverty alleviation
(5) Rural development
(6) Improvement of natural resources and environment management

Agricultural revitalization is directed to increase:
The ability to produce rice domestically around 90-95 percent of total demand
Food production and consumption diversification
Food availability from animal sources
Value added and agricultural production competitiveness
Production and export of agricultural commodities

4.2. General Strategies
To Bring About Clean Development Management, Transparent and Free From KKN (Corruption, Collusion and Nepotism)
To Improve Coordination in Preparing Policies and Agricultural Development Management
To Expand and Utilize Production Bases Sustainable
To Improve Institutional Capacities and Empower Agricultural Human Resources
To Improve the Availability of Agricultural Infrastructure
To Improve Innovation and Dissemination of Appropriate Technology
To Promote and Protect Agricultural Commodities

4.3. The Policies Directions
There are strategic policies which need to be stressed and need immediate action are:
Conducive macroeconomic policies, i.e. low level of inflation, stable exchange rates, and positive real interest rates.
Agricultural infrastructure development covering development and rehabilitation of irrigation systems, agricultural land expansion, especially in out of Java, prevention of land conversion especially in Java, development of farm roads, and other infrastructures.
Financing policies to develop financial institution primarily serving agricultural sector, micro financial institution, syariah financial scheme, and others.

Trade policies which promote market activities both for domestic and export. In addition to protect agricultural sector from world market competitions, we need: (a) to promote the concept of strategic products (SP) in WTO forum; (b) Tariff application and non tariff barrier for rice, soybean, corn, sugar, some horticultural products and livestock
Industrial development policies which is stressed to increase value added and farmer’s income.
Conducive investment policy to stimulate more investment in agricultural sector.

Development budget prioritized for agricultural sector and its supporting sectors.
Regional government attention to agricultural development which covering: agricultural infrastructures, empowering agricultural extension, institutional development on agriculture, eliminating various impediments (tax, fees) which can reduce the agricultural sector competitiveness, and providing sufficient regional budget allocation.

No comments: