OVERVIEW-Indonesia’s efforts towards achieving strategic foods self-sufficiency

Photo: A vegetable seller holds a pack of chilli for a customer at the morning market in Jakarta, Indonesia, August 1, 2017. REUTERS/Beawiharta

JAKARTA – To achieve self-sufficiency in strategic food commodities and reach its goal of becoming the food basket of the world by 2045, Indonesia’s government will continue its efforts to restructure the trade flows of domestic agricultural products, Amran Sulaiman, the minister of agriculture told Salaam Gateway.

The strategic food commodities are rice, corn, soybean, onion, garlic, chili, sugar and beef.

According to Sulaiman, the government wants to break up the oligopolies and monopolies in domestic strategic foods markets and re-structure the monopsonistic sectors, where farmers’ bargaining positions are weakened due to a big buyer controlling a large share of the market. In the prevailing market, middlemen who control access to markets, market information, and capital distort market prices. "It’s important to provide access and market information for farmers, as well as provide financing for them," said Sulaiman.

The minister added that distribution lines owned by some middlemen, and companies forming cartels to control prices could threaten national food self-sufficiency targets, which could also be hit by monopolies and cartel practices in the high profit import supply chain.

CRACKDOWN

The government has made moves to check unfair competition in the domestic agribusiness sector and recent cases have involved both market players as well as politicians and even a member of the legal fraternity.

Last year in April, the business competition supervisory commission (KPPU) penalised 32 cattle importers and beef feedlot companies 107 billion Indonesia rupiah ($8.1 million) in fines. The companies were found guilty of forming a cartel to fix prices, and use their beef import quotas to withhold stock to the local markets, which resulted in higher prices for consumers.

The companies protested their innocence, and some in the industry attributed the increase in prices to the cut in import permits made by the Indonesian government in its pursuit of self-sufficiency.

Six months later in October last year, KPPU cracked down on the local poultry sector, penalising 12 companies 119.67 billion rupiah ($9.16 million) in fines for the premature culling of 2 million parent stock chickens in an effort to control market prices.  

The biggest company to be fined, publicly listed Charoen Pokphand Indonesia, said at the time that if cartel practices did exist, they were due to the government’s instructions to perform the mass culling.

There has also been a case of a politician colluding with industry to fix prices. In 2013 then chairman of the Prosperous Justice Party (PKS) Luthfi Hasan Ishaaq was convicted for his part in securing the beef quota of a large meat importer in return for financial kickbacks. The Jakarta Corruption Court sentenced Ishaaq to 16 years imprisonment and a fine of 1 billion rupiah.

In another case, a judge of the constitutional court, Patrialis Akbar, is currently under detention and awaiting trial after the corruption eradication commission (KPK) nabbed him on charges of accepting bribes to sway a judicial review in a dispute over beef import policy.

SELF-SUFFICIENCY EFFORTS

“Food sovereignty is becoming increasingly relevant when Indonesia has entered the era of free trade, including the ASEAN Economic Community (AEC) in which the flow of goods and services among fellow nations throughout Southeast Asia will be free to enter and exit,” said Sulaiman.

The AEC was launched in 2015 with the intention of creating a single market among the 10-member Association of Southeast Asian Nations (ASEAN) but the levels of integration vary.

Indonesia itself has set limitations on the ‘free’ flow of certain commodities, including vegetables and fruits, into the country in a bid to protect local farmers and produce.

While it continues to build its beef capacity, the government claims the nation is self-sufficient in poultry. According to government data, poultry production averages 1.6 million tonnes while demand hovers at around 1.2 million tonnes.

To increase local beef stock, the government launched a special artificial insemination programme (UPSUS SIWAB) in February this year to help breeders improve livestock production. The programme aims to carry out artificial insemination of 4 million cows to breed 3 million calves by 2018.

Other efforts by the government to accelerate the increase in cattle population is through setting a 1:5 ratio for cow importation that requires one breeder cow for every five feeders imported.

To safeguard cattle in the supply chain, the agriculture ministry is working with the military to escort imported cattle for breeding to farmers in the provinces of Riau, North Sumatra, and Aceh. The police have also been roped in to help control the numbers of productive female cattle from being slaughtered.

The government is also trying to lower the industry’s costs by shortening distribution channels.

“We improve logistics and supply chains for cattle and beef commodities through the procurement and operation of the livestock vessel designed to meet the standards of animal welfare, and allocating a subsidy of 80 percent on tariffs … We are also preparing an additional five livestock vessels that are expected to be operational by 2018,” director general of livestock and animal health at the agriculture ministry Ketut Diarmita told Salaam Gateway.

The first livestock vessel, the Camara Nusantara I, transported the first batch of livestock in September 2015 from large cattle breeding area East Nusa Tenggara to Jakarta.

HELPING FARMERS GO DIGITAL

The government is also keen for farmers to go digital and online to trim and streamline the long distribution chains from farmers to consumers.

In April last year President Joko Widodo launched an online marketing system for agricultural products and his government has said it is committed to a large-scale socialisation programme to support the initiative.

“Utilization of Information Technology is the enabler in achieving the welfare of farmers through economic development and social transformation … With online supply chain connectivity via courier or logistics agents or delivery services … farmers can market their products online directly to consumers, regardless of volume,” said Diarmita.

As part of national effort to help farmers, five mobile apps— Petani, Limkilo, PantauHarga, and TaniHub—have already been launched to facilitate more direct sales to consumers.

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