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Indonesian food imports soar
Local output of fruits and vegetables soar to US$10 billion, but 80% of fruits on supermarket shelves are imported
Agriculture has been an integral part of Indonesia’s economic success story since the former Suharto government used the revenue boost from the 1973 and 1979 oil price hikes to accelerate rural development.
According to a recent report by the Australian Bureau of Agricultural and Resource Economics (ABARE), agricultural output grew by 4% annually between 1968 and 1992 with agricultural productivity rising 2.6% a year.
However, between 1992 and 2000, agricultural growth has slowed to just 1% annually with productivity contracting by 0.1% a year.
ABARE said there were four main reasons for the drop in productivity:
l There was a significant decline in research and development and on infrastructure expenditure for agriculture;
l Government subsidies on farm inputs, such as fertilisers and pesticides, were significantly reduced especially after the 1997 Asian economic downturn;
l Increased industrialisation and urbanisation led to increased competition for land and forced agricultural production on to marginal land; and
l Lack of economies of scale was a barrier to increase productivity with around 75% of farms being less than one hectare in area.
Rice is top crop
Rice is Indonesia’s most important staple food and crop, making up about 23% of total agricultural output in volume terms.
Production has been rising strongly over the years from around 20 million tonnes in the 1970s to a current figure of more than 50 million tonnes.
According to ABARE, cassava and maize (corn) are the two other major food crops, accounting for a further 13% of agricultural output in volume terms.
Sugar cane, palm oil and rubber make up an additional 19% of output for the nation’s farmers, who make up 60% of the population.
Growth in rice production has slowed since about 1995 due to limited availability of land and reduced productivity, as has been the case with maize.
ABARE said maize production had been affected by the 1997 economic downturn with a decline in demand for feed from the poultry industry.
Output has been on a rising trend once again since 2003.
Partly because of government support for rice, most maize is grown on small and unirrigated farms with poor soil fertility and poor productivity.
The report said sugar production was supported by a goal of national self-sufficiency with production dominated by smallholders.
Much of the sugar cane harvested in Java is grown in difficult, wet conditions that keep yields low.
High import tariffs
In its search for food self sufficiency, the government has imposed significant tariffs on imports, mostly at around 40% but ranging from a low of 27% to a high of 210%.
ABARE said: “The highest bound tariff of 210% is on imports of milk and cream in solid form, buttermilk and fats and oil derived from milk.
“Imports of milled rice fetch a bound tariff of 160%, while that for sugar is 95%.
“The bound tariff for fresh or frozen meat of bovine animals, frozen cuts of sheep, fresh or dried oranges or mandarins and fresh or chilled potatoes is 50%.”
It said tariffs on fruits and vegetables were generally around 5% with some exceptions such as mangoes, mandarins, shallots and potatoes, which face a 25% tariff.
However, there are few tariffs on fruit and vegetables imported from other Association of South East Asian Nations (Asean) member countries and China due to preferential tariff arrangements.
Rising incomes
and imports
ABARE said that in response to rising incomes and the influence of western style foods, Indonesian diets have been changing.
“While rice, vegetables and seafood remain staples, consumers have moved towards a wider variety of foods.
“In particular, there have been increases in consumption of wheat based products, food and livestock products, including beef and dairy products,” it said.
Between 1990 and 2005, per capita consumption of rice declined, falling from 55% in 1990 to 48% in 2005 in terms of daily calorie intake.
However, consumption of seafood, beef, poultry, fruit and vegetables has increased with per capita consumption doubling for wheat doubling (18kg) and poultry meat (6kg).
Agricultural imports have been rising since the 1990s with wheat, sugar and cotton imports in 2005 worth around US$800 million, US$570 million and US$575 million respectively.
Wheat represented about 14% of agricultural imports.
While Australia is the largest exporter of agricultural items to Indonesia, the United States is in second spot with around US$850 in sales, or 15% of Indonesia’s agricultural imports.
Thailand is a major supplier of rice and fruit and accounts for 9% of Indonesian imports, followed by China (6%).
Booming fruit sales
Although the ABARE report presents an overall picture of somewhat stagnating agricultural output in recent years, there are obviously some bright spots.
According to the World Bank, Indonesia’s booming modern retailing and supermarkets sector currently accounts for 30% of the country’s food retailing business.
“The national output of fresh fruits and vegetables has doubled to US$10 billion from 1994-2004 and is increasingly reflected in changing patterns of food consumption,” it said, noting that urban Indonesians were now spending as much money on rice as on fresh fruit and vegetables.
“Nearly all of this produce is home grown and while imports have nearly tripled over the last decade, they still account for only 3% of domestic consumption.”
In spite of this overall scenario, the World Bank report released last month noted that 80% of fruits and 20% of vegetables sold in supermarkets were imported, mainly from China and Thailand.
“Indonesian farmers trying to sell to supermarkets are really handicapped by extremely poor supply chains,” the lead author of the report, Shobha Shetty, said.
 
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