This paper describes policy direction and its implications for food security and farmers’ welfare. Applying this, the paper focuses on performance of agricultural development, which will be started by having a good grip of some issues and challenges in facing food security

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AGRICULTURAL DEVELOPMENT AND ITS IMPLICATIONS FOR FOOD SECURITY
AND FARMER WELFARE: LESSON LEARNED FROM INDONESIA1
Hermanto2
and Hasanuddin Ibrahim3
INTRODUCTION
Indonesian current population reached up to 255.46 million in 2015, and will grow
even further predicted around of 285 million in 2030. Population growth cannot be
avoided and will influence the higher need of food demand. Therefore, domestic
agricultural production for food security and farmer welfare are economically and
politically important in Indonesia. Agriculture in Indonesia acted as a buffer sector, being
able to absorb the workforce laid off in other sectors. It contributes 14,4% of GDP and
absorbed approximately 38.07 million new workers in 2013.
Indonesia has also improved food security significantly since the early 2000.
However, those achievements have not been able to solve more fundamental problems
at both consumers and producers level, especially at the farmers level. Recent food
price volatility has shown that the fundamental of food economy are still vulnerable. In
addition efforts to increase farmers’ productivity and welfare will be certainly difficult.
Therefore, food security and farmers’ welfare are the keywords in agricultural
development.
The government has done much to build agricultural sector. However, its fact is
still lacking and needs to be improved again. Therefore, as a pivotal component of Nine
1
The paper presented at The 5th
Global Economic Summit 19-21 November 2015, Expo Centre,
World Trade Centre Mumbai-India
2
Researcher at Indonesian Center for Agricultural Socio Economic and Policy Studies
(ICASEPS)
3
Assistant to the Minister of Agriculture for International Trade and Relation

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Priority Agenda (Nawa Cita) for Indonesia 2015-2019 agriculture has been a priority
sector to achieve rice-self-sufficiency and to improve farmers’ welfare. The Government
of Indonesia (GOI) has identified rice, corn and soybean as priority crops for self-
sufficiency within the next three years, with rice self-sufficiency as the top objective.
This paper describes policy direction and its implications for food security and
farmers’ welfare. Applying this, the paper focuses on performance of agricultural
development, which will be started by having a good grip of some issues and
challenges in facing food security.
ISSUES AND CHALLENGES
The challenges that Indonesian agriculture is facing over the coming decades are
complex. Main issues and challenges of agricultural development in the future include:
1. Global climate change that will reduce the capacity of agricultural production at
national and global level so that it becomes a threat to food security, energy security
and water security;
2. Increasing scarcity of availability and competition for land and water use will lead to
difficulties in extending the land and water for agriculture which will further encourage
the emergence of land and water grabbing on global order;
3. Population growth and urbanization will increase the demand for food, water and
energy so that the pressure in the realization of food security, water and energy more
weight;
4. Innovation of science and technology is increasingly complex and exclusive
ownership so that the independence of science and technology become a
prerequisite for realizing agricultural food security and farmer welfare;
5. Industry and trade facilities and global agricultural produce increasingly dominated by
a few multinational companies thus threatening the existence of small-scale
agricultural enterprises are still dominant in Indonesia;

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6. Increased demand for assurance and quality attributes of the product complexity has
led to the development of the value chain (global) transparent and traceable
(traceable) as an imperative requirement of market access for farmers (small); and
7. Demands of government decentralization, community participation and governance
reforms the government can impede agricultural development if not managed
properly.
Besides utilizing the internal strength such as abundant natural and human
resources, the ability to make external challenges into opportunities is the key to the
success of agricultural development in Indonesia in the future. These opportunities
include:
1. The use of human resource of such a large and still growing, particularly the
demographic dividend, as the basis of competitive advantage Indonesian
agriculture, including the implementation of the processes driving production
(human resources) and value chain development (social capital typical of
Indonesia);
2. The use of the comparative advantages of Indonesia as a tropical country and
maritime, which naturally is the region with the highest effectiveness and
productivity in harvesting and transformation of solar energy into biomass feedstock
bioindustry, became the basis of a competitive advantage in the bioeconomy;
3. Utilization of an increase in demand for food, feed, bioenergy and bioproduct
environmentally friendly by developing bioindustry that produce these products are
complementary;
4. Utilization of the new tendency rewards for environmental services and amenities
services as an opportunity to develop agro-ecological agriculture;
5. Utilization global advancement of science and technology for the development of
agriculture and bioindustry innovation through the development of site-specific
system of innovation with a capital base of research institutes and universities that
are widespread throughout Indonesia;
6. The use wisely the potential of land and water resources that are still available is
quite large in Indonesia, especially in the outer islands; and

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7. Exploiting the momentum of the decentralization of government, public participation
and governance reform for the development of the political system of agriculture-
driven and oriented to small farmers.
THE POLICY TO ACHIEVE FOOD SECURITY AND FARMER WELFARE
The concept of food security is multidimensional, encompassing food availability,
affordability, adequacy, safety and quality. In this context, farmers, the majority of the
population, serve an important role in national life as the backbone of food security.
Increased production and farmers’ income will determine the sustainability of food
security. This is clearly stated in the policy direction and strategy is summarized in
Table below.
Table 1. Policy strategy and agricultural development program plans 2015-2019
Item Remark
Public policies (1) Improving rice self sufficiency and increasing corn, soybean,
sugar, meat, chili, and shallot productions; (2) Developing
competitive, export, and import substitution products as well as
bioindustry raw materials; (3) Strengthening the institutional
seed/seedling, farmer, technology, extension, quarantine, and
food security systems; (4) Developing the agricultural cluster
area; (5) Focusing on strategic commodities; (6) Developing
facilities, infrastructures, and rural agro-industry as the basis of
sustainable bioindustry development; and (7) Implementing
good governance and bureaucratic reform.
Technical and
operational policies
(1) Climate change adaptation and mitigation, post-natural
disaster management, and plant protection; (2) Agricultural
multi-product re-orientation; (3) Subsidy and agricultural credit
financing application and management; (4) Thematic program
management supporting agricultural development; and (5)
Biodiversity utilization and management.

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Policy strategies (1) Increasing the availability and land use; (2) Improving
agricultural facilities and infrastructures; (3) Developing and
expanding seed/seedling logistics; (4) Strengthening
institutional farmers; (5) Developing and strengthening the
agricultural financing; (6) Developing and strengthening
bioindustry and bioenergy; (7) Strengthening the agricultural
product market networks; (8) Strengthening the capacity
building of agricultural human resource; (9) Improving support
to innovation, technology, and quarantine; (10) Providing
information services; (11) Administering the regulation; (12)
Using the information and communication technologies; (13)
Organizing the plan; (14) Structuring and strengthening the
organization; and (15) Managing the control system.
Development
programs
(1) Increase production, productivity, and quality of food crops;
(2) Increase production, productivity, and quality of
environmentally friendly horticulture; (3) Increased production
and productivity of sustainable estate crops; (4) Accomplish
food-based animal and smallholder livestock agribusiness; (5)
Improved value- added, competitiveness, quality, marketing
product, and agricultural investment; (6) Provide agricultural
facility and infrastructure developments; (7) Generate
sustainable agricultural-based bioindustry technology and
innovation; (8) Improve agricultural extension, education, and
training; (9) Increase diversification and community food
security; (10) Improve quality of agricultural quarantine and
biosecurity supervision; (11) Monitor and improve agricultural
government apparatus accountability; and (12) Support
management and implementation of other related technical
tasks.
Source: Strategic Plan of Indonesian Ministry of Agriculture of 2015-2019
AGRICULTURAL DEVELOPMENT PERFORMANCE
The “Kabinet Kerja” of the President Joko Widodo, during October 2014 -
September 2015 has resulted a good performance in the agricultural sector for food
security and farmer welfare, namely:

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1. Food production
Since October 2014 until now the focus of government to achieve food security
by developing strategic food are: rice, corn, soy, chilli, onion, beef and sugar cane. Data
Forecast (ARAM-II) BPS indicates paddy production in 2015 amounted to 74.99 million
tonnes of paddy, up 4.15 million tons (5.85%) in 2014. Production of maize is 19.83
million tons of dry seed, up 0.82 million tons (4.34%) and soybeans 982.97 thousand
tons of dry beans, up 27.97 thousand tons of dry beans (2.93%).
Increased production of paddy rice is the highest production during the last ten
years. This production increase comes from increased productivity of 52.9 ku/ha, up
1.54 ku/ha (3.0 %) and harvested area of 380.87 thousand hectares (2.76 %). Having
realized the rice production of 74.99 million tons of paddy, it has been reduced a round
of 7.3% of paddy to other uses and losses earned 69.52 million tons of paddy that is
ready to be processed into rice. Furthermore, using the conversion of grain rice to
62.74%, obtained rice production 43.61 million tons, up 2.41 million tonnes (5.8%) in
2014. By using a standard consumption of 124.89 kg per capita per year and total
Indonesia population in 2015 is about 255.46 million, so rice balance sheet showed a
surplus of 10.25 million tons of net to meet the needs of the household from 31.90
million tons, the use of non food 1.45 million tons or the total requirement 33.35 million
tons.
High corn production happens because the productivity of 51.39 ku/ha, an
increase of 1.85 ku/ha (3.6%) and, harvested area increased by 22.61 thousand ha
(0.59%), compared to 2014. Corn balance sheet showed a surplus of 930 thousand
tons of net to meet the needs of the animal feed industry from 8.25 million tons, the
local animal feed 6.34 million tons, 3.92 million tons of food industry, household 0.39
million tons, seeds and others.
Soybean production increased from contributing to the productivity of 14.92
ku/ha, up 0.22 ku/ha (1.42%) and harvested area increased by 9.16 thousand ha
(1.49%) compared to 2014. The production increased by 2.93% higher than the average
of the last five years. In line with the increase in population and the needs of industry,

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the 2015 soybean production has not been able to meet domestic needs (deficit of 1.55
million tons), so it remains to be imported from abroad.
Sugarcane production in 2015 is estimated to 2.72 million tons, an increase of
3.65% compared to 2014 amounted to 2.63 million tons. While the need for sugar for
direct consumption, domestic industry and the specific needs of 2.82 million tons of
sugar, which means balance deficit of 100 thousand tons.
Production of beef carcass cattle/buffaloes in 2015 is estimated 409 thousand
tons increased by 5.23% compared to 2014. This production has not been able to meet
the needs of 454 thousand tons of meat consumption, so the balance was a deficit of
beef 45 thousand tons.
Vegetables production fluctuates, for red chilli estimated 2.01 million tons, or
increase by 7.41% compared to 2014, while consumption of chilli 1.96 million tonnes,
which means a surplus balance of 52.2 thousand tons of chilli. With this condition
imported chilli can be controlled. Furthermore, shallot production 1.26 million tons, up
2.51%. While domestic consumption needs 947 thousand tons, which means the
availability of a surplus of 313 thousand tons so the part of its surplus was exported
abroad (1,500 tons).
2. Farmer’s exchange rate
Farmer’s exchange rate (NTP) is one indicator or the ability to see purchasing
power of farmers in rural areas. It also shows the exchange of agricultural products with
the goods and services consumed by. If the exchange rate higher, the consumption and
farmer’s purchasing powers is also higher. An improvement in farmers’ income occurred
based on the farmer's exchange rate; from 101.24 percent in September 2013 to 101.86
percent in March 2014. In October 2015, NTP reached 102.46 percent or increased
0.13 percent over the previous month (102.33 percent). BPS records also some
increases of NTP in agricultural subsectors during September-October 2015, such as
paddy 122,82 to 124.28 percent (increase of 1.99%), food crops from 125.763 to 127.21
percent, up to 1.99%, horticulture (101.80 to 101.96 percent), smallholder tree crops
(96.26 to 96.39 percent).

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3. Regulations on Imports
Indonesian regulations only permit The Indonesian National Logistics Agency
(BULOG) to impor rice. Control policies on imports and encourage exports in 2015 have
shown results. In 2014 there were imports of rice of medium quality. Since January
2015 there are no imported rice has been made therefore saving USD 374 million of
foreign exchange. Maize production in 2015 rose 8.72% followed by an increase in corn
exports, and it has gain USD 102 million in foreign exchange and on the other side-
imported corn has been controlled, thus saving USD 483 million in foreign exchange.
Control on imported comodities such as chilli, shallot and white sugar and export
of mung bean from Gresik and Shallot from Bima, and hatching eggs has been
increasing Indonesian foreign exchange. By controlling the imported products and
increasing food export from January to August 2015 the country can saved up to USD
4.03 billion or about IDR 52 trillion (exchange rate USD 1 = IDR 13,000). In addition,
these policies have a positif impact on domestic price stability and contribute nearly IDR
215 trillion, consisting a gain surplus of IDR 74 trillion for farmers and IDR 141 trillion for
traders.
4. Agricultural modernization
Agriculture Modernization through mechanization is an effective solution to
replace traditional farming and to overcome the labor scarcity. Agriculture
Mechanization has long been done, but with limited quantities. In 2014 can provide only
less than 10,000 unit agricultural machineries. In 2015 the government of Indonesia has
conducted a large-scale of agriculture mechanization include: Rice Transplanter,
Combine Harvester, Dryer, Power Thresher, Corn Sheller and Rice Milling Unit (RMU),
tractors and water pumps. The government of Indonesia in 2015 has distributed 26,100
unit of tractors and 2,790 unit of combine harvester for all farmer group associations in
the country. The use of that mechanization could saves the cost of production
mechanization ± 30% and 10% decrease crop losses.

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STRATEGIC PLAN FOR AGRICULTURAL DEVELOPMENT
Indonesia’s commitment in agricultural development is focused on the achievement
of food security and the increase of farmers’ welfare. The strategy to be achieved in the
period of 2015-2019 are as follow: (1) land optimalization of one-million-hectare paddy
fields; (2) Infrastructure rehabilitation for 3-million-hectare irrigation; (3) fertility
restoration of agricultural land; (4) land conversion management; (5) development of
post-harvest facilities and agricultural commodity barn; (6) food import management; (7)
development of one million of Seed-Sovereign Village Program; (8) development of one
thousand of Food Organic Piloting Village Program; (9) Increase in Land Access for
smallholder from 0,3 hectares to 2 hectares every household; and (10) development of
bank of agriculture and small and medium enterprises.
CLOSING
Food Security and farmers’ welfare are the keywords in agricultural development.
Increased production and farmers’ income are an important role in increasing farmers’
welfare. We are all aware that it is not an easy task to achieve the above targets,
however, based on the agricultural development performance in 2015, we are optimistic
that we will get the targets achieved if all stakeholders can work together to overcome
various major obstructing problems and constraints and provide encouragement that is
believed to be a key to the success of agricultural development in Indonesia in the
future.