Topic Area: Agriculture
Geographical Area: Indonesia
Focal Question: How has Indonesia's desire for food self sufficiency in rice compromised it's ability to address the issues of sustainable agricultural development?
(1) Barbier, Edward B., 1989. "Cash Crops, Foods Crops, and Sustainability: The Case of Indonesia." World Development, vol. 17, no. 6, pp. 879-895.
(2) Panayotou, Theodore, 1993. Green Markets: The Economics of Sustainable Development. San Fransisco, CA: Institute for Contemporary Studies Press.
Reviewer: Marc Small, Colby College '96

Agricultural policy in Indonesia has been primarily concerned with implementing production based policies designed to pursue food self sufficiency. Since 1967, Indonesian agricultural development polices have focused on achieving food self sufficiency in rice. This goal was reached in 1984, when, for the first time, domestic rice production exceeded domestic rice consumption. Unfortunately, achieving this goal came at the expense of sustainable agricultural development.

The economic costs of gaining food self sufficiency in rice were extremely high. The Government of Indonesia (GOI) achieved food self sufficiency in rice through extensive government investment and through the implementation of subsidy programs for fertilizer, pesticides and irrigation. Over the period 1970-84, the total irrigated land area increased from 3.7-4.9 million hectares; the use of subsidized fertilizers increased from 0.2-4.1 million tons; and the use of subsidized pesticides increased from 1080-14210 tons (Barbier 886). In 1986-87 the total cost of these input subsidies reached US$725 billion (Barbier 886).

In order to increase rice output, the Indonesian government was forced to expand cultivated land area. This expansion was accomplished by investing large amounts of government funds into infrastructure projects, such as the building of roads and processing facilities, and the development of new irrigation networks. The strategy to expand cultivated land area also relied on Indonesia's transmigration program. This program involved moving families out of crowded cities and resettling them on previously undeveloped marginal lands. The economic costs of this program were extremely high-US$9000 per family (Barbier 887).

Input subsidies also generated significant economic costs. For example, "until 1985 the Indonesian government subsidized pesticides at 82 percent of the retail price, at an annual cost of US$128 million" (Panayotou 64). In addition, fertilizer subsidies to farmers reached US$220.7 million in 1986-1987 (Barbier 888). Because farmers were not forced to pay the full cost of their fertilizer and pesticide use, inappropriate application of these toxic chemicals resulted. These costly subsidies resulted in a government induced market failure, which caused farmers to use more pesticides and fertilizer than was economically efficient.

Since most of the irrigated land in Indonesia was, at the time, devoted to rice production, maintaining and improving the irrigation network was extremely important for increasing rice output. A large part of this maintenance and improvement was paid for through government financed subsidies. These irrigation subsidies imposed a heavy financial burden on the GOI. It was suggested that, in order to irrigate 4 million hectares of land, a government subsidy of US$440 million was needed (Barbier 888). Because farmers were not responsible for paying the full cost of their water consumption, irrigation water was overused and wasted.

Not only were the monetary costs of achieving food self sufficiency in rice significant, the external environmental costs proved considerable as well. Some of the environmental costs affected only the farmer. For example, the input subsidies for fertilizer, pesticides, and irrigation along with the expansion of cultivated land area imposed costs on the cultivator in terms of reductions in agricultural productivity and depletion of resources. Some unfortunate non-user externalities also emerged from such a production-led approach. These external costs resulted from fertilizer and pesticide pollution, as well as from the depletion of natural resources (i.e. water resources).

The negative impacts of the pesticide subsidy in Indonesia have been well documented. The inappropriate use and overapplication of pesticides by Indonesian farmers led to the evolution of pesticide resistant pests, and the elimination of natural predators that help control pests. For example, in 1986-87, an estimated 50-60,000 hectares of cultivated rice were lost to an outbreak of a pesticide resistant brown planthopper species (Barbier 889). This loss of 1 million tons of rice was equivalent to US$180 million (Barbier 889). In addition to these direct user costs, contamination of surface water by pesticide runoff resulted in the decline of fishing productivity and in costs to human health.

The expansion of cultivated land area into marginal lands produced severe erosion problems. Increased rice cultivation on marginal lands by poor, subsistence farmers seeking to meet their basic food needs caused particularly high levels of soil erosion. Losses of fertile topsoil brought about significant declines in agricultural productivity. "Given an estimated 903,092 hectares of critical upland farming area on the island of Java, a rough estimate of the loss in farmers incomes from the failure to control soil erosion was US$139.8 million per year" (Barbier 891). Surface water sedimentation from erosion runoff produced harmful environmental externalities as well. Sedimentation of surface water disrupted irrigation networks, dams and other water systems (i.e. residential water supply systems). This disruption resulted in losses to agriculture, aquaculture and fishing, and losses from diminished navigation and hydropower.

Clearly, Indonesia's production-led approach to achieving food self sufficiency in rice was not sustainable. It has been stated that sustainable agricultural development occurs when "both the real economic costs of production and the real environmental costs of production are expected to remain constant or to fall as production expands" (Barbier 880). In order to increase rice output, Indonesia greatly increased both the economic and environmental costs of production. Indonesia's failure to adequately consider the monetary and environmental impacts of it's production-led policies resulted in an unsustainable outcome.

In recent years, the government of Indonesia has realized the importance of sustainable agricultural development. The GOI has become aware that sustainable agricultural development requires integrating natural resource management strategies into agricultural development policies. This is illustrated by the fact that in November 1986 President Suharto issued a decree which banned 57 brands of pesticide, and established the integrated pest management (IPM) program. This program involved controlling pests through the use of the pests' natural predators. Three planting seasons after the decree, the Food and Agricultural Organization (FAO) reported that pesticide use had declined by 90%, while average rice yields had risen from 6.1 tons per hectare to 7.4 tons per hectare (Panayotou 65). Indonesia's IPM strategy has served as the first step in the country's quest to achieve sustainable agricultural development. If agricultural development is to become sustainable in Indonesia, development strategies must continue to be modified so that the economic costs as well as the environmental costs are taken into account.

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