Enhancing value chains for the Indonesian small farmer. Why its needed and what it will take

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Shubham Chaudhuri
Indonesia Lead Economist
The World Bank

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Enhancing value chains for the Indonesian small farmer. Why its needed and what it will take

  1. 1. Enhancing value chains for the Indonesian small farmerWhy its needed and what it will take<br />ShubhamChaudhuri<br />Indonesia Lead Economist<br />The World Bank<br />2011 IFPRI Board Workshop<br />Jakarta, Indonesia<br />
  2. 2. Introduction<br />What I’ll be talking about<br /><ul><li>Enhancing agricultural value chains: where it fits into Indonesia’s overall development agenda
  3. 3. Raising rural incomes: increasing value-added per worker
  4. 4. Enhancing agricultural value chains: why it has to be part of a broader strategy
  5. 5. Increasing value-added per worker: increasing agricultural value-added or facilitating movement of workers out of agriculture
  6. 6. Enhancing agricultural value chains: why it is needed
  7. 7. Raising agricultural value added: increasing yields or increasing value-added through diversification and stronger supply chains
  8. 8. Enhancing agricultural value chains: where things stand and what it will take
  9. 9. Increasing value-added: sector-specific policies and programs or broader measures to improve the investment-climate</li></li></ul><li>Enhancing agricultural value chains<br />Where it fits into Indonesia’s overall development agenda<br />Increasing yields<br />Increasing agricultural<br />value-added<br />Sector-specific policies and programs<br />Raising rural incomes: increasing value-added per worker<br />Increasing value-added through diversification and stronger supply-chains<br />Facilitating movement of workers out of agriculture<br />Measures to improve broader investment climate<br />
  10. 10. Enhancing agricultural value chains<br />Where it fits into Indonesia’s overall development agenda…<br /><ul><li>Two-thirds of the poor live in rural areas so raising rural incomes and revitalizing the rural economy is critical to making growth more inclusive
  11. 11. Per-worker value-added in agriculture in Indonesia has essentially been stagnant in the last decade and is much lower than in Malaysia</li></li></ul><li>Enhancing agricultural value chains<br />Why it has to be part of a broader strategy<br />
  12. 12. Enhancing agricultural value chains<br />…and why it is needed<br /><ul><li>Agricultural growth rates have been falling till recently…
  13. 13. …because both public and private investments in agricultural infrastructure and agricultural support services have declined and resource management has been neglected
  14. 14. Technical options to dramatically raise yields of traditional crops are limited (except perhaps for genetically modified varieties)…
  15. 15. …so boosting agricultural value added will require diversification into higher-value added activities and strengthening of agricultural supply chains… </li></li></ul><li>Enhancing agricultural value chains<br />Where things stand<br /><ul><li>Costs more to transport a mandarin orange from hinterland of Pontianak to Jakarta than it does to import from China
  16. 16. Three quarters of rural roads in Indonesia were assessed to be in very poor shape
  17. 17. Less than 25% of rural land holders have formal land certificates
  18. 18. Local governments often target businesses with a plethora of new local taxes, levies and fees and though illegal, there are numerous restrictions on the movement of goods across district and provincial borders</li></li></ul><li>Enhancing agricultural value chains<br />What could be done<br /><ul><li>Target subsidies to poor farmers
  19. 19. Shift spending to revamped agricultural extension services and R&D programs
  20. 20. Shift spending to irrigation and introduce incentives for maintenance
  21. 21. Reducing the cost of inter-island shipping and increasing operational efficiency of regional ports and international gateways
  22. 22. Introducing performance-based transfer for local governments to improve rural roads and infrastructure
  23. 23. Completing the backbone road and rail infrastructure connecting the major growth poles, for example, the Trans-Java Expressway and the Jakarta—Surabaya rail link
  24. 24. Reducing regulatory uncertainty, for example, inconsistency between Presidential Regulation on Negative Investment List and Horticulture Law</li>

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