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

Enhancing value chains for the Indonesian small farmerWhy its needed and what it will take
ShubhamChaudhuri
Indonesia Lead Economist
The World Bank
2011 IFPRI Board Workshop
Jakarta, Indonesia

Introduction
What I’ll be talking about
Enhancing agricultural value chains: where it fits into Indonesia’s overall development agenda
Raising rural incomes: increasing value-added per worker
Enhancing agricultural value chains: why it has to be part of a broader strategy
Increasing value-added per worker: increasing agricultural value-added or facilitating movement of workers out of agriculture
Enhancing agricultural value chains: why it is needed
Raising agricultural value added: increasing yields or increasing value-added through diversification and stronger supply chains
Enhancing agricultural value chains: where things stand and what it will take
Increasing value-added: sector-specific policies and programs or broader measures to improve the investment-climate

Enhancing agricultural value chains
Where it fits into Indonesia’s overall development agenda
Increasing yields
Increasing agricultural
value-added
Sector-specific policies and programs
Raising rural incomes: increasing value-added per worker
Increasing value-added through diversification and stronger supply-chains
Facilitating movement of workers out of agriculture
Measures to improve broader investment climate

Where it fits into Indonesia’s overall development agenda…
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
Per-worker value-added in agriculture in Indonesia has essentially been stagnant in the last decade and is much lower than in Malaysia

Why it has to be part of a broader strategy

…and why it is needed
Agricultural growth rates have been falling till recently…
…because both public and private investments in agricultural infrastructure and agricultural support services have declined and resource management has been neglected
Technical options to dramatically raise yields of traditional crops are limited (except perhaps for genetically modified varieties)…
…so boosting agricultural value added will require diversification into higher-value added activities and strengthening of agricultural supply chains…

Where things stand
Costs more to transport a mandarin orange from hinterland of Pontianak to Jakarta than it does to import from China
Three quarters of rural roads in Indonesia were assessed to be in very poor shape
Less than 25% of rural land holders have formal land certificates
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

What could be done
Target subsidies to poor farmers
Shift spending to revamped agricultural extension services and R&D programs
Shift spending to irrigation and introduce incentives for maintenance
Reducing the cost of inter-island shipping and increasing operational efficiency of regional ports and international gateways
Introducing performance-based transfer for local governments to improve rural roads and infrastructure
Completing the backbone road and rail infrastructure connecting the major growth poles, for example, the Trans-Java Expressway and the Jakarta—Surabaya rail link
Reducing regulatory uncertainty, for example, inconsistency between Presidential Regulation on Negative Investment List and Horticulture Law

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

by International Food Policy Research Institute (IFPRI)

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