The lure, temptation to sell our rice

Aris Ananta ,  Singapore   |  Fri, 04/11/2008 12:32 PM  |  Opinion

"I can eat and enjoy a sandwich," said Hartono (not his real name), an Indonesian who was educated in the U.S. "I could survive without rice for months. Only once in a while I ate rice when I was in the U.S."

Interestingly, Hartono eats rice three times a day, for breakfast, lunch and dinner. Did he lie? No. He is now in Indonesia, not in the U.S. The climate, the surroundings and all the delicious Indonesian food are clearly much more tempting than a sandwich. Is there delicious Indonesian food without rice?

For Indonesians, rice is not simply a staple, it is also the flavor of the food. Hot and spicy food is not tempting at all if there is no rice. Indonesians even eat rice mixed with noodles and beehoon. Rice is very important for Indonesians. No wonder then that when the price of rice rises, the prices of Indonesian food become more expensive though other ingredients do not rise. Deprive Indonesians of rice and there will be social unhappiness, which may lead to social unrest.

The price of rice has been rising globally and has threatened many societies whose diet depends mostly on rice. On the other hand, the current situation has created a very promising business for rice. Businesses dealing in rice can make a handsome profit from the rising scarcity of rice. Indonesia is no exception. The price of rice has also been increasing in Indonesia, and people have been suffering.

Indonesia has not achieved rice self-sufficiency, and 2009 has been set to reach that target by the government. Yet, recently, the government of Indonesia announced a surplus of rice. Immediately, a proposal to export rice was made. The very high world price of rice may have tempted the government to export rice. Surely, this will boost Indonesian exports and economic growth. But at what expense?

It is very interesting to find a surplus of rice despite the cries of the people over the high price of rice. What has happened? A surplus of any commodity is expected to lower the price until the price returns to an equilibrium, without deficit or surplus. Yet, what happens in Indonesia is that a surplus exists at a high price. The price does not go down, and some investors even see the surplus as an opportunity to make a huge profit by selling to the world market.

Speculation may play an important role in preventing the surplus from lowering the price. Speculators may hoard the rice, expecting even higher prices. Worldwide, speculators have been moving away from financial markets and into commodity markets, including rice, at the expense of the majority of people whose diet depends on rice.

The government of Indonesia responded that they will consider exporting the expensive rice only after the government has been able to accumulate a stock of rice worth three to four months of domestic need. It is wise for the government to avoid the temptation and lure of boosting exports and economic growth through exporting the "surplus" of expensive rice.

The decision not to export will reduce the domestic price of rice or at least it will prevent the price from escalating. Therefore, it will avoid possible social unrest, particularly as the fever of the 2009 presidential election is on the rise. A stable Indonesia will greatly contribute to regional stability.

The decision also has quashed the profit of speculators, both in Indonesia and in the world market. It then contributes to taming the global rise of the price of rice. Hence, it will also benefit rice-importing countries.

The decision to export rice from Indonesia should therefore depend on whether Indonesia has achieved rice self-sufficiency at prices most people will be comfortable with.

Another policy to curb the rising price of rice is the modification of the diet of Indonesians. Indonesians can continue eating rice, but they may have to eat less rice than they are used to. They should find out that Indonesian food is still delicious though they mix the food with a smaller amount of rice.

The current situation of rising rice prices can be expected to convince the government of the need to give much higher priority to agricultural development, particularly rice production. This is not only for the purpose of making Indonesians happier, but it can also become one of the most important export commodities for Indonesia.

World demand for rice will continue and Indonesia has the potential to respond to the world market and, at the same time, prevent speculators from manipulating the price of rice.

Rather than having "workers" as a non-oil export commodity, why not make rice an important one after Indonesia achieves rice self-sufficiency?

The writer is senior research fellow at the Institute of Southeast Asian Studies. The opinions expressed here do not necessarily reflect those of the institute. He can be reached at aananta@iseas.edu.sg.

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