Fluctuating commodity prices slow agricultural industry

Agricultural experts and businesspeople have blamed fluctuating commodity prices, difficult capital accesses and poor development of downstream industries for poor performance of the country's agricultural industry.

PT Perkebunan Nusantara (PTPN) IV executive director Dahlan Harahap said that fluctuating prices was among the most prominent factors in determining the performance of companies operating in agricultural industry.

“Although we already have good management systems, the industry’s performance will remain unsteady if prices continue to go up and down,” he told a seminar on agriculture industry at the Indonesia Business-BUMN Expo and Conference (Ibbex) 2010 at the Jakarta Convention Center on Friday.

He added the fluctuating prices influenced the agricultural industry's performances because most of the companies relied their revenues on exports. Several major commodities which are mostly exported include crude palm oil (CPO) (77 percent exported), rubber (83 percent), cacao (86) and coffee (70).

Dahlan said that high bank interest was another factor impeding the growth of the country's agricultural industry. Indonesia, he added, sets the highest bank interest rate in Southeast Asia.

“So, no wonder if Malaysia's agricultural commodities, particularly CPO, are more competitive than ours,” he said.

Bank Indonesia's data shows that in 2009, Indonesia had the highest interest rate (5.89 percent) in the region compared to Malaysia (3.03), Philippine (3.92), Thailand (3.4), Vietnam (3.43) and Singapore (1.79).

Hermanto Siregar, the deputy rector of the Bogor Institute of Agriculture (IPB), who also spoke at the seminar, said that difficult capital access for small- and medium-scale enterprises (SME) had also halted the industry's development.

“As of today, the disbursement of micro-loans for SMEs in the agriculture sector reaches only 12 percent, whereas the sector can absorb about 40 percent of the country's workforce,” he said.