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Rice market operations ineffective in reducing prices
The governmentâs market operations to stabilize rice prices might not be effective in reducing price volatility in the long run, analysts have said, urging the government to fix structural issues that hamper farmersâ output
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The government's market operations to stabilize rice prices might not be effective in reducing price volatility in the long run, analysts have said, urging the government to fix structural issues that hamper farmers' output.
The World Bank, in a report released this month, noted that the market-operation mechanism to stabilize rice prices in reality 'has had no significant impact in reducing prices', with Indonesia's dependence on the policy actually contributing to price volatility.
Rice distributed through a market-operation policy only accounts for less than 1 percent of total rice supply, with questions lingering over the true economic impact of its implementation, according to the World Bank.
'Informed traders may choose to restrict their sales [of rice] as they wait for the government to exercise price-stability mechanisms,' the World Bank wrote in its quarterly report on Indonesia released this month, titled High Expectations.
'While market operations can play a role to smooth price volatility, interventions should be timely, appropriately sized and well targeted,' the US-based organization suggested. Rice is a staple food for Indonesia's 250 million citizens, with its price fluctuation becoming a widely debated social and political issue every year.
In his presidential campaign last year, President Joko 'Jokowi' Widodo wooed farmers with his economic vision of food self-sufficiency, in which the country is targeted to require no more rice imports within three years.
Rice prices soared only months after Jokowi took office, with officials blaming the issue on a 'rice mafia' attempting to push the government to open the clog of imports. In February, retail and wholesale rice prices surged 12 percent and 14 percent, respectively.
The World Bank noted that the price spike in February, which was deemed by government officials as short-lived, actually conformed to a consistent trend since 2004 of Indonesian rice prices rising at a faster rate than those in international markets.
The government's food-sufficiency goals need to be supported, but there should be better implementation so that the local rice supply is sufficient to meet demand, including better data utilization and improved investment in agriculture research and infrastructure.
'Concerns over achieving secure rice supply, in Indonesia as elsewhere, are valid,' the World Bank said.
'However, recent experience shows that the current price policy mix and implementation has had limited effectiveness in achieving the stated objective of the government to protect the poor and farmers.'
Jokowi and his economic ministers have so far claimed that the rice market operations have succeeded in pushing down prices, which have soared by as much as 30 percent in certain areas.
Rice prices in certain markets have stabilized in the range of Rp 7,000 to Rp 8,000 per kilogram after the market operations, having previously soared to as much as Rp 12,000 per kilogram in February, government officials have said, citing data from local traders.
But, a rice market operation that was not accompanied by structural reforms to boost farmers' productivity would only be 'short-term shock therapy' for Indonesia's agriculture sector, said Tejo Wahyu Jatmiko, the national coordinator of the Alliance for Prosperous Villages (ADS), a group of 15 NGOs that focuses on food and rural issues.
'Our agriculture sector has reached a saturated point where the increase in farmers' inputs, such as better fertilizers or pesticides, might not be followed by an increase in output,' he explained on Monday.
In this case, the government must implement breakthroughs in the extension of farming land, in addition to stronger investment in more efficient farming methods and technologies, said Tejo.
