The Jakarta Post
Among the major short-term policy recommendations proposed by the World Bank in its latest quarterly report on Indonesia are those for lowering import barriers and restrictions for foreign investors to make the economy globally more competitive and to create jobs.
Certainly, such reforms are extremely difficult and unpopular now in view of the April 2019 presidential and legislative elections, when inordinately strong nationalist sentiment may rear its ugly head. Still, it is worth their while for the two presidential candidates and their economic teams to deeply study the World Bank’s findings on the damage caused by the 2010 Horticulture Law, which limits foreign ownership in seed-breeding enterprises to a maximum share of 30 percent as from 2015.
The bank’s study concludes that the investment restrictions have reduced the participation of foreign seed companies, which could provide invaluable knowledge in a technologically intensive sector, such as horticulture. Likewise, the horticulture trade restrictions through special licensing requirements and restricted ports of entry have increased the domestic prices of such produce as garlic, fruit and vegetables but have failed to spur any significant exports.
On the contrary, according to the report, Indonesian imports of horticultural products between 2014 and 2017 have been twice as high as exports of barely US$1 billion a year. On the other hand, by keeping open trade and investment regimes, Vietnam, Thailand and, to some extent, the Philippines have expanded horticultural exports over the same period. Vietnamese exports have grown five-fold over the last 10 years to $5 billion, which compares to imports of almost $3 billion.
The severe restriction of foreign investment in seed breeding is especially damaging to horticulture production in view of Indonesia’s short history of biotechnology and the acute shortage of domestic research and development in seed breeding and propagation.
Plant breeding has historically played an important role in increasing agricultural productivity, and continued investment in plant breeding will be essential to ensuring a productive, sustainable and resilient agricultural system for the future. The growth in crop production depends on improved varieties made possible by public and private investment in research and development, and continued investment in these genetic improvements will be necessary for a sustainable increase in agricultural productivity.
It is therefore important to ensure seed breeding, which is a highly knowledge-based business, and seed markets remain competitive and innovative.
True, we should develop a strong national foundation for our own seed-breeding industry, but this process cannot simply be decreed by forcing foreign investors to give up their controlling ownership in seed-breeding enterprises.
The horticulture seed market has been controlled by foreign companies. But this dominant role should be credited to their centuries of experience in research and development in biotechnology and plant breeding.
The foreign seed-breeding companies have simply brought their research and knowledge to ASEAN countries, such as Thailand and Vietnam, which still allow foreign-majority ownership but under strict conditions on the transfer of research and knowledge to locals.