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gri-experts and other observers said Friday that fluctuating commodity prices, difficult access to capital and poor downstream development had held back Indonesia’s agricultural performance

PT Perkebunan Nusantara (PTPN) IV president director Dahlan Harahap said that fluctuating prices were among the main factors influencing the poor performance of agricultural companies .

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

He said fluctuating prices were critical since most firms relied on exports. He mentioned crude
palm oil (CPO) of which 77 percent is exported, rubber (83 percent), cacao (86 percent) and coffee (70 percent).

Dahlan said another factor impeding agriculture industry growth was high bank interest rates.

“Indonesia has the highest interest rates in Southeast Asia,” he said.

“No wonder that Malaysian agricultural products, particularly CPO, are more competitive than ours.”

Indonesia had the highest regional base rates in 2009 according to the central bank (5.89 percent), compared to Malaysia (3.03 percent), The Philippines (3.92 percent), Thailand (3.40 percent), Vietnam (3.43 percent) and Singapore (1.79 percent).

Hermanto Siregar, vice rector of the Bogor Institute of Agriculture (IPB) said that besides high interest rates, difficult capital access for small- and medium-scale enterprises (SMEs) also slowed the industry.

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

President director of PT Rajawali Nusantara Indonesia (RNI), Bambang Priyono Basuki, blamed poor development of downstream industries as another main reason why Indonesia’s competitiveness was below those of the neighbors.

“In Indonesia, particularly in the sugar sector, only a few firms produce derivative products. It is different in countries like The Philippine, Thailand and Australia where they can generate higher revenues from derivative products,” he said.

Dahlan said to spur the improvement of the agriculture industry, the government should assist private and state-owned companies to develop downstream industries by strengthening the role of research and development. Business-friendly fiscal and monetary policies, like minimizing value-added tax, were also necessary.

Hermanto recommended that the government improve the quality and availability of infrastructure particularly energy and transportation. He said poor infrastructure prevented investors from doing business in Indonesia.

“The government should also develop trade policies that are friendly to local businessmen like implementing protection to a certain extent,” he said. (rdf)