Category Archives: Economic Integration

Embracing 2016

Wishing everyone Happy New Year 2016!

We must say 2015 was a great  year for us and we believe that 2016 will be as thrilling if not more. GoLive Indonesia has lined up some exciting program for 2016, among others, the 3rd Indonesia Research Day, GoLive Day Out, Meet and Greet and our regular discussion series.

For the region, 2016 kicks off ASEAN Economic Community. ASEAN sees this as a community of opportunities which opens up market of 622 million people from 10 countries, a market worth of over US$2,5 trillion and the 7th largest economy in the world.

ASEAN Community represents ASEAN countries pursuit of becoming a region that collaborates and promote economic, cultural and social development to improve living standards. Detailed information on ASEAN Community Fact Sheets can be found here.

GoLive Indonesia hopes to continue debate and discussion about Indonesia and the region from a multi-dimension perspective. We encourage you to contribute to the debate by sending us your articles and opinion to be published on our website and participate in our discussion series throughout the year. Together we look forward to delivering constructive and insightful inputs for policy-making process.

 Maju bersama GoLive Indonesia!

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Filed under ASEAN, Economic Integration, Uncategorized

IRD2014, SA-based Indonesian researchers’ contribution to policy discussions

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GoLive Indonesia and Indonesian Student Association South Australia chapter (PPIA-SA) co-organised the 2014 Indonesian Research Day on Wednesday, 23 April 2014. The event was attended by more than 50 participants from three universities in South Australia, namely the University of Adelaide, University of South Australia and Flinders University.

Professor Christopher Findlay, Dean of Faculty of Professions at University of Adelaide, in his keynote speech on the Australia-Indonesia bilateral relationships reinforced three principles needed to improve bilateral relationships between the two countries, namely economic integration, ‘no-surprise’ policy and consultations and respect.

The President of PPIA-SA, Mr Dias Satria, also a PhD candidate at University of Adelaide, expressed his confidence that with the support from various organisations in SA this event will be held annually.

For GoLive Indonesia, this is the third event that the project has co-organised following succesful PhD conference in Canberra  partnering with Indonesia Synergy in November 2013 and early career researcher conference at Bogor Agricultural University in March 2014 collaborating with InterCafe.

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Filed under Australia, Conference, Economic development, Economic Integration, Education, Indonesia, Infrastructure, Investment, PPIA academic discussion, Trade

2013 Food Security Regional Dialogue-Medan: Inter-economy perspectives of food security scenarios

As part of promotion of evidence-based policy making, decision makers and researchers have applied a wide range of modelling to evaluate the effectiveness of food security programs. One widely applied model is a multi-country computable general equilibrium model or known as the GTAP.  Anna Strutt (University of Waikato) and Signe Nelgen (University of Adelaide) shared their work entitled “Food security scenarios for the Asia Pacific – inter-sectoral and inter-economy perspectives”.

Anna Strutt (University of Waikato)

Anna Strutt (University of Waikato)

Strutt and Nelgen’s study focuses on CIPTTV countries, namely China, Indonesia, Philippines, Chinese Taipei and Viet Nam aiming to capture the impact of potential policy changes and other external shocks. The study uses an economy-wide framework using a computable general equilibrium model, a global trade model GTAP. Some important features of the modelling include: attention is given to the structural detail of the economy and inter-relationships between sectors; Prices and quantities are determined simultaneously with markets usually are assumed to clear; Incomes are endogenously determined; There is optimising behaviour by consumers and producers, with prices inducing adjustment. The CGE model imposes constraints e.g. availability of factors of production.

The GTAP model and the latest available GTAP version 8.1 data base with a base year of 2007 for 134 countries/regions and 57 sectors are used. Aggregation is implemented to derive 25 sectors and 28 regions in the study. The data are first projected to 2015. Agricultural distortions by Anderson and Valenzuela (2008) are updated and mapped to the GTAP sectors. Bilateral preferences from the GTAP database are maintained. To better capture food security aspects, the study augments the GTAP with food nutrition data using kilocalories per day per person.

Signe Nelgen (University of Adelaide) to explain about agricultural distortions dataset

Signe Nelgen (University of Adelaide) to explain about agricultural distortions dataset

Five scenarios are being simulated for the CIPTTV region: 1) improved agricultural productivity (land consolidation may lead to a 5 per cent increase in TFP in land-using sectors; 2) increased rice self-sufficiency through increasing tariffs imposed on imports from all regions thus eliminating 99 per cent of rice imports; 3) Combination of 1) and 2); 4) increased rice self-sufficiency and retaliatory tariffs from a key rice exporter; and 5) natural disaster harming land productivity which is assumed to lead to a 5 per cent reduction in land productivity in the region.

The study concludes that policies to promote self-sufficiency through the use of protectionist trade policies such as tariff may lead to a worsening of key food security indicators such as household food consumption. But if agricultural productivity improvements are part of the policy mix, the impacts will be less severe. However, retaliatory trade policies are likely to worsen conditions.

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Filed under Agriculture, Conference, East Asia, Economic development, Economic Integration, Food and agriculture, Investment, Methodology, Trade

2013 Food Security Regional Dialogue-Medan: The Quiet Revolution in Staple Food Value Chains in Asia

Professor Tom Reardon of Michigan State University has lead research in the past 10 years on staple food value chains in China, Bangladesh, India, Indonesia, Philippines and Viet Nam where nearly 10,000 farmers and supply chain actors being surveyed. He gave a presentation over the Skype on Day 2 of the 2013 Food Security Regional Dialogue, Medan.

Modern supermarket in Medan, Indonesia

On eve of Green Revolution, there has been debate in these countries on development to choose the following. First is a large-farm development path where supporters saying large estate farms mean fast development. Moreover, there are no good technologies for small farm and small farms wont adapt new technologies.

The second is small farm development path where supporters saying Green Revolution provides technology that makes small farmers as or more productive than large estate farms.  Also, small farm path fits land scarce, labour abundant situation.

All six countries adopted small farm development path starting with the Green Revolution in the 1970s now have massive investments in rural infrastructure. But what progress have they made in small farm modernisation and in developing supply chains from small farms to domestic market (95 per cent of the food market in Asia), especially the rapidly growing cities (urban areas are 75 per cent of food market in Asia).

Tom’s project found some surprising findings. Small farms are rapidly becoming small businesses who sell 70-90 per cent of output such as rice farms in India, China, Vietnam and Bangladesh. They are very responsive to the improved contacts. There has also been rapid intensification of small farms where they shifted into high use of new varieties, purchased seed, fertiliser, pesticide and herbicide. Some examples include shrimp and mangoes in Indonesia where they use new commercial varieties and high use of inputs.

Tom’s project also observed rapid mechanisation of small farming. There was rapid shift to high use of farm machinery to free labour from grain farming to higher income activities (horticulture, rural non-farm jobs). Rapid diversification of small farms was also observed where small farms ‘climbed the value ladder’ shifting from rice/wheat into vegetables, fruits, fish, livestock, dairy,etc and providing them 4-8 times earnings; or shifting from low-quality to high-quality rice with 50-100 per cent higher returns as in Vietnam and China.

Tom’s project also reported ‘quiet revolution’ in food supply chains. It was mainly grassroot revolution by small/medium enterprises and driven by private sector (not government intervention).  There was rapid spread of ‘cold storages’ and  modernisation of wholesale markets and traders and rice mills. Spread of supermarkets in all six countries was also significant. This all supply chain development is important because it forms 50-70 per cent of food costs to consumers.

The role of the government has been extremely important. In all six countries except grain in Indonesia, government role in direct intervention is very small. There was minimal role in input supply and crop marketing. The role of government in enabling farmers and grass-roots private sector was very large. This includes agricultural research (eg seed varieties), investments in roads, ports, electricity grids, permitting cell phone expansion and promotion of information and extension.

*This summary was written by Risti Permani (University of Adelaide) and may be subject to her personal interpretation of the presentation.

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Filed under Agriculture, East Asia, Economic development, Economic Integration, Food and agriculture, Trade, Transport and logistics

2013 Food Security Regional Dialogue-Medan: Urban shopping patterns in Indonesia and implications for food security

Indonesia has undergone transformation of diets. The country observes declining importance of rice and other staples and growing importance of processed food products and high-value food products including meat, dairy, eggs, fish, fruits and vegetables. Two main causes may include growing income and urbanisation. Nicholas Minot of IFPRI presented his work on retail transformation to search for determinants of the use of modern retail in Indonesia.

Nicholas Minot

Nicholas Minot

Indonesia also experiences growth in modern food retail sector with 12 per cent annual growth in number of supermarkets and hypermarkets. There is even much faster growth among minimarts.

One effect of transformation on food security is on urban consumers they are provided with greater access to processed food with higher levels of sugar, salt and fat. This may potentially affect diet and obesity. Farmers are also affected. Supermarket chains establish structured supply chains. They require regular supplier (sometimes with contracts) demanding stable and high quality produce. This reflects opportunities as well as challenges for farmers.

An ACIAR-funded project called “Markets for high-value commodities in Indonesia: promoting competitiveness and inclusiveness” was to survey 1180 urban households in three cities, Surabaya, Bogor and Surakarta. The fieldwork was conducted between November 2010 and February 2011. The study finds that per capita expenditure is positively associated with the use of modern outlet but at a decreasing growth rate. The household size, education of head of household, and fridge ownership are positively associated with the use of modern and spending at modern outlet.

The project predicts that even though retail sectors continue to grow, in the next ten years urban food spending at modern retailers will not be more than a quarter of total spending.

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Filed under Agriculture, Conference, Economic Integration, Food and agriculture, Indonesia, Trade

2013 Food Security Regional Dialogue-Medan: Food security situation and policy in Indonesia

Rice in Indonesia has been considered to be not only main staple but also perceived as a cultural symbol of prosperity. Lumbung or rice barn was often used as a symbol of food security achievements. Current government approaches to food self-sufficiency still puts rice self-sufficiency as a key part of its national agenda. Ronnie Natawidjaja and Irlan A. Rum of Center for Agrifood Policy and Agribusiness Studies (CAPAS) – Padjajaran University reported food security situation and policy in Indonesia.

Ronnie Natawidjaja's session was moderated by Randy Stringer (University of Adelaide)

Ronnie Natawidjaja’s session was moderated by Randy Stringer (University of Adelaide)

New Food Law 2012 explicitly states that food security in Indonesia has to be based on domestic food availability and food sovereignty. Food self-sufficiency is defined when 90 per cent of consumption can be met by local production. The logistics agency or BULOG imports 10 per cent to stabilise the rice price. Unfortunately, there is no clear rule about when and how much Indonesia must import rice. As a consequence, policy responses are often coming late and this issue often creates policy debate and uncertainty in markets. Also, the rice domestic market is isolated although rice price has been generally stable (but higher than the international price level). Data from Coordinating Ministry of Economy also suggest that food subsidy for the poor has been increasing since 2007.

According to the Food Law 18/2012, food security is defined as a situation when individuals at all times have physical, social and economic access to sufficient, diversified, safe and nutritious food that meets their dietary needs, food preference and religious requirements for an active and healthy life. However, food security is often misunderstood as securing or protecting our food need and food self-sufficiency is often seen as the only solution.

Data from Statistics Indonesia (BPS) suggest an increasing trend in expenditures on prepared food (as a share of total household expenditure) and decreases in rice expenditures. The trend is related to urbanisation, supermarket transformation and increasing middle income class in Indonesia.

Whilst there has been a decreasing trend in rice import, rice prices continue to increase in the last years. In addition, regional variations exist. Eastern part of Indonesia, in particular Papua, has the biggest challenges to achieve food security due to the lack of infrastructure and low production. Ronnie views that some policy options to achieve food security should include effective trade policy, input and food subsidies, price stabilisation policy, government procurement and reserve stock policy and rice for the poor policy (Raskin).

Two issues that have not been discussed at the session are the following. First, given the increasing role of regional govenrments whether food security is seen as a ‘regional agenda’ where regional (provincial) governments have responsibilities to ensure their regions achieve food security, often be expressed as food self-sufficiency. If it does, regions with low production or with problems accessing food from production areas (due to distance and the lack of infrastructure) will be at risks. Secondly, whilst rice remains the main food commodity there is increasing demand for other food commodities such as animal-based protein sources such as beef and dairy products. One major concern is whether the Indonesian government uses the same quite costly self-sufficiency approach to these commodities. Early observations suggest that the government does.

*This summary was written by Risti Permani (Global Food Studies, University of Adelaide) and may be subject to her personal views.

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Filed under Conference, East Asia, Economic Integration, Food and agriculture, Indonesia, Investment

2013 Food Security Regional Dialogue-Medan: Origins of issues, short and long-terms policy options

Food insecurity can be driven by various factors. The factors can be classified into three factors, namely economic, social and environmental aspects. Don Gunasekera of CSIRO and Professor Christopher Findlay of University of Adelaide explain the origins of food security issues and short-term and long-term policy options.

Erwidodo (ICASEPS), Anna Strutt (University of Waikato), Randy Stringer and Christopher Findlay (University of Adelaide)

Food insecurity can be driven by factors including structural factors and market failures, food price volatility, societal vulnerabilities, gender issues, etc. Structural factors and market failures include inequality in access to land and water, insecurity in smallholder land tenure, underinvestment in agriculture. The challenges are becoming evident when data suggest upward price trend over the past decade with volatility. Global food prices have been closely tracking fossil fuel prices. The price volatility mostly affects poor people. In terms of real prices, food prices compared to a decade ago are high.

Regarding societal vulnerabilities, urban food insecurity is more significant than rural poor insecurity. Here, food insecure people are defined bas per capita food consumption for a country or income decile falls short of the nutritional target of 2,100 Kcals/person/day. In Asia, the share of population belong to food insecure people have been decreasing.  But the story from Africa is quite different.

Regarding gender issues, 43 per cent of developing country agricultural labour force are women, 50 per cent in East Asia and Africa and 20 per cent in Latin America. Under performance of developing country agriculture is partly because women have less access to inputs (eg fertiliser), land, water, equipment, extension and credit. If women had better access to productive resources, yield on their farms would increase by 20-30 per cent.

Failures in institutional governance may explain food insecurity. Governments are often unable to respond rapidly and predictably to changing markets and other social and environmental challenges.

Don Gunasekera (CSIRO) at Medan dialogue

Short-term policy options include promotion of market information (ie AMIS), market-based risk management schemes (future contract, option contracts on food imports, transparent emergency food assistance); raising food supply from smallholder farmers, reforms to distortionary trade policies and management of macroeconomic implications. Trade policy reform is important given that domestic market insulating policies raised 40 per cent of the world price of rice in 2007-2008. Social safety nets should be distributed directly to the poor.

Long-term policy measures include reducing losses across supply chains, well-functioning global food markets, raising agricultural R&D, better-managed ecosystems, and well-functioning social protection systems. One third of food produced is lost or wasted globally each year. Hence, the need to increase production and productivity would be reduced by reducing food losses and waste. This is important not only for developing but also developed countries. Reasons include limited access to finance and technical assistance and other resources. In addition, global agricultural trade minimises the adverse impacts of external shocks. Nevertheless, long-term productivity growth is unlikely to be achieved without investments in R&D. Whilst food security concepts may vary between countries, interaction of policy matters.

*The session was summarised by Risti Permani (University of Adelaide) and subject to her personal views.

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Filed under Agriculture, Conference, Economic development, Economic Integration, Food and agriculture, Trade