Rice Trade and Food Security in Indonesia From the International Perspective

Robert Michel Totah 

United States citizen, 35 years of working experience in International rice and Indonesia

  

Question: Indonesia has experienced self-sufficient in rice, but some of this year imports could not be avoided . Do you think it's import is a very disturbing food security programs in Indonesia?


Answer: Indonesian Self sufficiency in rice should not be the primary goal of the Indonesian government, diversification into other cash crops, organizing the fragmented rice farmers, investing in the agricultural infrastructure and promoting private-public partnerships, is.

 

Today the Indonesian farmer is not able to subsist on his own production, he must sell his good rice to purchase a lower quality of rice to feed his family. Promoting the idea of diversification from production of staple grains to higher-valued commodities would increase the farmer’s income and hence his purchasing power and lifestyle.

 

While implementing such a policy, there should be a concerted to effort to organize the remaining rice farmers. The fragmented rice farming sector should be consolidated by organizing the farmers into “rice estates”. The economies of scale of the rice estate will make for better use of inputs, and technology, which in turn would help increase production, therefore also helping to contribute to increasing the purchasing power of the rice farmer.

 

Increasing rice productivity will require that the government begin to focus more on agricultural infrastructure investment. Today, what is urgently needed, is the introduction to storage/silo’s and grain drying facilities, situated within close proximity and easily accessible the farmers. Currently, it is estimated that there is over 10pct post harvest loss in rice, this is equal to about 3 million tons of white rice! Recovering this loss would go a long way to helping calm concerns of Indonesian rice self sufficiency.

 

One should take into consideration, that even though 57pct of the Indonesian population lives in Java, Indonesia is an archipelago nation with over 15’000 islands. It is important that no major populous be left out on the road to progress. In order to achieve such a goal, and reap the benefits of increased efficiency throughout the country, there must be a concerted effort by the government, NGO’s and the private sector, to work together and agree on a common vision.


Question: Price of rice in Indonesia is higher than Vietnam, Thailand also Cambodia. Though productivity in Indonesia more better than Thailand. What causes, do you think?

 

Answer: The price of Indonesia’s rice is higher than in Vietnam and Thailand, but what one must take into consideration, is that even though Indonesia is the third largest producer of rice in the world, its population of 250 million people has one of the highest consumption of rice per capita in the world, 150 kilos per person. This, as well as the existing inefficiencies of todays existing infrastructure, and the high cost of land in Java, are reasons why Indonesian rice is so expensive.

 

Another advantage for Vietnam and Thailand, is that they are both export oriented economies. The export of rice creates income in dollars. Earning foreign exchange, helps fuels rice sector investment in infrastructure and increases efficiencies. One must not forget that until 1989, Vietnam was a net rice importer, but thanks to a strong central government, transformation in the rice economy came rapidly. I am a firm believer that the same is possible for Indonesia, but the challenges that lay ahead for Democratic Indonesia, will be bridging the cultural divide between private sector, government and NGO; you might call it a form of Agricultural Pancasilla. I know Indonesia can do it!!

 

Question: Running corporate farming from planting to post-harvest and supported by agricultural mechanization is one of some programs to makes rice price more lower. In other words, Indonesia's agricultural future should be more focus on mechanization. What do you think?

 

Answer: When approaching farming in Indonesia, it is important to organize the farmers in whatever form one may wish to call it, whether it be called corporate farming, rice estate or contract farming. Organizing the farmer, coupled with infrastructure development, will make for more efficient use of inputs and increase production. Economies of scale will further help to lower costs making the rice farming sector more efficient.

 

Mechanized farming, a concept once thought impossible on the island of Java, is becoming increasingly a possible option to use. Today we are beginning to witness a decreasing labor pool in the agricultural sector, probably due to the low pay scale of the farm laborer. Any introduction of mechanized farming should be done with the involvement of the farmer so that he also understands the benefit.

 

Indonesia should also consider the mechanized farming option on the less populated Islands of Kalimantan and PnG, where introduction of such technology would be swift and efficient. Increasing the rice production in the outer areas of Indonesia would help free up much needed agricultural land in Java.

 

Question: Indonesia has entered the era of AEC (ASEAN Economic Community) and a rice millers Indonesia will be facing directly with Vietnam and Thailand. What should be done the Indonesian government to protect local milling entrepreneur?

 

Answer: As Indonesia prepares to enter the AEC, Indonesia must try and maintain it’s rigid control on imports of foreign rice. Centralized control of imports should remain in the hands of government institutions and not in the hands of the private sector. It must not be forgotten, that even though Indonesia might have one of the largest growing middle class in the world, it still remains an agrarian based economy in transition. It is essential that Indonesia’s heart i.e. the rural farmers and mills, be protected in any international agreements, if sustainable advances are to be achieved in this sector.

 

Question: There were 180 thousands rice mill in Indonesia, and less than 1 % that is modern. Many small scale rice milling feel uncomfortable because large milling easier to raise the purchase price of grain. How does the ideal concept for rice milling large and small scale can work and grow together?

 

Answer: It is understandable that the over 180 thousand traditional rice mills in Indonesia feel uncomfortable with the introduction of the modern rice milling facility. These issues must be taken seriously by both the modern rice milling sector, and the government. Success in rice milling should not only be measured by the quality of tice you produce but also by your distribution network and the number of people you feed! Today Large scale rice mills are producing almost exclusively, premium rice 5pct, a domestic market of about 2 to 3 million tons.

 

This rice is destined for the large metropolis, whereas the other 180’000 rice mills are responsible for supplying the bulk of the low to medium rice for the “other Indonesia”. The low to medium quality rice is affordable for the common people. If sustainable change is to be achieved, the concerns of the small traditional millers should not be ignored. Large rice mills should be encouraged to share their technology and expertise with small rice mills. Such a policy could be introduced in a variety of different ways, such as, providing access to mechanical drying, storage/silos, access to new technology and preferential financing.

 

Question: You are one of the shareholders of PT LPI-Lumbung Padi Indonesia. How do you know well about agriculture, especially rice in Indonesia, can you tell me?

 

Answer: My love for Indonesia and experience in rice comes from a relationship with Indonesia that dates back to the 1970’s. I was 18 when I first visited Indonesia with my father, Raphael Totah (Continental Grain). As a family we have been involved in the rice milling /trading sector for over three generations. We owned and operated a rice mill in Alexandria Egypt until the 1950’s. We actively assisted the government of Indonesia in procuring rice in the international market for over 30 years. In the 1990’s, with the advent of globalization, markets began to change as well as Indonesia.

 

In 2001, With the introduction of the agrarian/land reform act that allowed for foreign investment, I saw the opportunity to give back to Indonesia the benefits and rewards it had provided my family. In 2004 I bought the 5 hectares of land in Mojokerto with a plan to build the first modern rice mill in Indonesia. It was not an easy task, especially for a foreigner. After several attempts of financing the project, the final one which involved US government financing (OPIC), Lumbung Padi acquired the project. Thankfully the new team of Indonesian investors, which include Fara Luwia, the new majority owner, and Rachmat Gobel, were able to secure the necessary financing to finally realize my vision.

 

Question: What program could you suggest to our government to develop the future of Indonesian agriculture, especially rice?

 

Answer: Looking towards the future of Indonesian agriculture, I see tremendous opportunities on the horizon. I believe that government should continue to maintain strategic stocks of rice but in the form of Paddy instead of white rice. Paddy rice (Garba) could be stored for longer periods and used in cases of food emergencies where rapid price stabilization is required. For this goal to be achieved, a comprehensive policy towards infrastructure investment needs to be formulated. Such a policy would need to include the participation of all sectors of the rice economy. Providing access to public-private drying and storage/silo’s facilities to small traditional millers and farmers, would help reduce post harvest loss, increase productivity and reduce costs, therefore positioning Indonesia as a potential rice exporter in the future.

 

Question: What do you think about role of PT Food Station and your suggestions of what to strengthen food security in Jakarta?

 

Answer: The role of PT Food station will play an important role, as their network of distribution to the consumer is wide reaching. PT Food Station participation in any future project would be a valuable asset not to be ignored. In tandem with Bulog Food Station could be used to store and manage government stocks of milled rice. This would help to insulate the rice market in Jakarta, and other large cities from unexpected destabilizing price fluctuations.


Today Indonesia, the sleeping giant is waking up and is finally emerging as a regional leader on the world stage. Successful implementation of agricultural policy in the coming years will help create a sustainable platform for growth in all sectors of Indonesia’s economy and fuel it’s political/economic power in the context of the global economy.