Policy Review: Boost Agriculture Investment to Reduce Poverty

President Joko Widodo and Minister for Agriculture Amran Sulaiman - Photo by President Office

JAKARTA (TheInsiderStories)— Indonesia is a world’s major key producer of a wide variety of agricultural tropical products. This sector has been historically contributing significantly to the economy and employment.

As a large archipelago nation of more than 17,000 islands and 256 million population the country’s agriculture industry responsible to absorb about 40 percent of national labor. Thus, any fluctuation in this sector correlates closely with the country’s poverty rate. 

According to the Statistic Indonesia data in 2018, Indonesia’s poverty rate reached 10.12 per cent in September 2017. By percentage, it may categorize as low compared to the country in Sub Sahara Africa, such as Angola and Uganda that have a poverty rate of more than 30 per cent, according to the World Bank data in 2018.

But it is a huge number since Indonesia has an enormous population of 262 million people. It means around 26.58 million people live under poverty line.

There has been a long debate to find solutions that effectively alleviate poverty. The evidence show economic growth driven by industrialization become a successful prescription to alleviate poverty in Japan, Hong Kong, Singapore, South Korea, Taiwan, Thailand.

However, not all the type of industries effectively alleviate poverty. Indonesia’s history shows the most progressive poverty reduction occurred during the 1970s to 1980s when Indonesia’s economy highly depends on the agriculture sector. The poverty sharply declines from 51.2 per cent in 1970 to 10.2 per cent in 1980.

The agriculture sector has a dominant role in alleviating poverty in Indonesia although its portion of the GDP sharply declines. It contributed to 46 per cent in 1971, sharply fell to 16 per cent in 2000, and 2.18 per cent in 2017.

This sector played a dominant role in poverty allegation because most of the poor people live in the rural areas that depend on the agriculture sector. Poor people in rural areas reached 16.31 million people, compared to 10.27 per cent in urban areas.

Investment in Agriculture

Based on the evidence above, Indonesia’s government needs to boost investment in agriculture sectors to reduce poverty effectively. President Joko Widodo actually aware of this issue reflected on his repeated statement on commitment to strengthen this sector.

“If we want to be competitive, we must focus on one sector. In my opinion, our strength is in food and agriculture,” said Widodo right after elected in 2014, as quoted by Kompas.

The president’s attention on this sector is reasonable since the agriculture sectors currently bring employment to the 50 million people although its share to GDP only around 13 per cent to 14 per cent per year, according to the Indonesian Chamber of Commerce and Industry in 2018.

Although Widodo repeatedly said the statement to boost the agriculture sectors, the investment realization in this sector remained low. According to Indonesia’s Investment Coordinating Board in 2018, the investment realization on the agriculture sectors only reached Rp1.4 trillion or only 0.8 per cent of the total investment in 2017.

Investment in the agriculture sectors suffer some obstacles. The first obstacles, the lack of agriculture infrastructures especially irrigation, roads, and agricultural processing industries. Furthermore, land grabbing to other industries or housing that decrease the land productivity for agriculture.

In addition, our products also lose competitiveness with other country’s product. The obstacle also in the farmer side since they relatively low access to the technology, capital, and institutional supports.

The government actually managed some breakthrough to gain investment in the agriculture sector. One of them was held by The Ministry of Agriculture that simplified the regulation. But this is not enough to boost investment in agriculture sectors.

The government should be more serious to boost the investment in the agriculture. If not, the development will only be enjoyed by the rich, while the poor people that mostly depends on the agriculture sectors cannot be prosperous. Without seriously take care of the agriculture, it will be difficult for the country to move from the lower middle income trapped.

Email: fauzulmuna@theinsiderstories.com