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The Role of Agriculture in Indonesia Economic Development Indonesia can be categorized as an agrarian nation, where the role of agriculture in Indonesia economy really significant. Agriculture sector in Indonesia has a role in: (a) providing job opportunity for the majority of labor force, (b) producing foods for the nation, (c) raw material producer for industrial sector, and (d) strengthening food security and rural development. The role of agriculture becomes more important when Indonesia in the middle of economic crisis.
Normally, agriculture activities are done in rural area, where most of Indonesian population stays. That is why agriculture development in Indonesia can not be separated from rural development at large. The development of agriculture sector will bring a large impact to the welfare of rural population. Because of most of population in Indonesia live in rural area, the condition of their welfare will largely effect national development. Agriculture development in Indonesia is also related to the effort to reduce poverty and strengthening food security.
Most of farmer in Indonesia own small piece of farming land. The average of land ownership in Indonesia is below 0. 35 hectare. The consequence of small size of land ownership is most of people live below poverty line exist in rural area. The farmer with small size of land and landless farmers are those who also prone to experiencing food insecurity. The decreasing of income or the rising of food prices is sufficient to make farmers and their families facing a hardship to get access to enough food.
The rate of unemployment in Indonesia is relatively very high, it is more than 10 per cent. The growth of employment opportunity much lower then the increasing of labor force itself. The role of agriculture sector in absorbing the surge of unemployment in is relatively high. In 1980 the agriculture sector could provide employment to labor force around 54 per cent of the total. The share decrease slowly and then going up when Indonesia was in economic crisis. If the central bank of Indonesia is alled “the lender of the last resort”, then agriculture became “the employer of the last resort”. In 2007, the share of agriculture sector in absorbing labor force was still above 40 per cent. The main objective of agriculture policy is maximizing the production growth rate, especially rice and other foodstuff such as corn and soybean. Most of agricultural programs were directed toward realizing food self sufficiency, particularly by means of expansion and intensification.
Expansion was aimed to extent planted area through (a) opening or extending new farm land, mostly outside Java Island, (b) improving infertile land quality, (c) extending irrigation networks, (d) increasing the dry land utilization, and (e) improving the quality of swamp and tidal swamp land. On the other side, the objective of agriculture intensification was increasing productivity of food farming system. Agriculture intensification was done by (a) improving the methods of cultivation, (b) exploiting the benefits of high yielding variety seeds, and (c) the application of fertilizers and pesticide appropriately.
Through expansion and intensification, it was hoped that Indonesia would capable to increase its food production, especially rice. The agriculture policy had produced positive as well as negative impacts. The positive impacts that resulted from agriculture policy were: (a) farm production increased significantly, (b) the stability of food price, (c) improvement on farm income and lead to poverty reduction in rural area, (d) improvement on capital accumulation in rural area.
Nevertheless agriculture policy brings negative impacts, and they are: (a) over use of agriculture input, especially nitrogen fertilizer, (b) land degradation in center area of paddy’s production, (d) increasing dependency on rice as a major staple food, (f) declining of rice competitiveness in international market, and (g) the improvement of other commodities except rice was forgotten. Although nowadays the role of rice in national economy is declining, but it’s direct and indirect roles are still significant. Paddy’s farming has contributed to earning of the farmers and providing job opportunities to more than 21 millions households.
To paddy’s farmer, the contribution of paddy’s farming to its household income is between 25 per cent and 35 per cent. Rice is a main staple food of more than 95 per cent of Indonesian population. The contribution of rice to protein and energy intake is remaining high; it is more than 50 per cent. The rice economic policy seems necessarily needed. However the policy that has been made in the past needs adjustments. There are already many changes in strategic environment that forced government to delete many existing policies. Strategic environment that has changed are domestically and globally.
The change of domestically strategic environment is important to be counted on due to: (a) the availability of government budget is much more limited than before, because of economic crisis, (b) government has made decision to open Indonesia economy more widely to the competition of global market, (c) there is a significant shift in national decision making and development implementation from centralistic system to more decentralized system, and (d) Indonesia has depended much on foreign countries and other foreign institution in providing fund for its development.
In accordance to those changes, the agriculture policy needs to be changed also.