Offal and Rice Imports in Indonesia

– By Christopher Linnan –

People often have an idyllic view of the average farmer. We envision the modern farmer to be a hard-working patriot, who toils away eking out a living, while feeding his fellow countrymen. As American high schoolers we are assigned classic books such as John Steinbeck’s East of Eden, Willa Cather’s My Ántonia, etc, which reinforce the beauty of farm life. Furthermore, we assume that if farmers are doing well, it is beneficial for society because prosperous farmers should equal food self-sufficiency for their country. As a result many governments around the world heavily subsidize their farmers and promote protectionist policies that would cause an outcry if they were used to shield other industries. This phenomenon is well-illustrated by the recently-elected Indonesian President Jokowi’s push to make Indonesia food self-sufficient within the next three to four years,[i] which is most apparent in his recent decision to ban offal imports from other countries and his refusal to import rice despite a significant price hike over the past year.[ii]

Offal are animal organs that people can eat and are used in a variety of Indonesian dishes, most notably bakso, or meatballs, which are very common in Indonesia. Over sixty percent of offal sold in Indonesia is imported, which means that by banning it the Jokowi Administration has decided to let consumers pay a significantly higher price, so that Indonesian offal producers are protected from foreign competition.[iii] The official reasoning given by the Indonesian Agriculture Minister Amran Sulaiman is that in the countries exporting offal to Indonesia it is considered unfit for human consumption, thus, it is demeaning that they export it to Indonesia for Indonesians to eat.[iv] The head of the Indonesian Meat Importers Association, Thomas Sembiring, provided an appropriate response when he asked “Where else in the world is the dignity of a nation determined by what its people eat…In France people eat snails, here we feed them to ducks. So what?”[v] Furthermore, it is rather doubtful that domestic producers will be able to replace importers’ production, which will lead to a noticeable shortage of one of the most common Indonesian food items.

The obvious winners from this import ban are Indonesian offal producers, which now do not have any foreign competition. However, the lack of competition does not mean they will become more efficient or productive, as Indonesia is facing a significant beef shortage in addition to a surge in prices.[vi] It makes sense for the Indonesian government to offer incentives to domestic beef producers to generate more meat and to do it more efficiently, but eliminating the competition does not lead to such results. This move highlights a troubling trend of promoting protectionist policies that often have negative effects, such as Indonesia’s ban on rice imports.

Indonesia’s ban on rice imports dates back to 2004 and has led to an exponential price increase of rice in Indonesia since then.[vii] Unfortunately, the people who pay the brunt of this are impoverished consumers, who have to spend a significantly larger portion of their income on daily necessities, such as food.[viii] This is especially relevant since anybody who has spent significant time in Indonesia knows that the average Indonesian eats rice multiple times a day in a wide range of dishes. Traditionally, Indonesia has struggled to meet domestic demand as it lags far behind many of its neighbors in Southeast Asia, which is most likely due to its geography.[ix] Indonesia’s decision to ban rice imports means mainland exporters such as Vietnam and Thailand are no longer able to export their excess rice supply to Indonesia. This helps domestic rice producers, but similar to offal this means that consumers will pay a significantly higher price.

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The average middle-class Indonesian is unlikely to suffer noticeable hardship from a higher price for rice, but for lower-class citizens they must carry a much heavier share of the burden from the government’s push to be self-sufficient. Asking Indonesians to pay a higher price for food out of an idealistic political program will only benefit inefficient domestic producers, while leaving the vast majority of Indonesians as losers. Jokowi’s administration has pledged to focus on helping lower-class Indonesians and even introduced a new welfare program called the Productive Family Welfare Program, which is aimed at helping poorer Indonesians.[xi] However, this admirable goal stands at odds with Indonesia’s food self-sufficiency push.

Making Indonesia, or any country for that matter, food self-sufficient is a very noble goal. However, achieving this through nationalistic measures such as banning imports is not the solution. Furthermore, banning another country’s imports or imposing steep tariffs typically leads to counterproductive economic warfare, which leaves both countries as losers. The people who are hurt the most by these decisions are average Indonesian consumers, while the beneficiaries are only a miniscule percentage of the population. Protectionist policies such as import bans, restrictive tariffs, and large subsidies make for good politics, but are usually poor policy decisions. A truly nationalistic approach should focus on helping Indonesian farmers to become more efficient and productive, thus, allowing them to progressively capture a greater market share naturally instead of artificially manipulating the market.

[i] Ina Parlina, “Jokowi Confident RI Can Attain Food Self-Sufficiency in 3 to 4 years,” The Jakarta Post 12 February 2015, http://www.thejakartapost.com/news/2015/02/12/jokowi-confident-ri-can-attain-food-self-sufficiency-3-4-years.html, accessed 5 March 2015.

[ii] Michael Taylor, “Indonesia Self-sufficiency Push Will Drive Up Beef Prices-Industy,” Reuters 4 March 2015, http://www.reuters.com/article/2015/03/04/indonesia-beef-idUSL4N0W533G20150304, accessed 5 March 2015.

[iii] Chris Brummitt et al., “Australian Beef Intestines Are Off the Menu With Indonesian Ban,” Bloomberg 4 March 2015, http://www.bloomberg.com/news/articles/2015-03-03/aussie-beef-lung-off-the-menu-with-indonesia-ban-southeast-asia, accessed 5 March 2015.

[iv]Ibid.

[v] Ibid.

[vi] Matt Brann, “Beef Prices in Indonesia Rising Sharply as Supply Dwindles in the Lead Up to Ramadan,” Australian Broadcasting Corporation 3 March 2015, http://www.abc.net.au/news/2015-03-03/beef-prices-in-indonesia-rising-sharply-concerns-for-ramadan/6273314, accessed 11 March 2015.

[vii] Peter Warr, “Indonesia: Why Food Self-Sufficiency is Different From Food Security,” Development Policy Center 28 April 2011, http://devpolicy.org/indonesia-why-food-self-sufficiency-is-different-from-food-security20110428/, accessed 5 March 2015.

[viii] Ibid.

[ix] David Dawe, “Rice Self-sufficiency: A Question of Geography,” International Rice Research Institute March 2014, http://irri.org/rice-today/rice-self-sufficiency-a-question-of-geography, accessed 11 March 2015.

[x] Ibid.

[xi] “Welfare Program Kicks Off,” The Jakarta Post 1 November 2014, http://www.thejakartapost.com/news/2014/11/01/welfare-program-kicks.html, accessed 11 March 2015.

About the author: Chris Linnan is a Fulbright English Teaching Assistant in Palangkaraya, Central Kalimantan. He graduated from Emory University in May 2014.

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