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Indonesia’s Bid to Become (Organic) Bread Basket of the World

Indonesia’s government is taking significant steps to increase food security. From Strategic Foresight Group (SFG):

“The government of Indonesia launched its first ‘integrated food production zone‘ or food estate, to be situated in Merauke, Papua in February 2010. This food estate is designed to increase food security by stimulating large-scale investment in the Indonesian agriculture sector. 1.6 million hectares of land in Merauke will be turned into a zone with integrated farming, plantation and livestock; where companies will grow, process as well as package their products. The project will support farming as well as a variety of agricultural businesses and post-harvesting industries such as packing, storage, processing and agro-tourism.

The government will help in developing the supporting infrastructure in Merauke to ensure its viability as an economic zone. If this effort is successful, the government plans to establish similar zones in eastern Indonesia.

Merauke has a population of 175,000... If the project is successful, the population here could swell to 800,000. The government hopes to create thousands of jobs through this food estate.

Investors in this zone, both foreign and domestic, will not be allowed to export any of their products until Indonesia‘s food needs are met. In any joint venture, the foreign investors will be restricted to a maximum of 49 % in an effort to ensure local ownership. Indonesia aims to become one of the world‘s main food producers by 2030. Already self-sufficient in the production of rice, Indonesia plans to become fully self-sufficient in food production in the next 5 years. The government is also planning the development of two other special economic zones (SEZs) for production of agricultural products in 2010, in Medan, North Sumatra, and in Dumai, Riau.”

The government is also supporting a grass-roots ‘smart farming’ movment. SFG:

“There are several farmers who are involved in experimenting and promotion of organic farming and smart farming techniques including the use of organic fertilizers in order to reduce dependence on chemical substances. These farmers also utilize smart farming techniques such as the System of Rice Intensification (SRI) to increase their production per hectare.

The area under organic farming is increasing steadily in Indonesia... Already, there are many farming cooperatives, farmer groups and NGOs working in this field. The global organic food industry is also growing (growth rate of 19% in 2007) with the US, the EU and Japan being the major markets for organic food.

The government has decided to cut chemical fertilizer subsidies for 2010 by 35%, driving up their prices even further... The Indonesian government has decided to increase subsidies for organic fertilizers in order to encourage farmers to use them. It has allocated a subsidy of USD 1.26 billion for the production of 11.76 million tons of organic fertilizer for 2010. The Indonesian Institute of Sciences has also launched a microbe-based ‘Beyonic‘ technology that will be used in the production of organic fertilizer.

Implications from SFG:

If [the food zone] experiment is successful, Indonesia may see itself catapulted to the status of the world‘s bread-basket as a result of its planned food estates. These estates may also lead to development of erstwhile backward areas in the country and lead to job creation.

The project is not without its share of criticism; locals in Merauke as well as NGOs fear a land grab trend, where local farmers may end up as cheap labour to outside investors. They fear a possibility where they will be forced to give up their landholdings to the food production zone. There is also a potential for differences over the food estate exacerbating a pre-existing tension between locals in Papua and the Government of Indonesia over the recently acquired autonomy for the region.

As the demand for organic products and the drive towards organic farming increase, the position of small holding farmers will gradually become better. Since their expenditure on fertilizers will reduce due to the use of organic fertilizers, and the quality of soil on their landholding will improve as a result, farming will become more lucrative and lesser number of small farmers will have to search for other means of employment.

Implications from IFTF:
As supply of organic produce increases, prices will likely go down, possibly sparking greater demand globally. Demand could rise particularly sharply in Indonesia itself if organic produce becomes a point of national pride. If successful, it could be a model for other countries and help alleviate poverty worldwide.

If there is ever a global food shortage, like some fear, Indonesia could become very powerful.

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Strategic Foresight Group, Asian Horizons,March 2010 page 7-8: