The price of rice in several Indonesian regions has risen by between 17 to 23 percent to IDR 8,500-9,000 per kilogram as rice production at the start of the year has not been able to meet rice demand. In January 2015, Indonesian rice production stood at 2 million tons, whereas demand reached 2.5 million tons. Inflation of rice is a sensitive issue in Indonesia because it jeopardizes declining poverty rates as poorer segments of Indonesian society spend over half of their total disposable income on food items, primarily rice.
Winarno Tohir, Chairman of the Farmers and Fishermen's Society (KTNA), said that domestic rice prices soared at the start of the year not only due to reduced output in January (partly the result of floods in harvest areas) but also because the central government stopped distributing subsidized rice to the poor (through its Raskin program) in November. This program was stopped by President Joko Widodo, who assumed office in October 2014, as it was estimated that about 30 percent of the subsidized rice went missing before it could reach the 16 million poorest Indonesian families. A preliminary investigation conducted by the country’s Corruption Eradication Commission (KPK) signalled that state agency Bulog, which managed the annual USD $1.7 billion Raskin program, did not run the program efficiently. To support the poorest Indonesian families, the government now sends electronic money (e-money) to the families’ bank accounts.
However, Tohir said that current price pressures will ease starting from mid-February as rice production is expected to touch 3.6 million tons this month. Rice production will further improve in March and April as almost all Indonesian regions enter the harvest season. Therefore Tohir does not believe that the government should intervene in the market to push rice prices down.
Rice Production Indonesia:
| Indonesian Rice
¹ numbers are in millions of unmilled tons of rice
² indicates a forecast
Sources: Food and Agriculture Organization of the United Nations and Indonesian Ministry of Agriculture
Reportedly, Indonesia holds the world’s largest per capita rice consumption at about 140 kilograms of rice per person per year. Therefore, it is not surprizing that Southeast Asia’s largest economy is eager to reach self-sufficiency in consumption of this staple food crop (only having succeeded in the mid-1980s and 2008-2009). The current Joko Widodo administration has the ambitious target to reach rice self-sufficiency by 2017 through providing subsidized fertilizers and seeds to Indonesian farmers and by rehabilitating one million hectares of tertiary irrigation channels for paddy production, but also by raising the government rice purchasing price (HPP) by roughly 10 percent to IDR 7,260 per kilogram in January 2015. Through this higher price, Indonesian rice farmers generate more income and are protected from low market prices. The central government targets to increase domestic rice production by 4 percent to 73.4 million tons from an estimated 70.6 million tons last year. If this target is met, then there will be no need for rice imports from Vietnam and Thailand. Last year, Bulog still needed to import about 425,000 tons of rice to meet domestic demand. According to information from the Indonesian Trade Ministry, Bulog currently holds 1.4 million tons of (commercial) rice reserves, an amount which is sufficient for up to six months.
Poverty in Indonesia
Relative and absolute poverty have declined steadily in Indonesia over the past decade. Based on the latest data from Statistics Indonesia (BPS) there were a total of 27.73 million Indonesians categorized as poor, or 10.96 percent of the total population, in September 2014.
Indonesian Poverty and Inequality Statistics:
(% of population)
Sources: World Bank and Statistics Indonesia