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Agriculture Sector
For anyone who is interested in soft commodities, Indonesia must occupy a priveleged place. It comes closest to what we would call the home of soft commodities. Even a drive through Sumatra presented a dream of tree crops. Thousands of hectares of wonderful commodities.
Vinay Chand has been associated with Indonesia since 1979 and is priveleged to have got to know the country and made so many good friends. The latest visit was in December 2010 to Jakarta to find out how the clove industry was doing and to visit the International Pepper Community on a project for the EU helping Madagascar export vanilla, cloves, pepper and cocoa beans, all commodities that grow abundantly in Indonesia as well.
Indonesian Agriculture
According to the World Bank:
'Indonesian agriculture supports the livelihood of millions of Indonesians. Three out of five Indonesians still live in rural areas and farming is their main occupation. While Indonesian agriculture has performed well historically and contributed to significant growth with increased employment and reduction of poverty, productivity gains of most crops have now slowed down significantly and the majority of farmers operate in less than one-half hectare today.

Revitalizing the agricultural sector is necessary to underpin renewed and robust growth of the economy and is a key component of the Government’s rural development strategy.



With agriculture now averaging only half of rural households’ incomes, a strategy for rural development will also need to focus on the non-farm rural economy which will demand close cross-sectoral collaboration. An additional challenge is that big-bang decentralization is altering fiscal and administrative relations between central and sub-national governments, regulatory systems are struggling to maintain nationally coherent frameworks in the face of decentralized implementation capacity, and public/private roles are being re-examined for extension, research animal health services, and others.



The rural development agenda will need to focus on two areas: reinvigorating productivity gains among rural producers, and providing the foundation for the long-run sustainability of these productivity gains.



To alleviate rural poverty, broad-based growth in rural productivity is essential with robust systems for generating, adapting and disseminating technology relevant to small-scale producers. While Indonesia has concentrated on these in the past through public sector research and extension institutions, these public systems are facing severe challenges due to decentralization.




Over the past decade, Indonesia has achieved and was, until the East Asia economic crisis struck, considered to be among the best performing East Asian economies. Indonesia grew at a rate of 7.1 percent between 1985 and 1995, and attained real GDP growth of 7.8 percent in 1996. Between 1970 and 1996, the proportion of the population living below the official poverty line declined from 60 percent to an estimated 11 percent -- about twenty-eight million people -- reflecting the government's strong commitment to poverty reduction. However, this rose to 23.4 percent at the peak of the crisis in 1999 but has since dropped back to 16.7 percent, lower than the pre-crisis level of 17.6 percent.'


Indonesia remains a rice farming system country. The area devoted to rice in the country
is more than for any other single crop. Oil palms have been promoted into becoming the leading commercial tree crop and the mainstay of the sector economy.
In terms of production, oil palms fruit lead, followed by paddy, sugar, cassava, coconuts and bananas. Of course, it must be remembered that Indonesia grows a vast range of commodities and these are merely the leading ones.
Source: FAOstats
There has beena great deal of criticsm from environmnetalists at the destructive nature of planting so much oil palm and much of the criticsm is well deserved. For much of the 1970-2000 period there was a global battle between soya and oil palm which was in the end won decisively by palm oil but a lot of risky decisions were taken in the process.
Source: FAstats
The range of crops being grown is illustrated by the next most important crops after the leading ones. The impressive aspect of this data is the large volume grown of these less important to the economy crops.
In terms of exports, as expected, palm oil dwarfs the other exports but is followed by rubber, palm kernel oil, coffee, cocoa beans and coconut oil. Clearly, tree crops dominate exports. Indonesia is a leading global supplier and capable of boosting production much further.
Source: FAOstats
In its exports of agricultural products, Indonesia today is still dependent on a few critical commodities that include palm oil, rubber, palm kernel oil, coffee, cocoa beans and coconut oil. The country is in a process of agricultural industrialisation and is moving into downstream processing of these basic commodities. However, 2008 was a very exceptional year in terms of prices.
Export values of the leading commodities nearly trippled over the period from 2005-2008. Since then, export values have declined, risen again and declined but are still far higher than in 2005.