A study looks at combined investments in research and development, infrastructure, technology, and policy reforms to achieve food security goals.
Overview
Indonesia’s economy has made significant progress over the past decades. Prevalence of undernourishment has been declining and the country needs to continue its efforts to fully eradicate it.
Increased investment in agriculture—to modernize production and marketing systems—is key to eliminate hunger in the country. This will not only help improve the country’s food production but also enable rural households to engage in more productive livelihoods and increase their income.
This article is adapted from Policies to Support Investment Requirements of Indonesia's Food and Agriculture Development during 2020–2045, an Asian Development Bank, International Food Policy Research Institute and BAPPENAS report. The joint study looks at how investments in agriculture could improve food security and boost economic growth.
Scenario Analysis
Agriculture retains an important role in the Indonesian economy, even if its share in the gross domestic product (GDP) has declined over time.
In the Global Food Security Index 2018 published by the Economist Intelligence Unit, Indonesia ranks 65th among 113 countries—below Southeast Asian neighbors Singapore (1st), Malaysia (40th), Thailand (54th), and Viet Nam (62nd).
The country has managed to reduce the number of undernourished people from 42 million in 2000 to 20.7 million in 2015. Additional efforts are needed to speed up the rate of reduction of the prevalence of undernourishment in the country.
The study analyzes different policy and investment scenarios for three subsectors, namely: agricultural research and development, irrigation and water resource management, and infrastructure development to reduce postharvest losses. Simulations were run under different assumptions about policy, agricultural R&D, and investments to understand possible impacts on food security and other agricultural outcomes, and the GDP.
In addition to the investment scenario, fertilizer subsidy policies and trade policy were simulated.
Key Findings
The findings of the analysis showed Indonesia can end hunger by increasing annual agricultural investment:
- Investments in agricultural R&D are particularly effective in boosting productivity and improving food security while cutting hunger in half.
- Investments in rural infrastructure to reduce postharvest losses and marketing costs will markedly improve food security.
- Investments in irrigation expansion and water efficiency will reduce hunger, although not by as much as the other types of investments. However, they will reduce agricultural water use by 7%.
- Removal of the fertilizer subsidy and reinvestment of the saved funds into agricultural R&D will increase agricultural productivity and reduce hunger.
Some specific policy recommendations are as follows:
Increase the investment in broad-based, yield-enhancing research, with more focus given to those likely to increase with climate change, including heat, drought, pests, and diseases.
Private sector investments will be critical to meet higher investment targets, and the provision of government guarantees, or risk sharing could incentivize the private sector to fund infrastructure investments.
Investments in irrigation expansion and improvement will increase crop yields and area, and promote the adoption of advanced technologies. Although increased investments in irrigation systems will lead to higher agricultural production and less hunger, the impacts will not be as high as for agricultural research and development and rural infrastructure. Therefore, cost-effectiveness should be taken into account in increasing investment in irrigation system.
The government, in partnership with the private sector, should promote more rapid adoption of precision agriculture for which improvement of extension service is crucial.
This combination of policies will promote the participation of youth and entrepreneurial farmers and foster innovative start-ups.
Constraints on new technology transfer, including barriers to foreign direct investment, excessive testing and certification requirements, and ad hoc biosafety decision making, should be reduced.
Fiscal savings from the phase-out of subsidies should be invested in increased agricultural research and development and non-distorting income support for small farmers.
Resources
Asian Development Bank, International Food Policy Research Institute and BAPPENAS. 2019. Policies to Support Investment Requirements of Indonesia's Food and Agriculture Development during 2020–2045. Manila.
B. Arifin, et al. 2018. Modeling the Future of Indonesian Food Consumption: Final Report. Research report submitted to the National Development Planning Agency (Bappenas), World Food Programme (WFP), and Food and Agriculture Organization of the United Nations (FAO). Jakarta.
The Economist Intelligence Unit. 2018. Global Food Security Index 2018: Building Resilience in the Face of Rising Food Security Risks. London. The Economist.
World Bank. 2019. The World Bank in Indonesia.
Ask the Experts
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Prior to joining ADB in 1998, Akmal Siddiq worked for a United States Agency for International Development-funded project, International Maize and Wheat Improvement Center, and consulted for the World Bank. He is a natural resource economist with extensive experience in sustainable development. He received his master's and doctoral degrees from the University of Arizona and University of Illinois, Urbana-Champaign.
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Md. Abul Basher works on food security and rural development issues, contributes to ADB’s agenda of sustainable development, and supports the bank's knowledge management process on food security and sustainability. Prior to ADB, he taught Economics at Willamette University in the United States and worked as an economist at the World Bank and a researcher at Bangladesh Institute of Development Studies.
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Mark W. Rosegrant is also a Non-resident Fellow of the Chicago Council on Global Affairs. He authored and edited 12 books and over 100 refereed papers in agricultural economics, water resources, and food policy analysis. He holds a PhD in Public Policy from the University of Michigan.
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Bustanul Arifin has over 30 years of experience working on food and agricultural policy, institutional change, and sustainable development strategy researches. He currently serves as Food Policy Adviser for the Minister of Economic Affairs and Chairman of Statistical Society Forum in Indonesia, and is a Senior Economist at the Institute for Development Economics and Finance, and Professorial Fellow at the School of Business in IPB University.
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Nicostrato D. Perez has more than 20 years of research experience working in academic and research institutions including IRRI, WorldFish, PhilRice, Bonn University, and Mindanao State University before joining IFPRI. He has a PhD in Agricultural and Applied Economics from Virginia Tech.
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Before joining IFPRI, Angga Pradesha worked as Research Associate at the Asian Development Bank Institute (ADBI). His research interests include the application of partial and general equilibrium models to understand the complex interaction between economic growth, climate change, poverty, and food security.
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Rowena A. Valmonte-Santos has extensive research experience in natural resource management, community-based fisheries management, and impacts of climate change in agriculture and fisheries. She is the Manager of Flagship 5 (Governance of Natural Resources) and CG Research Program on Policies, Institutions, and Markets. She received her MSc in Environmental Studies from UP Los Baños.
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The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.
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