Monday, December 11, 2006 Vincent Lingga, The Jakarta Post, Jakarta
The findings of the latest World Bank study to the effect that almost 70 percent of the poor in Indonesia live in rural areas and 64 percent work in agriculture boil down to a central message: the fight against poverty should be waged mainly on the rural front.
This does not, however, mean that the focus should be entirely on agriculture as rural non-farm economic activities (micro and small enterprises) also play an increasingly important role as sources of livelihood for villagers.
Although agriculture's contribution to national gross domestic product has declined to less than 20 percent, its direct and indirect contributions to the national economy remain significant through its forward and backward production, distribution and consumption linkages.
Put another way, the agricultural growth multiplier quantifies the impact of an increase in income in the agricultural sector on income growth in other sectors.
However, despite the vital role of agriculture in poverty alleviation, it is quite difficult to see how the Agricultural Revitalization Program of President Susilo Bambang Yudhoyono, launched in July 2005, connects with the new poverty reduction strategy -- the Community Empowerment Program -- that Coordinating Minister for People's Welfare Aburizal Bakrie described at a national poverty conference here last week.
Disappointingly, not a single minister, not even the agriculture minister, has elaborated on the agriculture-revitalization concept after its introduction by Aburizal Bakrie, the then coordinating minister for the economy, almost 18 months ago.
The World Bank report Making the new Indonesia work for the Poor, which was launched last week, reemphasized the vital need for higher productivity in the agriculture sector and rural non-farm small enterprises.
The report endorses the conclusions of similar studies by other domestic and foreign institutions, which have concluded that farmers' incomes can no longer be improved significantly by focusing on such staple crops as rice, cassava, soybean, sugar and corn as such crops will do little to provide additional employment and income growth due to diminishing productivity gains, especially in Java, where most farmers till less than half a hectare.
The problem, though, is that shifting to higher value agricultural activities, such as forestry and horticulture requires high-yield seeds, agriculture extension services, better infrastructure (such as rural roads), up-to-date information flows, market facilities and electricity.
Rural infrastructure is quite vital as in both agriculture and the rural non-farm economy, opportunities for growth can be generated by greater linkages with the urban economy and export markets.
Future agricultural growth will depend largely on urban and international demand for high value agricultural produce. In other words, smooth transportation is vital to facilitating linkages with the farm economy and stimulating the development of rural small enterprises.
The sad reality, however, is that farmers' access to basic services and markets has sharply deteriorated as the result of an acute lack of maintenance of the rural road network since 1998. Likewise, the scope and extent of agriculture extension services has declined since decentralization.
No wonder, agricultural total factor productivity has declined steadily since 1993, according to the World Bank report.
Regional administrations, which under local autonomy play a key role in the provision of both basic services and rural infrastructure, often do not understand the nature and importance of linkages between agriculture and the non-farm economy.
There is nothing wrong with the Community Empowerment Program concept. It will be more effective as it promotes the empowerment and involvement of poor people in conceiving programs, as well as transparent budgeting rules, processes and procedures, good-governance practices and increased accountability.
The program, however, will be less effective in alleviating poverty if it is not supported by strong and competent institutions, and an enabling environment for the revitalization of agriculture and the development of agribusiness in its broadest sense. Yet more challenging is that fact that the responsibility for creating such an enabling climate rests squarely with local government.
The message that one can really draw from the main recommendations of the World Bank study is that poverty alleviation should incorporate the broad objective of empowering farmers (improving their incomes) and the rural community through the development of the farm and non-farm economy, the improvement of rural infrastructure and the provision of basic services.
The revitalization of the agricultural sector will require tight ministerial coordination and cooperation with local administrations in mobilizing resources for the development of such basic infrastructure as roads, markets, processing facilities, rural financial institutions, farm research stations designed to meet area-specific conditions, and technical farm extension services.
The agriculture extension service should be decentralized and be complemented by a conducive business environment to stimulate private investment in the propagation of high-yield seeds for high value crops.
The questions now are twofold: how will the revitalization of the agriculture sector be integrated into the Community Empowerment Program, and which minister will be responsible for coordinating the government functions in all of the multidimensional activities involved in the Community Empowerment Program? Will it be the coordinating minister for people's welfare, Aburizal Bakrie, or the chief economics minister, Boediono?
