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THE ANALYSIS OF FACTORS AFFECTING IMPORTS OF RICE OF INDONESIA (1982 ? 2004)

Submitted by superadmin on Fri, 12/26/2008 - 09:14

CHAPTER I

INTRODUCTION
 
                1.1.  Background of the Study
According to Indonesia statistical year book 2005/2006, Indonesia is well known as an agricultural country as it can be seen by a large area utilized for agriculture. By 2004, agricultural area in Indonesia (excluding Maluku and Papua) comprised around 52.36 million hectares or around 71.33 percent of the total area. The utilization of land for agriculture can be distinguished into land area for estates, comprising around 21.05 million hectares (28.67 percent of the total area). Then it is followed by land area for arable dry land, garden, bareland, shifting land that 14.88 million hectares (20.27 percent), woods around 9.45 million hectares (12.87 percent), and land used for wet land around 7.696 million hectares (10.48 percent). The smallest utilized land covered for brackish and fresh water pond is only 0.54 million hectares (0.73 percent) and 0.23 million hectares (0.31 percent) respectively. The rest of the land area consists of 19.57 million hectares (26.66 percent) constituted of temporarily fallow land, house compound 12.42 million hectares (16.92 percent), surrounding (front and back yard) 5.56 million hectares (7.57 percent), and grassland 3.07 million hectares (4.19 percent).
Food crops sub sector consists of paddy (wet land paddy and dry land paddy), maize, cassava, sweet potatoes, peanuts, and soy beans. Compared to harvested area in 2003, it increased by 0.42 million hectares or increased around 3.66 percent. The harvested area of wet land paddy increased around 3.81 percent, meanwhile the dry land paddy increased around 2.23 percent. In 2004, the production of paddy was 54.06 million tons in dry rough paddy. It increased by 3.69 percent as compared to the production in 2003 (52.14 million tons dry rough paddy). The production of the wet land paddy increased around 3.65 percent and the dry land paddy increased around 4.36 percent. This increase was due to increase of harvested area and productivity of paddy. In 2003, the productivity of paddy in was 45.38 quintal, then it increased to 45.40 quintal in 2004, or it increased around 0.04 percent. The productivity of wet land paddy increased around 0.15 percent, meanwhile the dry land paddy decreased around 2.10 percent.
Regional distribution of paddy production in Indonesia showed a concentration on paddy production in a particular island or province. In 2004, Java Island produced around 29.64 million tons (54.82 percent) of the total production in Indonesia. The higher paddy production in Java was related to higher productivity and larger harvested area of paddy in this island compared to other islands. In 2004, the harvested area of paddy in Java Island reached 47.98 percent of the whole harvested area in Indonesia with the productivity 51.87 quintal per hectare. This means that the condition of lands in Java is better than other islands, and it should be maintained carefully in order to increase the harvested area and the productivity of food crops, in term of their quantity and quality. The harvested paddy needs to be milled into rice for consumption. Table 1.1 shows the conversion of paddy to rice.
 
Table 1.1
Conversion of Indonesia Paddy Production 
to Rice Product
Year
Paddy production 
Converting
 
(m.ton)
Paddy to rice
1992
48 240
65%
1993
48 181
65%
1994
46 642
65%
1995
49 744
65%
1996
51 102
65%
1997
49 377
65%
1998
49 237
63.20%
1999
50 866
63.20%
2000
51 899
63.20%
2001
50 461
63.20%
2002
51 490
63.20%
2003
52 138
63.20%
2004
54 088
63.20%
 
Source: Indonesia Statistic various edition 
If we talk about rice, it is the commodity which has a long historical background for Indonesia’s political economy policy. Since rice is the basic consumption for almost the whole nation, it always needs government intervention to secure its market with attainable price even during the Dutch colonialism. During their colonialism, Dutch had intervened sufficiency of rice with attainable price through many ways, as well as through infrastructure development and technological investment of agriculture product focusing on production. While maintaining the stability of price, the colonial government from time to time also opened up the imports path when needed and transported it to every region that needs rice. Besides, it conducted an organization which could stabilize the price of rice during 1939, and it is the idea of BULOG (Logistic Organization) today.
After the independent, rice is still being a strategic social political commodity for Indonesia. However, by the era of directed democracy, which believed that politic as a God, there was kind of lack of availability and attainability commodity of rice. As a consequence, the absence of this commodity in several cities in Indonesia became one reason of the falling of Soekarno’s regimes in 1965 (Liddle, 1987).
To build public entrustment at the beginning governance of the new order regimes, Indonesia opened up imports path and widened international support for imported rice. After achieving public trust and stability, the new order tried to revitalize the function of BULOG to support attainable price of rice by widening its obligation and organization structure. In line with the existence of government petroleum subsistence, during the decade of 1970’s to the early of 1980’s government made magnificent investments in the agricultural sector, especially in the rice production. Those investments, which were made possible by the surplus of Indonesian oil export revenues, included upgrading prime seeds, providing pesticide and fertilizer subsidy. This effort was known as the green revolution.
The green revolution resulted in high increase of rice production in which domestic production could fulfill the total domestic demand of rice. As the result, rice production increased sharply and reached its peak in 1984. This increase in rice production had a significant impact in reducing rice imports. At the same time, this green revolution created an increasing income in rural area community and minimized the unbalance between rural and urban community in Indonesia though at the same time there was a decreasing of price level of agricultural product (Booth, 1989).
The trigger and the key of this success come from this effect came from direct and indirect transfer from the government to agricultural producers. Once again, this government transfer was made possible by the subsistence of Indonesia oil export revenues (Hill, 1996).
From 1984 until 1993, Indonesian rice imports were relatively lower than those of other years. In other words, during that time Indonesia was said to experience relatively self sufficient in fulfilling its rice consumption. Between 1984 until 1993, Indonesian average rice imports were around 166.963 ton per year. Gradually, from 1994-1997 this rice imports increased to about 1.235.091 ton per year. From 2001-2004, rice imports experienced a slight decrease, even though the size was still above 1 million ton per year (Supadi, 2004). Nevertheless, Indonesia include as the 5 biggest imported rice countries together with, Nigeria, Iran, Philippines, and Iraq.
It is obvious that imported rice is not something new but it has been done routinely and neatly within the last twenty years. Naturally, imports of rice required to fulfill food necessity from any shortage of domestic production, as well as to support national food stock for any reasons. Then, after all this time, why have we just debated upon this? To make it clear, the writer provides the data of imported rice and its domestic production in table 1.2 below:
Table 1.2
Imports Volume of Rice and Rice Production
Year
Vol. imported rice
Rice production
 
(m.ton)
(m.ton)
1993
24 317
31 317 707
1994
633 048
30 316 991
1995
1 807 875
32 333 691
1996
2 149 758
33 215 979
1997
349 681
32 095 085
1998
2 895 118
31 117 589
1999
4 751 398
32 147 557
2000
1 355 666
32 800 074
2001
644 733
31 891 214
 
             Source: Indonesia statistical year book various edition
It is interesting to know why imports of rice happens and what factors influence the quantity imports of rice in Indonesia that make domestic production cannot cover rice consumption in Indonesia. The research deals imports of rice which comes from all rice importers to Indonesia. In this research, the writer also includes the data imports of rice in year of 2000-2004 from many countries that support the rice stock in Indonesia.
  
Table 1.3
Imports of Rice by Country of Origin, 2000-2004
Country of origin
2000
2001
2002
2003
2004
 
 
Net weight: m.ton
 
 
 
Taiwan
0
0
3 542
9 601
10 600
China
476 777
24 728
126 768
54 440
111
Thailand
361 735
189 656
418 698
492 114
129 421
Myanmar
198
25 441
111 687
41 399
2 500
Vietnam
369 547
142 512
561 729
506 013
58 810
India
0
2 047
405 032
108 797
923
Pakistan
20 139
26 110
32 281
49 071
0
USA
49 405
177 889
13 393
107 608
16 767
Others
77 865
56 350
132 250
59 463
17 735
Total
1 355 666
64 4733
1 805 380
1 428 506
236 867
 
           Source: Indonesia statistical year book 2005/2006
This research will be in the year of 1982 to 2004. Based on this data and the above study background, the writer decides to make rice commodity as the object of the research and the title will be:
THE ANALYSIS OF FACTORS AFFECTING IMPORTS OF RICE OF INDONESIA (1982-2004).
 
                1.2.  Problem Identification
Economic and financial crisis have been continuing to occur to the present time. They also have influenced to the total value of Indonesian imports. This research will focus on what factors that affect the quantity of imported rice to Indonesia. The factors that will be discussed are production of related good, income of the country and dummy variable to express the effects of self-sufficiency in rice in the years of 1984 to 1993. 
The writer wants to find out whether or not the changes in those factors affected the quantity of imports of rice. For example, if there is an increase in production of rice, would this change affect the quantity of imported rice by Indonesia? Hopefully, by knowing the effects of those factors on imports of rice of Indonesia, the problem of rice imported might easily be conducted.

 

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