KETAHANAN EKONOMI
MELANJUTKAN EVOLUSI
DENGAN REVOLUSI BERPIKIR
Agus Pakpahan
5/20/2007 1
WHAT ARE OUR PROBLEMS?
OUR PROBLEM IS IN OUR MIND
• Our belief:
• Agri(culture) vs industry, or agri(culture) then
industry, or agri(culture) and industry
• Food & Economy
Food & Famine
Plenty of food
• Our sense:
What is beauty of good food & peaceful economy?
5/20/2007 2
Our Problem (cont.)
• Our knowledge:
Evidences: 7000 years or more of evolution of agriculture
Developing countries?
Determinants:
• Adaptive capacity
• Innovation
• Buying high productivity
• Noogenetic revolution
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What Can Nature Supply?
Tropical climate:
• Large diversity but lesser volume per size of land
• Tropical plants and animals
• Humid and hot
Geographical configuration
• Islands types of land
• More waters than land
• Different size of islands; e.g. Java is only about 7 % out
of total Indonesia’s land area but produce about 60 % of
food.
Population size is high, e.g.: 115 million in 1970,
217 million in 2005 and will be 275 million in
2050.
Poor country
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AGRICULTURE, FOOD & ECONOMY
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WHAT WILL BE WITH OUR
WORLD TREND?
The issue will be much more complex because the situation of the world
has changed significantly. When most Asian countries reached
independence from colonialism in 1950, for example, the world population
was only 2.5 billion people but now the world population is about 6 million
people. Furthermore, in 2025, the world population was predicted about
7.5 billion. In 2050, the population of the world was projected around 8
billion (low projection) to 11 billion people (high projection). Therefore,
within 100 years since 1950, the world population at least will increase by
more than three times[1]. The world’s resources become scarcer.
If we assume Indonesian economic growth is maintained 5 % a year, using
a simple growth formulation suggest that income per capita of Indonesia in
2050 will be about US$ 8,000.
A country that has income per capita around US$ 9,930 in 2002 was South
Korea.
So, observing those figures at least we may have an intuition or a sense
that in 2050 will Indonesia be like South Korea before 2002?
[1] Source: United Nations, World Population Prospects: The 2000
Revision (New York: February 2001).
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COPING WITH UNCERTAINTY
Whether or not Indonesia will be able to reach
that level of per capita income is uncertain.
What is quite predictably certain is that global
situation in the future will be more intense with
competitions. In fact, there might be also more
intense conflict among nations.
One of the most probable factors for intensifying
conflicts in era of globalization is that there will
be more competition of population on land or
space for life.
Most of population in the world in 2020 will be in
Asia and this situation will make Asian countries
to think and work harder and to maintain a more
peaceful condition.
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Agriculture, natural resources
and control over resources
Agriculture is human activities that dependent on natural
resources. Farmers are individuals or communities that raise their
living from agriculture.
The development of technology, organization, and management
has induced a new form of agriculture, namely raising livestock or
planting crops by corporation.
The latter is an application of industry principles into agricultural
practices. King called the latter as industrialization of agriculture
[1].
In developing countries has been practiced since the middle of
19th century, especially in plantations of industrial crops. A
company in Indonesia may have more than 100,000 hectare. So,
we have majority of small farmers with land size less than one
hectare, and at the opposite side we find a company with land size
more than 100,000 hectare.
[1] (1) M.B. King, 2000
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OWNERSHIP IMPACT ?
What are the implications of this pattern of ownerships?
What will be our future of agriculture when majority of
farmers is lack of land but there are a few companies
controlling land, capital, and markets?
5/20/2007 9
WHAT DEVELOPED COUNTRIES
HAVE DONE?
Let us learn from the US experience. One of the most interesting
cases with the US is that rapid economic transformation in
reducing number of farmers out of agriculture had not caused
social revolution.
All transformation is a matter of economic forces. In 1820,
numbers of the US farmers were 71.8 % of labor force, and a
hundred year latter, 1920, number of the US farmers reduced up
to 27 % out of total labor force in the US. (Compare to the
situation of Indonesian now, there are still more than 40 % of
labor force engaged in agriculture).
In 1940, number of farmers reduced to 17.4 % with average size
of farm 70 hectare (174 acre). In 1994, the number of the US
farmers declined to about 2.5 % and the average land holding size
increased to 191 hectare (471 acre).
Increasing land holding size was also induced by President
Abraham Lincoln that enacted Homestead Act 1862 that given
opportunities to the US farmers acquired the land with very cheap
price with a unit of the land 65 hectares (165 acres).
5/20/2007 10
THE INDONESIA TREND?
What had happened in Indonesia was the opposite case[1]. In
1870 the Dutch colonial enacted Agrarischwet 1870, namely an
agrarian law that allow foreign investor to open and use the land
for plantation. Such types of law is still used up to now, and have
made more than 19.9 million hectares of plantation companies’
controlled land in 2002. If we compared to total wet land (paddy
rice land) in 2002 that only 7.8 million hectares and associated
farmers and labourers 40.6 million persons, then the land holding
size is small (BPS, 2003)[2]. We see that the distribution of land
holding size is very skewed, a tiny land controlled by farmers, and
huge land controlled by corporations.
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RURAL-URBAN SYNERGY:
SPREADING KNOWLEDGE
Economic transformation from agriculture to industry calls for huge
energy. In the developed countries, it is implied by reduction of
numbers of farmers, farmers have energy to transform their position
so that they were or their children were acceptable in the new
employment opportunities. Abraham Lincoln has contributed in this
human resources transformation through Morrill Act 1862, namely the
establishment of Land Grant College in all over the US.
Therefore, there was an expansion of human resources capacities in
both agriculture and agricultural based industries through
development and application of new knowledge and technology in
those areas. Agriculture and rural areas supplied not only agricultural
product surpluses but also high quality of human resources that
migrated from rural/agricultural areas to the cities that demand for
their labor and skills.
The economic expansions in cities have induced smaller labor demand
in agriculture and in effect declining number of farmers. Increasing
population has no negative effect in term of reduction of farmers land
holding size, but in the contrary the new situation make scarcer labor
in agriculture. This scarce labor in agriculture induced demand for
mechanization, and the latter increased demand for manufacture
products. Therefore, cities and rural areas have been in a synergy
situation.
5/20/2007 12
RURAL VS URBAN: OUR CASE
In Indonesia and in other developing countries as well,
fragmentation and conversion of agricultural land took place. On
the other hand, the growth of industry has no sufficient power to
absorb additional labor force.
In South Korea, the share of agricultural GDP had reduced from
41 % in 1957 to 4 % in 2002; and such reduction was followed by
reduction of agricultural labor from 70 % in 1957 to 12 % in
2002.
We see that any 1.0 % reduction of agricultural GDP in Korea has
been followed by 1.56 % of reduction of labor in agriculture. The
same case was also happened in Malaysia and Thailand but with a
smaller reduction percentage of labor, namely only about 1.02 %
and 1.1 %, respectively.
In Indonesia, however, any 1.0% reduction of agricultural GDP
was only followed by reduction of 0.43 % agricultural labor. Here
we see that industrialization in Indonesia has not produced
sufficient energy to make economic transformation, except only in
agricultural GDP term that it has declined from 56 % in 1957 to
17 % in 2002[1].
5/20/2007 13
ECONOMIC TRANSFORMATION
& MAJORITY POOR FARMERS
Economic transformation is difficult to take place where
majority of farmers are small farmers and majority of labor
force are poor.
Certain designed structural changes related with land or
with agricultural resources must be undertaken and at the
same time, industrial policies should be focused on how to
fasten economic transformation.
Analogy with what Abraham Lincoln has been done in
1862; Indonesia also needs such a kind of innovation to
support agriculture and rural economies and at the same
time opening new opportunities in industrial and services
sectors.
One option is to shift agricultural corporations to move to
downstream industries and farmers take over the
ownerships and control in plantations or other agricultural
lands. Market is used in such transformation, and financial
institutions are created to support such plan. The process
could take more than 20 years of operation.
5/20/2007 14
Broadening Ownerships
We believe that economic transformation will not take place
as long as majority of farmers and workers are poor and
such situation will continue take place if there is no new
design of broadening ownerships and participation of the
poor into economy.
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Rural Area & Poverty
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Import Trend of Cereals
5/20/2007 17
Revenue of Top Ten Food &
Beverages Company
Company Revenue (bill US$)
5/20/2007 19
How much food we need?
217 million x 120 kg/kapita = 26 million ton of
rice (2004)
275 million x 120 kg/kapita = 33 million ton of
rice = 55 million ton of paddy (2050)
Paddy production estimate (2005)= ± 54 million
ton.
What do we perceive:
• Rice import?
• Hunger & Malnutrition?
• Declining food/population productivity growth?
• How much is our uncertainty & risks?
5/20/2007 20
Sources of Uncertainties
Population growth high growth &
imbalance population distribution
Capacity to produce land conversion &
soil fertility deterioration
Declining capacity of social capital
farmers’ capacity
Unfriendly climate & bad harvest
Political instability
Infrastructure inadequacy
5/20/2007 21
Action of Thought
Redefining food:
• How can we adapt with our nature?
Healthy & halal food
New food what is our food
5/20/2007 22
Action of Thought (cont.)
Regrowing agriculture sustainable
agriculture
• Lesson from Green Revolution
Farmers remained poor
Declining capacity to produce food
products
Declining Environmental Quality
5/20/2007 23
Action of Thought (cont.)
Rebuilding Java’s agric. capacity
• Reorganize agriculture
Integrating food, feed, fuel and fiber
Corporitazion of farmers
5/20/2007 24
Where do We Start?
Java:
• Reindustrializing rice agriculture:
Producing energy from husk (sekam)
• 30 million ton rice = 10 million ton husk
• Heating value = 3500 kcal/kg
• Heating value/10 million ton husk = 35 trillion
kcal
• 6 MW plant require 7.1 ton/hour 1 MW = 1.18
ton husk/hour
• 10 million ton husk = 8.47 million MW/hour
• Price of electricity Rp 600/kWh
• Value of electricity = ???? huge!!!
5/20/2007 25
Cont.
Increasing land productivity
• Leveraging potentials
• Target: 2050 farm size in Java > 5
ha/farmer
• Assure farmers’ welfare
FOE (farmers owned enterprise as major
instrument).
5/20/2007 26
Cont.
Outer islands:
• Natural Resources Specialization:
Food, Feed, Fuel & Fiber Industrialization
building cities & rural areas simultaneously
How the Dutch built Java?
Build FOE
• Expansion SOEs
5/20/2007 27
Building Our Markets
How to harness MNC
Increasing farmers’ bargaining power
Roles of SOEs
• BULOG and other SOE
Controlling food imports
Food Nation loyalty food national
identity e.g., serabi vs. pizza
5/20/2007 28
Building Food Technology & Food
Industries
Food R&D
Investment in Food Industries
Government supports
Global suports
5/20/2007 29
Conclusions
Building new culture in food consumption
Regrowing agriculture
Integrating food, feed, fuel & fiber
Reorganizing agricultural development
All supports for agriculture
National food identity
Food security & food safety is a matter of
Life and Death!
HERE WE GO!
5/20/2007 30