The productivity of Indonesian agricultural and plantation land has not increased significantly and tends to decline, with the exception of palm oil. Fertilizer subsidies are the second-largest in Indonesia, costing approximately IDR 30 trillion annually. In addition to problems with fertilizer subsidy distribution, other issues beyond fertilizer contribute to low productivity. These include declining irrigation quality, soil degradation, and extreme weather events that cause flooding and drought. National Disaster Management Agency (BNPB) data shows that disasters such as flooding and drought have increased in the past five years, from 1,967 cases in 2014 to 3,721 cases in 2019. In 2019, 31,000 hectares of fields failed due to drought, and 10,000 hectares failed due to flooding. Two different extreme conditions, occurring simultaneously.
In addition to productivity issues, there are also socio-political issues that threaten Indonesia's agricultural sector, namely the decreasing workforce in the agricultural sector, and at the same time Indonesia is increasingly importing various food ingredients that can actually be produced domestically, such as rice, garlic, and soybeans, because domestic production is more expensive.
Food Security = Large-Scale Agriculture?
The government is attempting to address these issues in various ways, primarily by establishing food estates . The allocation of inactive land for food estates is stipulated in the Job Creation Law, and it is planned that the area to be cultivated will be 164,598 hectares, with initial development covering 10,000 hectares in Pulang Pisau Regency, 20,000 hectares in Kapuas Regency, 30,000 hectares in Humbang Hasundutan Regency, and other areas, including Papua. The food estates are expected to be large-scale, utilizing degraded land, swamps, and peatlands. It is hoped that this large-scale production will lower the price of Indonesian food products and make them competitive with imported food products.
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However, food barns have been implemented during the era of President Soeharto, and also during the era of President Megawati Soekarnoputri with the Mega Rice Project . This means that large-scale agricultural land expansion has been carried out repeatedly, with its own challenges. However, the conversion rate of agricultural land for food commodities to other uses (such as oil palm plantations, residential areas, urban areas, and so on) is also very high. In fact, the rate of conversion of agricultural land to other uses is faster than the land being converted to food estates . Meanwhile, Indonesia's population continues to grow annually, which will lead to a continued increase in food demand. If land expansion is made a priority program to achieve food security, this solution will only be temporary and will quickly become ineffective. Food security cannot be achieved solely by increasing land availability.
In fact, Indonesia has achieved national food self-sufficiency, but there are still areas that suffer from food shortages. Eighty-eight districts in Indonesia still experience food shortages, and as of 2019, nearly 30% of Indonesian children experienced stunting due to malnutrition. In early 2020, there were 8 million hectares of plantation/agricultural land in Indonesia, compared to 16 million hectares of oil palm plantations. A CPI study in Berau, East Kalimantan, found that oil palms dominated 90% of total plantation land. Palm oil production showed an increasing trend, while other crops such as rice, corn, and cocoa showed a downward trend.
Agricultural Diversification, Biodiversity
Plantation expansion for scale, efficiency, and profit has led to deforestation and the conversion of agricultural land to oil palm plantations. Oil palm is touted as a driver of economic growth and the well-being of smallholder farmers. Nearly half (40%) of oil palm plantations in Indonesia are cultivated by smallholder farmers, and this figure is expected to continue to increase in line with high demand. However, the income from oil palm plantations for smallholder farmers remains minimal.
According to research conducted by the Climate Policy Initiative , reliance on single-crop plantations displaces food crops and increases the risk of food shortages. Furthermore, farmers' income from palm oil is insignificant. In Berau, East Kalimantan, the income of a farmer cultivating 2 hectares of land does not reach the regional minimum wage.
Conversely, when modeling projected income for farmers who grow not only oil palm but also food crops like corn, cocoa, or pepper, it was found that income could be significantly higher without land expansion. In some scenarios, income could even reach 800% (nine times) the income from oil palm alone.
In addition to higher incomes, farmers also gain various other benefits from agricultural diversification. First, the risk of overall crop failure is reduced. Second, increased income and cash flow can facilitate access to finance for farmers. Beyond the benefits to farmers, diversification also brings benefits to the region. Diversification opens up opportunities for the continued cultivation of endemic plants in the region to maintain biodiversity.
Ideal Economic System: Food Security is achieved through Ecosystem Resilience
Focusing on food cropland diversification presents an opportunity to shift the narrative of land use. Land use, previously portrayed as a means to meet food needs and generate profits for plantation companies, is shifting to a more limited use of land while maintaining biodiversity and ecosystem resilience. The focus of development can shift from focusing on irrigation channels and fertilizer subsidies to one that preserves water sources and topsoil quality. Agricultural and plantation development can also shift from its original paradigm of building agricultural centers or "food barns" on large-scale plots to the development of decentralized small-scale agriculture and plantations with diverse crops (not monocrops).
The plants selected are not based on strategic decisions from the central government, but rather on endemic plants known to local communities, thus preserving local biodiversity. The government can support this not by dictating land area, prices, or the types of plants to be planted, but by guaranteeing land ownership for local communities and indigenous peoples, facilitating market access, and establishing marketing centers for agricultural products in each region.
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Currently, funding to support the development of the small-scale agricultural and plantation sectors is very minimal. Of the total global funding flowing to address climate change issues, only 3% is allocated to the plantation, forestry, and land sector, and of that 3%, only 40% is allocated to small-scale plantations and their supporting sectors. Therefore, the government also needs to be more careful in allocating public funds to the agriculture/plantation sector.
Fertilizer subsidies could be re-examined, with some being channeled to support water resource conservation, soil health, and the marketing and supply chain of diverse crops from each region. Plantation credit subsidies could be made conditional, requiring the use of water-efficient agricultural techniques that do not damage soil quality. Fiscal transfers to regions could use an incentive scheme ( ecological fiscal transfer ), providing monetary rewards to regions that successfully maintain their ecosystem resilience, which could be demonstrated through indicators such as green area coverage, crop diversification, renewable energy use, and so on.
While every region may have different economic activities, climates, topographies, socio-cultural characteristics, and other characteristics, ecosystem balance is an absolute necessity. Ecosystem balance provides essential commodities for economic growth: food, water, and clean air. It's time to realize this priority in our economic system.
By: Tiza Mafira
Associate Director, Climate Policy Initiative
Reference:
1. Mecca et. al., Fostering Economic Resilience in Berau through Smallholder Crop Diversification, (CPI, 2020), accessible at https://www.climatepolicyinitiative.org/publication/fostering-economic-resilience-in-berau-through-smallholder-crop-diversification/
2. Chiriac, Naran, & Falconer, Examining the Climate Finance Gap for Small-Scale Agriculture, (CPI, 2020), accessible at https://www.climatepolicyinitiative.org/publication/climate-finance-small-scale-agriculture/
3. Mecca et. al., Index Village Building Plus (IDM+): Enhancing Direct Incentives for Sustainable Land Use in Indonesian Villages, (CPI, 2020), accessible at https://www.climatepolicyinitiative.org/publication/index-desa-mbangun-plus-idm-enhancing-direct-incentives-for-sustainable-land-use-in-indonesian-villages/
