Resticking Agriculture in Indonesian Economy: Facts, Policy Impact Issues and Poverty Reduction

Type Working Paper
Title Resticking Agriculture in Indonesian Economy: Facts, Policy Impact Issues and Poverty Reduction
Author(s)
URL http://www.irsa-world.org/XII/papers/10-1.pdf
Abstract
This paper attempts to respond two simple but very substantive questions; (1) why does the agriculture sector should be resticked in Indonesian economy? and (2) why does the sector and its policy could be strongly expected to alleviate poverty? Firstly, the facts shows that at least, the agriculture provides export earnings and it gives a source of employment for millions of rural smallholder families which are very strongly associated with poverty rates. Secondly, when the peak of Asian economic crisis hit Indonesia in August 1998, Rupiah per US$ hardest downwards (80% of its value), followed by remarkable inflation (also reached by 80%), no economic sector had the best performance in the country, except the agriculture sector. At the time, the export value of agriculture grew quickly and the income of smallholders whose agriculture exports products also rapidly soared. Those phenomenon were affected by not only production side, but also the positively consequence of the Rupiah depreciation. Needless to say, smallholders enjoyed to those crisis impacts even though Indonesian economy stopped growing in general. That is the reason why the agriculture sector is strongly believed as a leading sector and the way out of the crisis as well as poverty reduction. Finally, this paper conveys a crucial message that resticking agriculture and reempowering the Small and Medium Enterprises can be strongly expected to generate growth and employment as well as combating poverty in the country.

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