Marketing infrastructures and policies for promotion of non-traditional agricultural production and export - the case of Indonesia

• Rural Industries Research and Development Corporation, Australia

Many Asian countries have sought ways to diversify into different types of agricultural production once they have become self-sufficient in rice, since limited markets and low world prices are strong disincentives to growing rice for export. Indonesia now has a varied crop and livestock/agriculture mix for home consumption, and food diversification has been pursued to raise rural incomes and ensure the population has a more varied and nutritious diet. This project, a joint study involving the International Food Policy Research Institute in Washington and the Australian Rural Industries Research and Development Corporation, will assess the constraints existing in Indonesia to producing and marketing non-traditional agricultural products such as fruit and vegetables, special quality rice, poultry and fish, and the extent to which the lack of progress in developing such markets can be attributed to insufficient institutional support. Investigators will build a profile of production and the domestic structure of the non-traditional products, assess production potentials and constraints at the farm level, examine the capacity and effectiveness of existing marketing infrastructures to meet the challenges of export marketing, and gauge the domestic and foreign demand for non-traditional agricultural products. The research findings will assist the Indonesian government in formulating appropriate policies to bring about any needed reforms in this subsector. Australia will gain from the knowledge of likely trends in developing this subsector, because any expansion would have implications for our own expanding export markets of allied products in Asia.

From the investigative study to date it is apparent that horticultural production only occupies a small sector in an economy long pre-occupied with ensuring self-sufficiency in rice and a number of basic food items such as coarse grains, roots and tubers and sugar. The horticultural sector as a whole has been left on its own, producing for the domestic market in a protected regime of high tariffs and until recently, complete import bans. Other than these there are no direct support for the sector. The development of the norticultural sector over the last 15 years has seen the move towards a more liberal trade regime and the correction of the anti-trade bias of the exchange rate through a series of devaluations. The improvements in the macro and trade regimes notwithstanding, Indonesia's fruit production in particular has stagnated and its presence in the world market for such products is hardly perceptible. Of the three fruit commodity singled for detailed investigations, only bananas, mangoes and mangosteen hold further promise of strengthening Indonesia's participation in the export market. Despite indications of comparative advantage in the production of these crops there are severe limitations to the capacity to respond to world market opportunities. These include the lack of available land for expansion on the existing overpopulated central islands and the issues over clear land titles; the lack of infrastructure support in the Outer islands to make production plans realizable; the lack of adequate institutional support in the form of R&D, extension and training and most critically in the supply of good planting materials.

The annual report was received on 3 March 1997.