Jakarta. While starting to enjoy its status as a middle-income country, with a relatively fast economic growth rate, Indonesia is facing a number of serious challenges to the sustainability of its agricultural sector and related food security.
The ever-increasing demand for staple food, notably rice, coincides with the reduction of rice production areas due to competition for land use and increasing water scarcity. Bad overall land governance and a less than serious commitment to effective decentralization of water resources management tend to exacerbate the challenges and make it more difficult to meaningfully enhance farmers’ quality of life.
Sustainability in the agricultural sector involves increasing output to continuously increase the wellbeing of the people whose livelihoods depend on it, beyond merely applauding growth of the country’s per capita gross domestic product.
This emphasizes ensuring growth in the value of agricultural production for those dependent on the sector, hence ensuring inclusiveness in the distribution of benefits, while ensuring sustainability of natural capital, such as land and water, which support the production system.
Ensuring continuous growth of agriculture production requires land, water and technology. The continuous improvement in the wellbeing of farmers requires inclusiveness of benefit distribution, either through improved access to capital (natural, financial, and technology) or through a more equitable system of benefit sharing.
To achieve both requires a different approach in the overall governance of the agricultural system. With 40 percent of Indonesia’s labor force, roughly about 50 million people, still employed in the agriculture sector contributing “only” 16 percent to the GDP, the added challenge of moving them out of the sector is enormous. And this is on top of the two challenges highlighted earlier.
On the longer term, Indonesia needs to adopt a new vision for its agricultural sector that maximizes the value of agricultural resources — including biodiversity — to improve the livelihood of its people.
A programmatic investment scheme will be needed to realize that vision, including institutionalizing good governance for the core agricultural capital: land, water and biodiversity.
The needs to be a focus on land — as an immediate- and medium-term issue that needs special attention — and water — which requires a longer-term vision:
Agricultural land issues deal with its availability for use in food and non-food crop production, as well as productivity, location, and those who have access to it.
While the fertile rice-growing area on the island of Java is shrinking rapidly — with some estimates showing that it is reducing by up to 400,000 hectares per year in the northern corridor — there is no convincing evidence that this loss of production area is being replaced in other parts of the country.
Finding replacement areas will not be an easy task as the soil quality for rice production is much higher in Java compared to that on other islands, to the extent that to maintain the same level of production, one hectare of area lost in Java needs to be replaced with 1.5 to 2.5 hectares of new paddy field on other islands.
An increase in the numbers and the incomes of the current productive portion of population has clearly taken a toll as agriculture land in Java is increasingly being used for housing and infrastructure needs.
The second issue related to land availability is the priority of allocation, as directed by government policy and strongly influenced by business interests.
Oil palm plantation areas increased by about 8 million hectares within the past 10 years, with about 4 million hectares that is unplanted. This in no way can be matched by the slow pace of development of new food-growing areas, such as for rice.
Market imperatives and government policy directives together have created effective incentives for agribusiness companies to move in that direction.
The low-tech but highly lucrative crude palm oil businesses have pushed extensification of palm oil production and put aside the urgency of developing staple food production due to its lack of business attractiveness.
While it is believed that all kinds of agriculture technologies that speed up an increase in productivity can ease land-use competition, Indonesia has not taken significant advantage of it.
The incentive structure still direct agribusiness to go for extensification rather than employing productivity technology to optimize the land value or enhance the value added to horticulture products. One possible business rationale behind it is land banking for future use and speculation.
Where land is available and who gets access to it are by no means small issues. Spatial planning, land-use licensing, and property right policies determine the way the land is governed. The Indonesian government, despite almost 60 years after independence, continues to use a colonial approach when it comes to land rights and governance.
In the past, the sustainability of economic growth and inclusiveness of benefit sharing were not based on an understanding of the security of business activities, which to a large extent, depends upon the spatial plan and security of tenure. Making the spatial plan so fluid at the implementation stage and prioritizing the rights of outsiders while marginalizing the local rights holders, like it or not, have created significant tension and a sense of business insecurity across the country.
Currently, only seven out of 34 provinces have their spatial plans finalized and officiated, and less than 12 percent of forest land has been gazetted (while the Forestry Ministry claims control over 70 percent of Indonesia’s land area).
The current system of land-use licensing is amplifying the problem. With up to 15 government institutions issuing land-use licenses that affect economic activities at district level, apparently with no obligation to use one map nor cross-agency checking, overlapping land-use licenses and conflicts over claims of right are mere consequences of the policy, and should be expected to happen and potentially escalate at any time.
No sustainable business or development can occur under such a conflicting situation as it violates one core principle: inclusiveness to ensure sustainability of the functioning of the social fabric.
Especially so for a land-based business such as agriculture.
This is where the Indonesian government should start its march toward sustainability of agriculture production and overall economic development.
Three major challenges that need to resolve in the land governance issues are: finalizing the spatial plan and having it implemented consistently to ensure business security; institutionalizing a new land-use licensing regime that ensure the use of one reference map and coordination across related government institutions; and institutionalizing a property right regime that respects and protects the rights of the legitimate stakeholders.
Mubariq Ahmad is a financial and natural resource and environmental economist. The view expressed herein is solely the writer’s and does not represent views of institutions associated with him. This is the first of three articles.