Indonesian agriculture in transition: Projections of alternative futures

Abstract

This paper presents an integrated grain and livestock sector partial equilibrium supply-demand model and utilizes it to project the Indonesian production, consumption and trade situation for major crop and livestock commodities under alternative trade, pricing, and investment policies. The possible long term implications of the 1997–1998. Indonesian economic crisis are also explored. The alternative simulations confirm the importance of investment in agricultural research, extension, and irrigation for future growth in the crop and livestock sectors. Interventions in input and output prices, on the other hand, can be costly. The projections also provide strong evidence that fertilizer subsidies should be eliminated. Removal of these subsidies will have very little impact on future food production, and transfer of the fiscal savings from elimination of the subsidy into productive investments would have large benefits. The results indicate that the economic crisis could severely slow the process of diversification of Indonesian diets and growth in food consumption if income effects are prolonged into the next century.