Optimizing the role of rice central market in Java, Indonesia: the effect of toll roads construction to the rice market integration

Abstract

Rice is considered as the primary staple food that Indonesian people mostly consume on daily basis. The need of rice in Indonesia is always increasing. However, the production of rice in Indonesia has not meet its demand. One of the factors resulting the number of paddy field decreasing is the construction of toll roads. The government of Indonesia has invested intensely in the development of a toll road network. The length of toll road operation has increased from around 750 km in 2014 to over 2,500 km in 2022. The construction encroaching paddy fields and resulting the production of rice decreasing every year. The paper objective is to investigate the implications of toll road investment to the rice market integration by focusing on Java as the central rice-producing region in Indonesia. We used the Vector Error Correction Model (VECM) approach to analyze the long-ranging daily rice price data series. The result of the study found that Cipinang Central Market in Jakarta has not the significant spatial market integration with rice markets in Java. Despite the fact that West Java, East Java, and Central Java with Cipinang Central Market have a major business tie, prices are not increasing. This shows a severe lack of market integration. The phrase “optimal market integration” refers to a more efficient market, especially when it comes to establishing rice market prices.