The Second Parchment

On Economics, Finance, Politics and Music

Category: Agricultural Economics

On Alimoeso’s Interview

An interesting interview with Soetarto Alimoeso (one of the Director Generals of Indonesia’s Ministry of Agriculture) about the Indonesian government intervening in the importation process and local market of basic food. He claims that unpredictable price fluctuation is a type of ‘market failure’ (really?), thus necessitating the Indonesian Bureau of Logistics (BULOG) to dip its hand into the market in an effort to rectify it.

His statement fundamentally contrasts with a prominent Indonesian economist who, based on my inference, opposes BULOG’s manipulative method of distorting the price of basic food in Indonesia. One day before my departure to Abu Dhabi, I watched ‘Suara Anda’ (Your Voice), a broadcasted roundtable discussion among Indonesian policymakers, economists, and scientists. I recall Kwik Kian Gie (former Coordinating Minister of Economy under Abdurrahman Wahid’s presidency) saying this:

BULOG’s intervention is undesirable simply because it defies economics’ most rudimentary principle. It purchases basic food produced in a high cost and resells it in a price lower than its production cost.

What he said was not exactly the same as what is written above, but I can corroborate that he was applauded when he said it out loud. A substantial portion of Indonesians, apparently, are fiscal conservatives who dislike government policies aimed at resolving economic problems in the short run. Indonesian taxpayers who were silent watchers of the discussion seem to detest the notion of their taxed income being used for implementing placebo policies rather than being used for promoting long-term growth by incentivizing local basic food producers.

Side note: The article also highlights that basic food importation in Indonesia is currently controlled by a number of private firms. Several economists doubting the effectiveness of Indonesia’s antitrust laws, during the televised ‘Suara Anda’ (Your Voice) discussion, proposed that the government take over these firms and form a non-profit-maximizing public monopoly to preclude the formation of cartels and maintain a socially-admirable price of basic food.

Flower, Gleam and Glow: On Indonesia’s Flower Industry

During my way back to Jakarta after a family vacation at a nirvana-like Kampung Sampireun (translated: Sampireun Village), my head was inundated with thoughts on Indonesia’s agricultural economy. The afternoon breeze touching my face as we forayed into Garut’s green lands conjured up a childhood memory of  a natural science class I took in elementary school: “Look at your surroundings,” my teacher said. “Want to know how fertile that land you see over there? Impale a cassava stem on the ground, and see how tall the dry stick will have grown in a week or two. No need to regularly fertilize it or anything. Just leave it there.” So I did; my friends and I gullibly followed my teacher’s instruction, left it for a few weeks, and were surprised to see trees taller than any members of the class. If you ask any Indonesian you know, they would more or less tell the same story.

The world has known that Indonesia has a potent yet unharnessed comparative advantage in agriculture ever since European sea explorers harbored their ships on its islands. It was (and is hopefully still) a tropical trove of spices; no foreigners should claim to have visited Indonesia without taking back some throat-relaxing jamu. The country boasts its leadership in the world market of palm oil, though recently the enactment of grave policies about the country’s approach to rescuing its soy bean industry have caught the attention of local newspaper journalists. Food-based agriculture entices me daily (as my father deals with it night and day), but Garut’s brisk atmosphere made me think of flowers instead. Roses, chrysanthemums, orchids, tulips, lilies. How is Indonesia doing in the realm of floriculture (the culturing and production of flowers), and how has its market condition been?

The only related and legitimate online study I could find is an undated study by Toto Sutater and Kusumah Effendie who worked (or are probably still working) for the Research Institute for Ornamental Plants, Central Research Institute for Horticulture, Agency for Agricultural Research and Development. Both FAO-affiliated researchers highlights Indonesia’s burgeoning flower industry and scientific obstacles that had occasionally stymied the growth of the business. From the table presented, I can deduce that they drew conclusions from a regression analysis started in 1996, which was 16 years ago. An old research indeed. You can read the details of the market research report here, but here is an abridged version of the report’s conclusion:

Research on cut flowers … is very important to support and solve problems faced by growers. Development of domestic market is a prerequisite…as well as competitive price. A well established wholesale market is needed in Jakarta. The short production cycle of cut flowers and ornamental plants makes the country and ideal place for multiplication of planting material.

The report generally sounds positive and hopeful. Yet, there are some parts in which the authors emphasize the need for the private and public sector to start a collective effort in scientific advancement in horticulture and the importance of creating a systematized market so as to assure sustainable demand.

The question is, are the author’s inferences still relevant in 2012? I could not find any statistical evidence or updated horticultural studies to find out whether they are or are not, but all of the online articles I read regarding Indonesia’s floriculture rarely contain an acrimonious tone. A farmer-cum-business owner in this post, for instance, says that there is a generally stable and growing local demand of flowers from all parts of Indonesia, except from Papua. He further says that a substantial amount of the seeds are acquired from the international market, indicating that the problem about seed technology mentioned in the FAO report still exists. Some articles cover positive news about local industries exporting their fresh roses overseas, such as the Netherlands and Singapore. Others highlight that the the business of flowers is growing and that the floriculture market has been getting more competitive.

Whatever the challenges are, it should be noted that Indonesia is located in a place in which orchids are well-acclimated, that it has been exporting its floral commodities, and that the country’s floral business is progressively expanding. Indeed, flowers do not grow taller than a 8-year-old boy simply by embedding their stems on the ground, but the aforementioned facts may somehow ignite one’s hidden entrepreneurial spirit.

(Irrelevant-yet-interesting) sidenote: Flowers once ruled the economy. The Europeans were once so enthralled by tulips that they caused their own economic meltdown!