Food And Economy

KETAHANAN PANGAN dan KETAHANAN EKONOMI MELANJUTKAN EVOLUSI DENGAN REVOLUSI BERPIKIR Agus Pakpahan

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WHAT ARE OUR PROBLEMS? OUR PROBLEM IS IN OUR MIND • Our belief: • Agri(culture) vs industry, or agri(culture) then industry, or agri(culture) and industry • Food & Economy  Food & Famine  Plenty of food  Cheap food price policy  Food and political instability  Who pay cheap food?  Food & our future • Our sense:  What is beauty of good food & peaceful economy? • Food is a part of culture  How to change our culture to secure our future 5/20/2007

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Our Problem (cont.) • Our knowledge:  Evidences: 7000 years or more of evolution of agriculture  Rise and fall of nations • Hundred dead cities • Maya, Aztec, etc. • Desertification • Developed and Developing countries • Who have food for now and future?  Developed countries?  Developing countries?  Determinants: • Adaptive capacity • Innovation • Buying high productivity • Noogenetic revolution 5/20/2007

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What Can Nature Supply? 

Tropical climate:

• Large diversity but lesser volume per size of land • Tropical plants and animals • Humid and hot

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Geographical configuration

• Islands types of land • More waters than land • Different size of islands; e.g. Java is only about 7 % out of total Indonesia’s land area but produce about 60 % of food.

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Population size is high, e.g.: 115 million in 1970, 217 million in 2005 and will be 275 million in 2050. Poor country

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AGRICULTURE, FOOD & ECONOMY 

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Economic development is expected to transform the economy from heavily based on agriculture to industrial economy. This kind of evolution has been a process of rapid changing economic structure in developed nations. Less than a century, for example, the US economic transformation has reduced number of farmers from more than 50 % in 1860 to less than 10 % in 1960 and now is about 2 %. Can developing countries follow the path of structural evolution such as happened in developed countries? Can information era be compatible with agricultural development in developing countries? China Cultural Revolution had been paid by about 27 million death of people because of hunger and famine during 1949-1951, and now after more than 50 years China has not yet become a developed country. Green revolution has been practiced for more than 30 years but Indonesia still have about 20 % people in poverty and income per capita only reached the level of about poverty line standard. Therefore, what goals should be taken and what direction and instruments must be taken to reach our better future?

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WHAT WILL BE WITH OUR WORLD TREND? 

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The issue will be much more complex because the situation of the world has changed significantly. When most Asian countries reached independence from colonialism in 1950, for example, the world population was only 2.5 billion people but now the world population is about 6 million people. Furthermore, in 2025, the world population was predicted about 7.5 billion. In 2050, the population of the world was projected around 8 billion (low projection) to 11 billion people (high projection). Therefore, within 100 years since 1950, the world population at least will increase by more than three times[1]. The world’s resources become scarcer. If we assume Indonesian economic growth is maintained 5 % a year, using a simple growth formulation suggest that income per capita of Indonesia in 2050 will be about US$ 8,000. A country that has income per capita around US$ 9,930 in 2002 was South Korea. So, observing those figures at least we may have an intuition or a sense that in 2050 will Indonesia be like South Korea before 2002?

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[1] Source: United Nations, World Population Prospects: The 2000 Revision (New York: February 2001).

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COPING WITH UNCERTAINTY 

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Whether or not Indonesia will be able to reach that level of per capita income is uncertain. What is quite predictably certain is that global situation in the future will be more intense with competitions. In fact, there might be also more intense conflict among nations. One of the most probable factors for intensifying conflicts in era of globalization is that there will be more competition of population on land or space for life. Most of population in the world in 2020 will be in Asia and this situation will make Asian countries to think and work harder and to maintain a more peaceful condition.

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Agriculture, natural resources and control over resources 

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Agriculture is human activities that dependent on natural resources. Farmers are individuals or communities that raise their living from agriculture. The development of technology, organization, and management has induced a new form of agriculture, namely raising livestock or planting crops by corporation. The latter is an application of industry principles into agricultural practices. King called the latter as industrialization of agriculture [1]. In developing countries has been practiced since the middle of 19th century, especially in plantations of industrial crops. A company in Indonesia may have more than 100,000 hectare. So, we have majority of small farmers with land size less than one hectare, and at the opposite side we find a company with land size more than 100,000 hectare. [1] (1) M.B. King, 2000

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OWNERSHIP IMPACT ? 

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What are the implications of this pattern of ownerships? What will be our future of agriculture when majority of farmers is lack of land but there are a few companies controlling land, capital, and markets? Can we transform our rural economies when majority of rural people are landless? Can we transform national economy from agrarian economy to industry when most farmers have no control over land, capital, and agricultural market? In other world, can we transform our economy if majority are the poor and lack of opportunities and minority are rich and controlling all economic opportunities?

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WHAT DEVELOPED COUNTRIES HAVE DONE? 

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Let us learn from the US experience. One of the most interesting cases with the US is that rapid economic transformation in reducing number of farmers out of agriculture had not caused social revolution. All transformation is a matter of economic forces. In 1820, numbers of the US farmers were 71.8 % of labor force, and a hundred year latter, 1920, number of the US farmers reduced up to 27 % out of total labor force in the US. (Compare to the situation of Indonesian now, there are still more than 40 % of labor force engaged in agriculture). In 1940, number of farmers reduced to 17.4 % with average size of farm 70 hectare (174 acre). In 1994, the number of the US farmers declined to about 2.5 % and the average land holding size increased to 191 hectare (471 acre). Increasing land holding size was also induced by President Abraham Lincoln that enacted Homestead Act 1862 that given opportunities to the US farmers acquired the land with very cheap price with a unit of the land 65 hectares (165 acres).

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THE INDONESIA TREND? 

What had happened in Indonesia was the opposite case[1]. In 1870 the Dutch colonial enacted Agrarischwet 1870, namely an agrarian law that allow foreign investor to open and use the land for plantation. Such types of law is still used up to now, and have made more than 19.9 million hectares of plantation companies’ controlled land in 2002. If we compared to total wet land (paddy rice land) in 2002 that only 7.8 million hectares and associated farmers and labourers 40.6 million persons, then the land holding size is small (BPS, 2003)[2]. We see that the distribution of land holding size is very skewed, a tiny land controlled by farmers, and huge land controlled by corporations.

[1] See (1) S. Kartodirdjo and D. Suryo, 1991. Sejarah Perkebunan di Indonesia. Kajian Sosial Ekonomi. Penerbit Aditya Media, Yogyakarta. (2) S.M.P. Tjondronegoro and G. Wiradi (Eds.), 1984. Dua Abad Penguasaan Tanah. P.T. Gramedia, Jakarta. [2] Badan Pusat Statistik, 2003. Stastistik Indonesia. BPS, Jakarta.

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RURAL-URBAN SYNERGY: SPREADING KNOWLEDGE 

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Economic transformation from agriculture to industry calls for huge energy. In the developed countries, it is implied by reduction of numbers of farmers, farmers have energy to transform their position so that they were or their children were acceptable in the new employment opportunities. Abraham Lincoln has contributed in this human resources transformation through Morrill Act 1862, namely the establishment of Land Grant College in all over the US. Therefore, there was an expansion of human resources capacities in both agriculture and agricultural based industries through development and application of new knowledge and technology in those areas. Agriculture and rural areas supplied not only agricultural product surpluses but also high quality of human resources that migrated from rural/agricultural areas to the cities that demand for their labor and skills. The economic expansions in cities have induced smaller labor demand in agriculture and in effect declining number of farmers. Increasing population has no negative effect in term of reduction of farmers land holding size, but in the contrary the new situation make scarcer labor in agriculture. This scarce labor in agriculture induced demand for mechanization, and the latter increased demand for manufacture products. Therefore, cities and rural areas have been in a synergy situation.

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RURAL VS URBAN: OUR CASE 

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In Indonesia and in other developing countries as well, fragmentation and conversion of agricultural land took place. On the other hand, the growth of industry has no sufficient power to absorb additional labor force. In South Korea, the share of agricultural GDP had reduced from 41 % in 1957 to 4 % in 2002; and such reduction was followed by reduction of agricultural labor from 70 % in 1957 to 12 % in 2002. We see that any 1.0 % reduction of agricultural GDP in Korea has been followed by 1.56 % of reduction of labor in agriculture. The same case was also happened in Malaysia and Thailand but with a smaller reduction percentage of labor, namely only about 1.02 % and 1.1 %, respectively. In Indonesia, however, any 1.0% reduction of agricultural GDP was only followed by reduction of 0.43 % agricultural labor. Here we see that industrialization in Indonesia has not produced sufficient energy to make economic transformation, except only in agricultural GDP term that it has declined from 56 % in 1957 to 17 % in 2002[1].

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ECONOMIC TRANSFORMATION & MAJORITY POOR FARMERS 

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Economic transformation is difficult to take place where majority of farmers are small farmers and majority of labor force are poor. Certain designed structural changes related with land or with agricultural resources must be undertaken and at the same time, industrial policies should be focused on how to fasten economic transformation. Analogy with what Abraham Lincoln has been done in 1862; Indonesia also needs such a kind of innovation to support agriculture and rural economies and at the same time opening new opportunities in industrial and services sectors. One option is to shift agricultural corporations to move to downstream industries and farmers take over the ownerships and control in plantations or other agricultural lands. Market is used in such transformation, and financial institutions are created to support such plan. The process could take more than 20 years of operation.

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Broadening Ownerships 

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We believe that economic transformation will not take place as long as majority of farmers and workers are poor and such situation will continue take place if there is no new design of broadening ownerships and participation of the poor into economy. It is a basic strategy for sustainable development, namely increasing what people can do or can be by majority of people that they are now in poor situation. They potential energy should be materialized in the form of positive participation and it calls for the above new design. Social revolution or social disharmony will threaten Indonesia if the present situation continues taking place in the future. Sufficient food is a matter life and death for our economy and so for our nation.

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Rural Area & Poverty

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Import Trend of Cereals

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Revenue of Top Ten Food & Beverages Company 

3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Company

Revenue (bill US$)

Nestle S.A. Kraft Foods, Inc. Unilever PepsiCo Inc. Archer Daniels Co. Tyson Foods Cargill Inc. ConAgra Inc. Coca-Cola Co. Mars

54.2 29,7 25.6 25.1 23.4 23.3 21.5 19.8 19.5 17.0

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Agricultural land per agricultural worker (ha/ worker)

Region

1989-1991

World Develop Developing

4.0 29.9 2.6

1998-2000 3.8 37.6 2.5

Source: F.A.O. http://www.fao.org/es/ess/os/envi_indi/part_221.asp

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How much food we need? 

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217 million x 120 kg/kapita = 26 million ton of rice (2004) 275 million x 120 kg/kapita = 33 million ton of rice = 55 million ton of paddy (2050) Paddy production estimate (2005)= ± 54 million ton. What do we perceive: • • • •

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Rice import? Hunger & Malnutrition? Declining food/population productivity growth? How much is our uncertainty & risks?

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Sources of Uncertainties 

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Population growth high growth & imbalance population distribution Capacity to produce land conversion & soil fertility deterioration Declining capacity of social capital farmers’ capacity Unfriendly climate & bad harvest Political instability Infrastructure inadequacy

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Action of Thought 

Redefining food: • How can we adapt with our nature? Healthy & halal food  New food what is our food 

• Food technology & industry Flour based food based on local resources  Food diversity 

• Building new culture 5/20/2007

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Action of Thought (cont.) 

Regrowing agriculture sustainable agriculture • Lesson from Green Revolution Farmers remained poor  Declining capacity to produce food  Dependency on external sources MNC’s products  Declining Environmental Quality 

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Action of Thought (cont.) 

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Rebuilding Java’s agric. capacity • Reorganize agriculture  Integrating food, feed, fuel and fiber  Corporitazion of farmers  Infusion of SOEs’ capacity into Farmers Owned Enterprise (FOE) Accelerating Outer’s Island Agriculture: • Building cities & villages simultaneously • Agricultural induced regional development

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Where do We Start? 

Java: • Reindustrializing rice agriculture: 

Producing energy from husk (sekam) • • • • • • •

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30 million ton rice = 10 million ton husk Heating value = 3500 kcal/kg Heating value/10 million ton husk = 35 trillion kcal 6 MW plant require 7.1 ton/hour 1 MW = 1.18 ton husk/hour 10 million ton husk = 8.47 million MW/hour Price of electricity Rp 600/kWh Value of electricity = ???? huge!!! 25

Cont. 

Increasing land productivity • Leveraging potentials • Target: 2050 farm size in Java > 5 ha/farmer • Assure farmers’ welfare 

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FOE (farmers owned enterprise as major instrument).

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Cont. 

Outer islands: • Natural Resources Specialization: Food, Feed, Fuel & Fiber Industrialization building cities & rural areas simultaneously How the Dutch built Java?  Build FOE 

• Expansion SOEs

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Building Our Markets   

How to harness MNC Increasing farmers’ bargaining power Roles of SOEs • BULOG and other SOE

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Controlling food imports Food Nation loyalty food national identity e.g., serabi vs. pizza

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Building Food Technology & Food Industries    

Food R&D Investment in Food Industries Government supports Global suports

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Conclusions       

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Building new culture in food consumption Regrowing agriculture Integrating food, feed, fuel & fiber Reorganizing agricultural development All supports for agriculture National food identity Food security & food safety is a matter of Life and Death! HERE WE GO!

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