Is Indonesia Facing a Looming Food Crisis?

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ASEAN Beat | Politics | Southeast Asia

Is Indonesia Facing a Looming Food Crisis?

Indonesia’s food security has become a focal point as the impact of COVID-19 reverberates across the archipelago.

Is Indonesia Facing a Looming Food Crisis?
Credit: Photo by CEphoto, Uwe Aranas

Even before the emergence of COVID-19, Indonesia’s food security has long been a source of concern due to the country’s reliance on staple food imports to meet domestic demand for commodities such as sugar, rice, corn, and beef. Therefore, it comes as no surprise that the wide-ranging health and economic impacts of COVID-19 have put pressure on the already fragile system and thrust the issue of food security back into Indonesia’s political discourse.

The issue of food security in Indonesia re-emerged at the national level on April 28, when during a video conference with cabinet ministers, regional leaders, and the head of the Regional Development Planning Agency, Indonesian President Joko “Jokowi” Widodo announced that provinces across the country were experiencing deficits in key staples, such as rice, garlic, sugar, chili peppers, eggs, and corn. In an effort to emphasize the seriousness of these deficits, Jokowi cited observations made by the Food and Agriculture Organization (FAO), which claimed that the global disruptions caused by the COVID-19 pandemic could cause food shortages around the world. Although Jokowi’s remarks were cast as a warning rather than as a foregone conclusion, his identification and call to action on the issues of supply, distribution, and price indicates that the threat of a looming food shortage in Indonesia is very real.

In Indonesia, the domestic food supply has long been supplemented by imports despite longstanding calls for self-sufficiency. This reliance on the import of key staples is largely attributed to the country’s poor domestic production which has failed to keep up with the country’s increasing population. If we look at rice as an example, which is by far Indonesia’s most important and widely consumed staple, we can see that annual production in Indonesia has been in decline since 2016, with a drop of 7.75 percent in 2018-2019 alone. In 2019, Indonesia’s domestic rice production reached 31.31 million tons, which only just outstripped demand of 29.6 million tons, requiring surplus stocks to be imported from Vietnam, India, and Myanmar.

While food imports have long provided Indonesia with a security net to help meet and buffer domestic demand, the COVID-19 pandemic has restricted access to this important lifeline through disruptions to international supply chains and distribution networks. Moreover, several of Indonesia’s import supply markets, such as Vietnam and India, at the outset of the COVID-19 pandemic placed restrictions on exports or hesitated to sign export contracts due to global distribution disruptions. At present, Indonesia’s food procurement and distribution agency, Bulog, revealed that the country’s moderate position in the wake of Ramadan and the May harvest will see domestic rice stocks at 7 million tons. However, with rice consumption sitting at an estimated 7.9 million tons over the period of February to May, it is easy to see how the country’s rice stocks could face significant supply challenges in the coming months, particularly with the ongoing difficulties around imports.

While the Indonesian government faces serious challenges around supply, the current state of the country’s food distribution network also poses a serious risk to Indonesia’s food security. The implementation of both official and unofficial strict social distancing policies across Indonesia has interrupted the country’s logistics and distribution networks. At the local level, reports have emerged of villages imposing their own quarantine policies to mitigate the spread of COVID-19. As a result, transportation vehicles have been prevented from entering these communities and have therefore been unable to transport harvested crops to processing, warehousing, and/or distribution centers. At the regency level, some local governments have banned harvested food from leaving their regions in an effort to stabilize food prices. Similarly, at the provincial level, strict social distancing policies have seen processing, warehousing, and distribution centers face supply gluts as they struggle to transport food to market due to a lack of available logistics personnel and extensive road blocks. Consequently, both domestically produced and imported food is struggling to reach Indonesia’s large urban centers and regions that rely on domestic imports.

The compounding impact of COVID-19-related supply and distribution issues are simultaneously exerting upward and downward price pressures at different points in the supply chain for key staples, such as rice, chili peppers, sugar, and cooking oil. The supply glut at Indonesia’s warehousing, processing, and distribution centers has caused the purchase price of staple crops from farmers to decline by 5 percent. The core concern here is that low crop prices will see farmers unable to recoup their capital from this harvest and reinvest for their next harvest. Such an outcome could have dire consequences for Indonesia’s food security, as the Indonesian government is banking on increased domestic production to cover the predicted import shortfall. The other risk around rising food prices must be seen in relation to Indonesia’s deteriorating economy and rising unemployment. There is concern that rising food prices and increasing individual financial hardship could lead to social unrest if people are unable to afford to feed themselves and their families. Such an outcome could lead to panic and instability that could potentially spread across the archipelago

Cognizant of the potential risks at play, the Indonesian government has attempted to deal with the issues of food supply, distribution, and price head on.  For supply issues, Jokowi has called on the relevant ministers and government agencies to accurately calculate food stocks to identify which regions are suffering shortfalls. Jokowi hopes that accurate stock figures will allow the government to effectively monitor the situation and strategically direct food should supply become an immediate issue. In addition, Jokowi also issued a presidential regulation in early April, easing import restrictions for specific food imports. In alleviating the country’s distribution issues, Jokowi has called for the country’s food distribution network to be exempted from regional social distancing policies. The Ministry of Trade has also engaged the Indonesian e-hailing service, Gojek, to help address the country’s widespread food distribution problems. In respect of easing food prices, particularly the price paid to farmers for commodities, such as rice, Jokowi has announced a targeted social welfare program that will distribute $19.45 a month in cash payments and subsidies to 2.4 million farmers to help them maintain their future harvest sizes. In addition, Jokowi has also ordered Bulog to purchase rice directly from farmers in an attempt to boost government supply and help farmers’ financial position. The Indonesian government hopes that the combination of these policies will keep market prices from rising in the country’s urban centers and nonagricultural regions.

Ultimately, Indonesia’s food security rests on the ability to overcome the aforementioned issues around supply, distribution, and price. As each of these issues is interlinked and dependent on the other, it is fundamental that each of them is properly and effectively resolved. In the immediate short term, it seems that Indonesia’s current food stocks should see supply meet demand in the coming months; however, should the government’s policies fail to resolve the risks mentioned above, limited food supply and high food prices may create a breeding ground for social unrest that could threaten the stability of Indonesia.

Marcus Tantau is a senior analyst for risk consultancy firm S-RM.