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The challange of Indonesia on agribusiness

Though the country has recently achieved self-sufficiency in rice, it is still reliant on imports for other commodities such as sugar

Despite improvements in recent years, Indonesia's agricultural sector continues to underperform in comparison to regional peers such as Thailand. Though the country has recently achieved self-sufficiency in rice, it is still reliant on imports for other commodities such as sugar. The government led by President Susilo Bambang Yudhoyono, who himself has a PhD in agricultural economics, is hoping to change this and turn Indonesia into an agricultural powerhouse to compete with Thailand and Brazil. This will be achieved, the government says, by improvements in efficiency and the development of vast new tracts of agricultural land on the archipelago's scarcely populated outer islands, such as Papua and Borneo.

The government announced more details on plans for a massive 1.2mn hectare estate for food production in Merauke, Papua. The development will include land for the production of rice, corn, sugar cane and soybean among other crops, as well as land for processing facilities. Both domestic and international companies are being invited to invest in land rights in the estate.

While we have long argued that further expansion of agriculture in Indonesia's outer islands is necessary if the country is to meet the food needs of its massive population, we expect this project to face many difficulties before it becomes a reality. There will be considerable opposition from environmental groups both at home and abroad. Poor infrastructure will also make production and transportation difficult, at least while the project is in its infancy.

Though drier-than-average weather is still expected for much of Indonesia in the first half of 2010 - though some aresa have also been hit by unusually heavy downpours - it is now looking as if the country's food production will not be too badly hit by the El Nino-Southern Oscillation (ENSO) phenomenon. We expect there to be a slight rise in rice production, though the dry weather will mean the rise is not as much We have revised down our forecast for sugar production in 2009/10 as dry weather followed by unusually heavy rains in Java are expected to delay the start of the cane harvest and see sugar content fall. We now forecast Indonesia to produce 2.77mn tonnes of sugar, down from a previous forecast of 2.92mn tonnes. This leaves the country a long way from meeting domestic demand, which we forecast to rise to 4.48mn tonnes in 2009/10. The government is now implementing trials of tropical sugar beet production as part of its plan to reach self-sufficiency in sugar.

A major shake up in the poultry supplies to Indonesia's capital Jakarta is underway as part of the government's campaign to tackle highly pathogenic avian flu. The move will involve shifting almost 2,000 poultry slaughterhouses in the city limits to five main sites to be set up by the government.

by S. C.
03 may 2010, World News > Asia

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