Data shows that the development of rice prices in Indonesia tends to increase from year to year. In fact, when compared to rice importing countries, such as the Philippines, Bangladesh, China, and Vietnam, the price of Indonesian rice is the most expensive in the world.

Based on data from the Food and Agriculture Organization (FAO), as of June 2011 the average retail price of rice in Indonesia was US$ 1.04 per kilogram. At the same time, the price in Manila is US$ 0.69 per kilogram; Bangladesh US$ 0.38 per kilogram; China based on the average price in 50 cities for second quality rice at the retail level slightly below Indonesia, US$ 0.83 per kilogram; and Vietnam only US$ 0.41 per kilogram. Meanwhile, the price of rice in Thailand as the country of origin for Indonesian imports is US$ 0.44 per kilogram.

On the other hand, in 2010 and 2011, when the government imported rice, the domestic price of rice actually soared. The domestic rice price in 2010 reached US$ 1.01 per kilogram and in 2011 (June) it rose to US$ 1.09 per kilogram. In fact, the price of rice in Thailand in 2010 was very cheap, US$ 0.45 per kilogram and in 2011 (June) it fell to US$ 0.43 per kilogram. Prices rose due to reduced supply and the influence of weather which hampered the drying process of grain. The high price of grain and rice was influenced by the minimal number of harvests in the rice-producing areas.

The Country Is Hugely Lost
The too high disparity between the price of rice in Thailand as the country of origin of Indonesian rice imports and the price of rice in the country shows the failure of the rice import policy objective. By comparing the cheaper price of imported rice, the domestic price of rice should be cheaper. However, in fact, the price of rice in Indonesia is actually the most expensive in the world.

This situation begs the question, who is actually playing “rice politics”? This question again finds its actuality with the fact that in rice imports in 2011, for example, Bulog proposed exemption from import duty on rice. In fact, it is not appropriate for the import of rice to be exempted from import duties because with the fairly high disparity between the price of rice in Thailand and Indonesia, the price of rice in the country may still be pushed down even further. So, with this rice import policy, the state loses twice: the import policy does not match the target and the state has the potential to lose income.

Imagine that every year rice imports tend to increase. In fact, since 1998 rice imports have reached 5.8 million tons and 4 million tons in 1999. Thus, Indonesia has become the largest rice importer (country) in the world. This dependence on rice imports is actually inseparable from the huge domestic demand, the low price of rice in the international market, insufficient domestic production, and the existence of import credit assistance from exporting countries.

In the context of rice imports, there are two questions, namely, is it true that our rice is so bad that the government has to import rice every year? Has the rice import policy disappeared on domestic rice prices? These two questions are very vital because the answers to these questions are the basis for the government going forward in taking rice import policies.

Based on data released by the Central Statistics Agency (BPS), in the last four years (2007-2010) the national rice production increased significantly, from 34,578,885 tons (2007) to 41,396,272 tons (November 2010). Meanwhile, rice imports in 2007 reached 1,293,980 tons and in 2010 fell drastically to 228,000 tons. In the period 2008-2009, according to the Bulog Operational Report, Indonesia did not import rice.

From the development of rice production and imports above, it is difficult to conclude whether in the period 2008-2009 Indonesia was actually self-sufficient in rice just because the government did not import rice. Next. we hope that the 1957 case does not repeat itself. If it is already self-sufficient in rice, why does Indonesia still have to import rice?

It seems that agricultural politics needs to be further refined. There are at least three basics in determining this rice policy, namely sustainable self-sufficiency, lower prices at the consumer level, and an increase in the welfare of farmers. In urban areas, about 96% of rice consumers or only 4% are rice producers. In rural areas, about 60% of rice consumers or only 40% of the villagers are rice producers. The implication is that for every 10% increase in the price of rice, it will reduce the purchasing power of urban communities by 8.6% and rural communities by 1.7% or can “create” two million new poor people.

Rice Market Structure
So, how do you actually understand rice politics in Indonesia? How is it possible that Indonesia, an agrarian country, which was previously able to become self-sufficient has turned into the largest rice importing country in the world? One of the reasons for the national rice political swimmer’s tick is the structure of the rice market.
It turns out that the structure of the rice market in Indonesia is oligopolistic. Rice on the market is only about 20% of the total production. Meanwhile, as much as 80% is used by farmers as producers for consumption. This condition causes farmers to always be in an unfavorable bargaining position. Farmers are easy to play with.

Therefore, the basic thing that must be done is a rice price policy that provides incentives for farmers to produce, protects and guarantees a reasonable price for consumers, provides reasonable profits for traders and mill entrepreneurs.

Equally important is to create a relationship between reasonable price fluctuations in the country and the price of rice in the world market. More than that, we must also change the direction of the development strategy, which was originally leaning towards industry (advanced technology and based on imported raw materials), shifting to agriculture (modern, agro-industry). In the beginning, the policy target group was mostly for urban people, from now on it should be shifted to suburban areas (rural communities).”

The author is a Research Professor in Regional Economics at the Indonesian Institute of Sciences (LIPI)