INDONESIA’S LOOMING FOOD CRISIS: Can the overregulated agro sector withstand the threat?

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food crisis
Illustration: LEONARDO A. PUTONG

Jakarta, IO – The greatest threat to Indonesia’s food security is not a lack of production capacity, but our proclivity for enacting overly broad and frequently changing regulations. This is what I call overregulation: when there are too many cross-sectoral policies, the state fails to deliver food at steady and affordable price. 

The cooking oil saga is a clear, outright example of this phenomenon. The government made new policies in the energy sector, which in turn resulted in the breakdown of market mechanisms in the food sector. Then the people had to bear the consequences. Cooking oil prices soared because CPO supply was diverted into the biodiesel industry. 

With rising protectionism around the world, fueled by the Covid-19 pandemic and the Russian-Ukraine conflict, the food and agriculture sector in Indonesia needs to be immediately reformed to anticipate an unfolding global food crisis. 

Overregulated and slow to adapt 

Food crisis has become even starker amid the ongoing war between Russia and Ukraine, which is backed by the west, threatening to spill over into the economic realm. Harsh economic and financial sanctions imposed by the west on Russia was countered by the latter by threatening to cut its energy supply if payments were not made in rubles. Furthermore, Russia has restricted its fertilizers and wheat exports to countries it deemed hostile. It has to be noted that Russia is not only one of the largest exporters of fertilizers and wheat in the world, it also offers cheaper commodity prices compared to other producing countries. 

This development has prompted many countries with large populations, such as China and India, to change the course of their policies, becoming more adaptive, even pragmatic. One such example is by securing the supply of fertilizer, wheat, oil and gas and other crucial commodities from Russia. The goal is clear, China and India must ensure food security for their massive population, with over a billion people in each country. If the supply of fertilizers and gas from Russia is hampered, agricultural production is bound to decline, and further disrupt and threaten domestic food security. 

Surprisingly, this responsive, adaptive policy has not been carried out by the Indonesian government. In the public discourse, so far the government has only talked about adjusting the fuel and electricity prices. It is as if our policymakers are living in a vacuum, separated from the realities of global politics. In fact, the Russia-Ukraine conflict has been going on for more than three months and its impact on rising food and energy prices is already being felt by ordinary citizens.