The Roles of Biotechnology in Indonesia s Agricultural Development
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1 The Roles of Biotechnology in Indonesia s Agricultural Development Prof. Dr. Bustanul Arifin barifin@uwalumni.com Professor of Agricultural Economics at UNILA Professorial Fellow at InterCAFE and MB-IPB Founder/Senior Economist of INDEF-Jakarta Member of National Innovation Council (KIN) PERHEPI Pre-Conference Workshop, on August 27, 2014 in Bogor, Indonesia
2 Presentation Outline 1. Refresh: The Indonesia s agricultural development 2. Slow growth performance of TFP in agriculture 3. Declining research intensity in the last decade 4. Is biotechnology the answer for agric development? 5. Increasing investment in R & D in agriculture 6. Concluding Remarks: Policy Recommendations
3 Refresh: Indonesia s Agricultural Development Transformation Major Agric Policy Soekarno ( ) Soeharto I ( ) Soeharto II plus ( ) Yudhoyono (2004 now) Share of Agric-PDB >30% 20-30% 15-20% <15% Share of Agric-labor >50% 45-50% 40-45% <39% Agricultural Growth Low (<3%) High (6%) Low (3-4%) Low (3%) Agric Major Policy Mass Guidance Green Revolution Green Revolution Agric Revitalizing Agric Input Policy Introducing modern inputs Agric inputs for self-sufficiency Response to drought & crisis Organic input grows rapidly -Fertilizer Subsidy Not specific, but guidance on use Started in 1971 Price subsidy Removed but re-introduced Compound-NPK, More subsidy -Seed Subsidy Modern seed was known Package of agric inputs plus credit Package of agric inputs plus credit Private sector grows rapidly Policy process Top-down: Food, & Peasant first Top-down: Oder- & Command Dialog with some stakeholders Democratization: Dynamic drivers Sumber: Arifin, Bustanul The Roles of Input Policies in Transforming Agriculture in Indonesia. Washington, D.C.: IFPRI
4 Slow Growth of Indonesia Agriculture Total Factor Productivity (TFP) is the portion of output not explained by the amount of inputs used in production. TFP is determined by how efficiency and intensely the inputs are utilized in production. A recent TFP study of ASEAN agriculture (Suo, et al. 2014) has found 1.4 percent growth, where all 8 countries have positive TFP, except Laos and Myanmar having negative TFP growth. The study applies decomposing the TFP into technical efficiency change (TEC) and technological change (TC), using Malmquist Index- DEA Methodology. Variations in TFP growth is primarily driven by technological change (TC). The declining shift of labor productivity in Indonesia and Philippines is not surprising, given that supply response in major agricultural commodities in these two countries is quite slow, in spite of increasing demand for foods and agricultural products.
5 New Complexity of Indonesian Agriculture The current growth rate of agricultural sector is 3.4 percent is simply not adequate to improve the growth quality of Indonesian economy; Declining farm households of 500,000 per year has consequences of the growth performance and the future of structural transformation. The majority of food-crop farmers is smallholders, facing problems of economies of scale, even for innovation in production technologies. The current administration is not successful in implementing agrarian reforms -- known as asset reform and access reforms -- because of non-compatibility with program priorities of local governments. New approach on agricultural biotechnology and corporate farming and food-energy estates, especially outside Java, to boost food production & to maintain food security has yet to implement in the field.
6 Strategic Foods: Slow Productivity Growth Strategic Food * Rice Harvested Area (ha) Productivity (ton/ha) 5,01 4,98 5,14 5,15 5,15 Production(ton GKG) Corn Harvested Area (ha) Productivity (ton/ha) 4,43 4,56 4,90 4,84 4,90 Production(ton dry grains) Soybean Harvested Area (ha) Productivity (ton/ha) 1,24 1,37 1,48 1,42 1,48 Production (ton dry beans) , , ,062 Sugar Harvested Area (ha) ,000 Productivity (ton/ha) 5,29 4,95 5,74 5,19 5,22 Production (ton sugar) Sources: BPS, various years. Data 2014* First Forecast, July Sugar Data ** from AGI (Gula Insight, December, 2013)
7 Java: remains important in food security target Rice 2009: 34.9 mil.ton-54,2% 2013: 37.5 mil.ton (52.6%) Maize 2009: 9.5 mil.ton-53,6% 2013: 10,1 mil.ton-54,5% Soybean 2009: 645 thou.ton-66,4% 2013: 521 thou.ton-66,9% Sugar 2009: 1,5 mil.ton-67,3% 2013: 1,6 mil.ton-67,4%; Next 5 years, new government would not take the risks by shifting the basis of strategic food production to Outside Java; Preventing land conversion in Java by enforcing the law & regulations; Strengthening the foundation of food production of Outside Java.
8 Ratio Research Intensity in Agriculture: Declining Research intensity Linear (Research intensity) RI = -3E-05t Source: Warr, 2011
9 Economic Impacts of Agric Research (Data: Projection of VMP from Rp 1 M of Research Budget (2007) for the next 25 yeas) Source: Warr, 2011
10 Way Out?: Modern Classical Breeding Desired Gene Random, multi gene transfer X Compatible Donor Plant Commercial Variety New improved plant Modern Breeding with Biotechnology Desired Gene Desired Gene Single Gene Transfer Donor Gene Source Commercial Variety New Improved Plant
11 Biotechnology: GMO Crops in Indonesia Crop Gene Characteristic Location Maize Cry I ab Stem borer resistant Central Jawa Maize EPSPS Glyphosate herbicide tolerant Maize Pin II Stem borer resistant Soybean EPSPS Soybean Pin II Glyphosate resistant & herbicide Tolerant Fruit borer resistant Central Jawa Rice Cry I ab Stem borer resistant Rice Cry I ab and GNA Sources: Siregar and Arifin (2011) Stem borer & wereng coklat resistant
12 Biotechnology: GMO Crops Indonesia (continued) Crop Characteristic Progress Rice Resistance to water stress T1 transgenic in contained trial Rice Nitrogen efficiency T1 transgenic in contained trial Papaya Delayed ripening Contained trial Orange CPVD resistant Contained trial Cacao Resistant to cacao moth Lab, transformation Coffee Reistant to leaf rust Lab, propagation Oil palm Oil quality Lab, cloning Sugarcane Sugar content Contained trial Rice Resistant to stress water Field trial, gene construct Teak Levy plant to keep green Contained trial Source: Suryana, 2007
13 The Future: Increasing Investment in R&D The 1980s: Public investment in research and development (R&D) is integrated to overall policy supports translated into infrastructure in irrigation, research, extension, subsidies on inputs and credits. Since 1990s: High level of growth of the agricultural sector has not sustained due to the following reasons, among others: - non-conducive policy environments, - low pace in R&D investment - slow progress in technological change Public investment drops significantly from 0.76 in 1984 to 0.39 in 2000 (calculated from the share of expenditure on agriculture to the national development expenditure compared to the share of agricultural GDP to the national GDP). Now, the share of total R&D funding to the GDP is < 0.1 percent, or 7 times and 14 times lower than that in Malaysia and China. Indonesia needs more investment in R&D to boost the production and productivity of major and strategic foods.
14 Closing Remarks: Policy Recommendation Develop innovation system and technological change to improve the productivity and efficiency in agriculture, capacity building in R&D, strategies for rural development and employment creation; Follow-up the promotional policy on biotechnology development to improve investment in research and development of GM crops; Increase budget allocation for R&D and R4D at least 1 percent of the GDP, from the public funds, SOEs and private sectors, empower food-innovation networks, involving ABGC. Provide incentives for regional and local government to develop early warning and monitoring system for environmental risks and climate change and improve water infrastructure management; Close the gap between ideal and actual yield level, strengthen the institutions of extension system at local and central, by connecting the university and center of excellence and farmers and society;
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