Chapter Four INTEGRATED FOOD CROP PEST MANAGEMENT IN INDONESIA: A COMPUTABLE GENERAL EQUILIBRIUM MODEL

Transcription

1 Chaper Four INTEGRATED FOOD CROP PEST MANAGEMENT IN INDONESIA: A COMPUTABLE GENERAL EQUILIBRIUM MODEL Absrac The excessive use of pesicides in Indonesia during he 1970s and 1980s caused serious environmenal problems such as acue and chronic human pesicide poisoning, animal poisoning and conaminaed agriculural producs, desrucion of boh beneficial naural parasies and pes predaors, and pesicide resisance in pess. To overcome hese environmenal problems, since 1989 he Indonesian governmen has acively adoped a sraegy of inegraed pes managemen (IPM). 1 The firs goal of his essay is o build a Compuable General Equilibrium model ha includes various links from pesicide use in agriculural secors o human healh problems, and he links from human healh problems o socieal healh coss and he effeciveness of producion aciviies. The second goal of his essay is o analyze he impac of he IPM program on Indonesian economic growh and household incomes for differen socioeconomic groups. 4.1 Inroducion The chronic food shorage during he firs wo decades of Indonesian independence ( ) simulaed he Indonesian governmen o esablish a comprehensive food inensificaion program as a naional prioriy. Achieving and mainaining self-sufficiency in food, increasing farmers income, and providing srong suppor for he rapidly expanding indusrial and service secors were he main goals of his food inensificaion program (Oka, 1995). The food inensificaion program included large-scale adopion 1 This essay limis is analysis o he implemenaion of he IPM program in he food crop secor. The reason for his limiaion is ha, firs, unil now he implemenaion of he IPM program in Indonesia has been limied o food crops. Second, he governmen has no ye planned o implemen he IPM program in he non-food crop secor. 90

2 91 of high-yielding modern seed varieies, developmen of irrigaion sysems, expansion of food crop producing areas, increased use of chemical ferilizers and pesicides, expansion of agriculural exension services, esablishmen of farmer cooperaives and inpu subsidies, and sabilizaion of naional food crop prices (Oka, 1991). During he 1970s and 1980s, his food inensificaion program caused food crop producion o grow a an annual rae of approximaely 3.74 percen 2 (CBS, ). A major miracle occurred in rice producion. Pushing he average annual growh rae of rice producion o approximaely 4.67 percen, he rice inensificaion program ransformed Indonesia from he world s larges imporer of rice, imporing approximaely wo million ons per year by he end of he 1970s, o self-sufficiency in 1983 and hereafer (Oka, 1991 and 1995). Despie he remarkable success of he food inensificaion program, he excessive use of pesicides caused serious environmenal problems 3 such as acue and chronic human pesicide poisoning, animal poisoning and conaminaed agriculural producs, desrucion of beneficial naural parasies and pes predaors, and pesicide resisance in pess (Achmadi, 1992; Oka, 1995; and Pimenel e al., 1992). To overcome hese environmenal problems 2 The average annual populaion growh was approximaely 2.3 percen in he 1970s and 1980s. 3 In 1988, Achmadi found 1267 cases of acue pesicide poisoning in 182 general hospials hroughou he islands of Java and Bali. He also observed ha approximaely 20 o 50 percen of he farmers who uilized pesicides conraced chronic pesicide-relaed illnesses. These illnesses included headaches, weakness, insomnia, and difficulies in concenraing (Achmadi, 1992). In he case of pesicide resisance in pess, brown planhoppers and green leafhoppers became resisan o pesicides and damaged more han 450,000 hecares of rice fields in 1976/1977. The esimaed yield loss was 364,500 ons of milled rice, which could have fed hree million people for an enire year. In 1980 and 1986, he same pes problem broke ou again, causing damage o a leas 12,000 and 75,000 hecares of rice fields, respecively (Oka, 1995).

3 92 caused by he overuse of pesicide, he Indonesian governmen adoped a sraegy of inegraed pes managemen (IPM). The program alered he predominan governmen policy of pes conrol from a unilaeral mehod, depending solely on pesicide, o a combinaion of various conrol acics o manage pess, including synchronized planing, crop roaion, naural predaor, and pesicides. During he firs wo years of he IPM program ( ), he governmen rained approximaely 100,000 food crop farmers, mosly rice farmers, o implemen he IPM. Wih he IPM, hese farmers have been able o reduce he use of pesicides by approximaely 56 percen, and increase yields by approximaely 10 percen 4 (Oka, 1995). Wih his posiive resul, he Indonesian governmen is eager o rain more food crop farmers o implemen he IPM. Economic lieraure which analyzes he impac of he IPM program on household incomes and naional economic performance is very limied. The Indonesian IPM Naional Program Monioring and Evaluaion Team in 1993 argued ha IPM farmers would increase heir incomes by approximaely 50 percen. The eam also esimaed ha, if he IPM were o become a common pracice hroughou Indonesia, he reducion in pesicide use would resul in oal savings for farmers of approximaely 212 billion rupiahs. This sudy by he IPM Naional Program Monioring and Evaluaion Team, however, only observed he parial impac of he IPM program on farmer incomes, i.e. he eam did no ake ino accoun he muliplier impac of an IPM program on incomes of boh farmers and oher household groups. The eam also did no menion he impac of he IPM program on naional economic growh. 4 The increasing yields are caused by he eliminaion of serious or large-scale pes oubreaks.

4 93 This essay uilizes a Compuable General Equilibrium (CGE) model o analyze he oal impac, including he muliplier impac, of he Indonesian IPM program on naional economic growh and household incomes for various socioeconomic groups. A CGE model is a sysem of equaions ha represen all agens'behaviors and marke clearing condiions in a naional economy. The main goal of his essay is o build a CGE model ha is appropriae o analyze he impac of an IPM program on a naional economy. Implemenaion of an IPM program has hree immediae impacs. A governmen has o reallocae is budge o finance he implemenaion. The implemenaion of an IPM program causes a reducion in he use of pesicides, and an increase in agriculural oupu. The CGE should be able o model how hese immediae changes impac producion and consumpion behaviors in he economy, and in he end, affec naional economic growh and household incomes. To capure hese impacs, he CGE should include various relaionships among pesicide use in agriculure, human healh problems, socieal healh cos, and producion aciviies. 4.2 Compuable General Equilibrium Model This secion explains some imporan feaures of he CGE uilized in his essay. To become familiar wih oher feaures of his CGE, one should review he Indonesian CGEs developed by Lewis (1991) and Thorbecke (1992). 5 This essay combines he Indonesian CGEs jus menioned o creae a new CGE model. The model describes various relaionships o represen he 5 See also Appendix I.

5 94 impac of an IPM program on he economy. Finally, several dynamic equaions are added o he model o ransform he new CGE ino a muliperiod CGE. Facs and relaionships modeled in he CGE o represen he impac of an IPM program on he economy are as follows: Governmen needs o spend a cerain amoun of money o implemen he IPM program. In his essay, governmen is assumed o ake his IPM budge from governmen savings, resuling in a smaller governmen capial invesmen. Mos of he governmen IPM budge is allocaed o he educaion or public service secors, since he main aciviy of he IPM program is o educae food crop farmers in IPM. The firs direc impac of he IPM program is a reducion in he use of pesicides by food crop farmers. The second direc impac of he IPM program is a more efficien food crop producion secor, i.e. wih a lesser amoun of pesicides and he same amoun of oher inpus, IPM farmers are able o increase heir oupu. 6 This increased oupu is due o he fac ha he IPM program can beer conrol pes problems han a program ha solely depends on pesicides. Since he use of pesicides causes pesicide poisoning cases among farmers, he reducion in he amoun of pesicide use in he food crop secor decreases he number of hese pesicide poisoning cases. 7 6 Dr. Oka, former chairman of he Indonesian Working Group on IPM ( ), argues ha he IPM program does no require more facor inpus han a program ha solely depends on pesicides. 7 Non-farmers also may be poisoned by pesicides used in agriculure. Available daa, however, concern he number of farmers poisoned by hese pesicides. This essay hus limis is analysis o pesicide poisoning cases which affec farmers.

6 95 This reducion in he number of pesicide-relaed illnesses lowers food crop farmer households spending on necessary reamen o recover from pesicide-relaed illnesses. These lower healh coss enable households o spend money on oher goods and services, mosly food. The occurrence of pesicide-relaed illnesses negaively affecs he produciviy of agriculural labor inpu. This negaive effec migh reduce he produciviy of oher agriculural facor inpus, i.e. land and capial. The reducion in he number of pesicide-relaed illnesses among food crop farmers hence improves he produciviy of all facor inpus in he food crop producion secor. The deailed modeling of he impac of he IPM program now follows. Figure 4.1 shows a diagram of secoral producion aciviies. The CGE in his essay has 20 differen secoral producion aciviies. The imporan feaures of hese secoral producion aciviies are he value-added funcion, secoral producion funcion, and he inpu-oupu coefficien of he quaniy of pesicide used in he food crop secor. Le us firs observe he value added funcion. Value added is a funcion of human pesicide-relaed illnesses and facor inpus. The facor inpus are expressed in he Consan Elasiciy of Subsiuion (CES) funcion.

7 96 Oupu X CES Inermediae Inpu Value Added Fixed Prop. CES X 1 X 2 X n Ag Lab Man Cler Prof Lab Capial Land Noe: CES is he Consan Elasiciy of Subsiuion producion funcion Fixed Prop. is he Fixed Proporion (Leonief producion funcion) Figure 4.1 Srucure of he Secoral Producion Funcion v VAi = HEi α i β i f FACDEM f ρi v, i, f 1 v ρi (4.1) where: i VA i HE i is he index for producion secors is he value-added inpu for secor i is he impac of human pesicide-relaed illnesses on he value-added producion aciviy FACDEM i,f is he demand for facor inpu f in secor i.

8 97 The facors represened by f are agriculural workers, manual-clerical personnel, professional laborers, land, and capial. Land and capial are fixed. The marke for professional workers is assumed o be in a full-employmen condiion. Boh he agriculural and manual-clerical labor markes experience unemploymen. In his essay he impac of human pesicide-relaed illnesses on producion aciviy, i.e. HE i, is simply a funcion of resriced aciviy days caused by pesicide-relaed illnesses. Furhermore, since daa on he number of resriced aciviy days are limied o farmers only, he HE i funcion is: HE i RAD i = 1 i crop secors (4.2) DA i and HE i = 1 i crop secors (4.3) where: RAD i is he number of resriced aciviy days caused by pesiciderelaed illnesses DA i is he number of man-days ha should be available if no pesicide-relaed illness occur. The second imporan poin abou secoral producion aciviies is he producion of secoral oupu. The form of he secoral producion funcion is: x x ( i i i i ) ( 1 ) x X = α β IN + β VA i i 1 ρ ρ ρ i x i x i x (4.4) where: X i is gross domesic secoral oupus

9 98 IN i is composie inermediae inpus. In food crop secor, farmers who implemen he IPM can increase heir yields. To represen hese increasing yields, his essay defines he share parameer of he food crop producion funcion (α FOODCROP x) as a funcion of he number of farmers who adop he IPM. The more farmers who implemen he IPM, he higher his share parameer will be: α x, FOODCROP x = α FOODCROP 1 IPMFARM FACDEM FOODCROP, AGLAB x IPMFARM + α FOODCROP 110. (4.5) FACDEM FOODCROP, AGLAB where: 1.10 is due o he fac ha IPM farmers are en percen more efficien han non-ipm farmers x α FOODCROP is he iniial/benchmark shif parameer of food crop secoral producion x, α FOODCROP is he shif parameer of food crop secoral producion in year IPMFARM is he number of food crop farmers implemening he IPM in year FACDEM FOODCROP,AGLAB is he number of oal food crop farmers in year. The hird imporan feaure of he secoral producion aciviies is he iomi PEST,FOODCROP, which is he inpu-oupu coefficien of he amoun of pesicide used in he food crop secor. Farmers who implemen he IPM can reduce he amoun of pesicide used. The pesicide inpu-oupu coefficien in he food

10 99 crop secor is a funcion of he number of IPM farmers. The more farmers who adop he IPM, he smaller his pesicide coefficien will be: iomi PEST, FOODCROP, = iomi PEST FOODCROP 1 IPMFARM FACDEM FOODCROP, AGLAB IPMFARM + iomi PEST, FOODCROP (4.6) FACDEM FOODCROP, AGLAB where: 0.44 is due o he fac ha IPM farmers are able o reduce he use of pesicides by 56 percen iomi PEST, FOODCROP is he iniial/benchmark inpu-oupu coefficien of pesicide use in he food crop secor iomi PEST, FOODCROP is he inpu-oupu coefficien of pesicide use in he food crop secor in year. This essay considers en differen ypes of household groups. Each household group maximizes is uiliy as a Cobb-Douglas funcion of all goods and services, excep for he necessary healh reamens relaed o pesiciderelaed illnesses, subjec o is budge consrain: U = ( HCD ) h α h i, h i aph chsi, h ; chs i, h = 1 (4.7) i aph subjec o: PQi HCDi, h YHh HTAX h HSAVh CDHEh HHTRh (4.8) i aph where: h is he index for household groups

11 100 aph is he index for healh services consumed by households which experience pesicide-relaed illnesses YH h HCD i,h PQ i is he income of household h is household consumpion is he price of commodiy i HTAX h is income axes HSAV h is household savings HHTR h is ne household ransfers CDHE h is necessary healh coss o recover from pesicide-relaed illnesses. Noe ha his essay limis is analysis o he case of pesicide-relaed illnesses among farmers. The healh coss associaed wih pesicide-relaed illnesses (CDHE h ) in he relaionship (4.8) hence only appear in agriculural household groups budge consrain, i.e. for non-agriculural households, CDHE h always equals zero. From he relaionship (4.8), one can see ha a reducion in healh coss associaed wih pesicide-relaed illnesses creaes exra income for agriculural households o spend on goods and services. In developing counries, agriculural households mosly spend his exra income on food. The amoun of healh spending by households depends on he number of pesicide-relaed illnesses which occur. The quaniy of pesicide-relaed illnesses is a funcion of he quaniy of pesicide used in agriculural secors: PESHLTag, ph = apeshag, ph iomipest, ag INag R( AGLAB) (4.9) where:

12 101 ag ph PESHLT ag,ph apesh ag,ph iomi PEST,ag IN ag R(AGLAB) is he index for agriculural secors is he index for he pesicide-relaed illnesses is he number of pesicide-relaed illnesses is he pesicide-healh coefficien is he amoun of pesicide used in agriculural secor ag is he raio beween agriculural labor in any simulaion scenario and in he benchmark siuaion. The pesicide-relaed illnesses are chronic and acue pesicide poisoning. Farmers who conrac chronic or acue pesicide poisoning usually canno work for a leas one day. In his CGE, he capial accumulaion equaion is he imporan dynamic equaion relaed o he implemenaion of he IPM program. Capial accumulaes as new capial is invesed; he amoun of capial nex year is a funcion of he exising capial plus new capial, minus depreciaed capial. where: ( ) + 1 FACDEM = FACDEM 1 depr + DK (4.10) i, CAPITAL i, CAPITAL. i i depr i DK i is he depreciaion rae is he new capial invesed in year. Governmen and privae savings fund new capial invesmens. Governmen savings also mus provide he budge for IPM program implemenaion. In he absence of his program, he governmen would use he funds allocaed for he IPM budge for new capial invesmen. Implemenaion of he IPM program, hence, reduces he amoun of new capial invesed, and, in he end, decreases he rae of capial accumulaion.

13 102 Oher imporan dynamic equaions, alhough no relaed o he implemenaion of he IPM program, are he equaions which deermine he wages for manual-clerical and agriculural workers. For manual-clerical laborers, wages increase as a funcion of he growh in boh oal value added and employmen. 8 Growh in oal value added his year increases he wage nex year. In conras, growh in oal employmen his year decreases he wage nex year. WA WA mn mn GDVA GDVA = α 0 + α 1 1 GDVA MANCLER MANCLER WAMANCLER mn α 2 TOTLAB TOTLAB 1 TOTLAB 1 (4.11) where: GDVA is he gross domesic value added in year TOTLAB is he oal employmen in year. For agriculural workers, wage growh is a funcion of growh in boh agriculural value added and agriculural employmen: WA WA ag ag AGVA AGVA = α 0 + α 1 1 AGVA AGLAB AGLAB WAAGLAB where: ag α 2 AGLAB AGLAB 1 AGLAB 1 (4.12) AGVA is he oal value added in he agriculural secor in year 8 Indonesia exhibied wage relaionships (4.11) and (4.12) during he 1970s and 1980s. See Thorbecke (1992). In Thorbecke s work, wages are a funcion of he price deflaor, value added, and oal employmen. This essay omis he price deflaor variable from he wage funcion since in any year of he simulaion wages (also oher prices) are in real erms. See also foonoe 17.

14 103 AGLAB is he number of agriculural workers in year. 4.3 Inegraed Food Crop Pes Managemen in Indonesia This secion reviews he hisory of he implemenaion of he inegraed food crop pes managemen (IPM) program in Indonesia. The descripion in his secion serves as he base o develop he simulaion scenarios in laer secions. The Plan Proecion Direcorae under he Minisry of Agriculure inroduced he IPM program a he end of he 1970s. Unil he mid-1980s, he implemenaion of his program was very limied. No sysemaic effor o educae exension workers and farmers exised. Governmen subsidies for pesicides coninued o reach 80 percen of oal prices for pesicides. Farmers really had no incenive o implemen he IPM. The massive oubreak of brown planhoppers (caused by pesicide resisance) and human pesicide poisoning problems in he mid-1980s moivaed high-ranking governmen officers o consul Indonesian agriculural scieniss. The scieniss convinced he governmen ha he soluion o he wo problems associaed wih he overuse of pesicide was o implemen acively he IPM program. Indonesian agriculural scieniss believed ha, wih implemening he IPM program, farmers would be able o reduce he use of pesicides wihou decreasing yields. The governmen hen issued Presidenial Decree No. 3 of This presidenial decree esablished he IPM program as a naional policy ha all governmen agencies would suppor. The decree had he following objecives (Oka, 1995):

15 104 develop manpower, boh farmers and field personnel, a he grassroos level o implemen he IPM increase efficiency of inpu use, in paricular pesicides improve he qualiy of he environmen and is influence on human healh. Along wih his decree, he governmen decreased subsidies for pesicides from percen of oal prices for pesicides in 1986 o percen in Finally in January 1989 hese subsidies were oally abolished. 9 The governmen also banned 57 broad-specrum insecicides, and only allowed he use of a few relaively narrow-specrum insecicides. To acively implemen he IPM, in 1989 he Naional Developmen Planning Agency (BAPPENAS) esablished an Advisory Board which consised of high-ranking officers from BAPPENAS, he Minisry of Agriculure, and he Minisry of Home Affairs. The Board was he supreme policy-making body, and responsible for he success of he IPM program. Under he Board, a Seering Commiee was formed o direc he projec aciviies, and o ascerain he need for policy improvemen. The Commiee consised of IPM expers from various governmen agencies, universiies, and inernaional insiuions. Cerain members of he Commiee formed he Working Group which conduced he day-o-day asks of he Commiee. The cenral aciviy of his naional IPM program was o educae farmers in IPM using he learning by doing mehod. The Working Group firs rained exension workers and field pes observers o each farmers. By he end of 1991, 2,000 exension workers and 1,000 field pes observers had been able o rain approximaely 100,000 farmers. Afer 1991, approximaely 9 Wih he abolishmen of pesicide subsidies, he Indonesian governmen saved approximaely billion rupiahs ( million dollars) per year.

16 ,000 farmers were rained each year. 10 Approximaely en percen of hese 200,000 farmers became one-on-one rainers. Each of hese farmer rainers was required o rain one farmer wice per year, and repea his raining wih a new farmer in he following year. The cos of all IPM raining aciviies is approximaely billion rupiahs (5.36 million dollars) each year. 11 The cenral governmen provides approximaely 80 percen of his oal cos; he various regional governmens provide he res Daa Sources and Iniial Siuaion This secion discusses daa sources uilized in his essay. The main sources of daa are he 1990 Indonesian Social Accouning Marix (SAM) and Inpu-Oupu (I-O) Table which are available from he Indonesian Cenral Bureau of Saisics (CBS). This essay modifies he 1990 SAM in wo ways. Firs, i reduces he classificaion of facor inpus o five caegories: agriculural labor, manual-clerical labor, professional labor, capial, and land. Second, by disaggregaing cerain producion secors (using he I-O Table) and combining ohers, he number of producion secors decreases from 22 o 20. Imporan o noe in he new classificaion is ha hree agriculural secors exis: Food Crop, Non-food Crop, and Oher Agriculure. Pesicide producion also is removed from he Chemical and Basic Meal secor o become a separae Pesicide secor. In addiion, he healh aciviies relaed o pesicide poisoning illnesses are separaed from he Public Service secor o become he Pesicide-Healh secor. 10 During he beginning years of his IPM raining program, he raining was mosly for rice farmers. Laer, raining for oher food crop farmers was also provided. 11 For a naional program, his IPM budge is relaively small. The budge is approximaely 0.08 percen of oal governmen spending on goods and services in 1990.

17 106 The SAM in his essay uses he same caegories for household classes ha he CBS SAM does. The caegories are as follows: Agriculural Employee : Agriculural workers who do no own land Small Farmer : Agriculural land owners wih land beween 0.0 and 0.5 ha Medium Farmer : Agriculural land owners wih land beween 0.5 and 1.0 ha Large Farmer : Agriculural land owners wih land larger han 1.0 ha Rural Low : Non-agriculural households, consising of small 13 reail sore owners, small enrepreneurs, small personal service providers, and clerical and manual workers in rural areas Rural Non-labor : Non-agriculural households, consising of nonlabor force and unclassified households in rural areas Rural High : Non-agriculural households, consising of managers, echnicians, professionals, miliary officers, eachers, big 14 enrepreneurs, big reail sore owners, big personal service providers, and skilled clerical workers in rural areas Urban Low : Non-agriculural households, consising of small reail sore owners, small enrepreneurs, small Based on an inerview wih Dr. Oka. Small refers o a low income level. Big refers o a high income level.

18 107 personal service providers, and clerical and manual workers in urban areas Urban Non-labor : Non-agriculural households, consising of nonlabor force and unclassified households in urban areas Urban High : Non-agriculural households, consising of managers, echnicians, professionals, miliary officers, eachers, big enrepreneurs, big reail sore owners, big personal service providers, and skilled clerical workers in urban areas. Table 4.1 shows characerisics of each household group in Column 1 liss he proporions of he oal populaion of Indonesia ha belonged o cerain household groups. From column 1, one can see ha 39 percen of he oal Indonesian populaion belonged o Small Farmer households. Since he oal populaion in Indonesia in 1990 was approximaely 180 million people, Small Farmer households equaled approximaely 70.2 billion people. Column 2 shows he raio beween he income of each household group and oal household income of all groups. In 1990, oal household income was approximaely 161,544.5 billion rupiahs. 15 From columns 1 and 2, one can see ha, alhough Urban High households formed only five percen of he oal populaion in he counry, he oal income of Urban High households conribued 25 percen o oal household income. In conras, Agriculural Employee and Small Farmer households represened 10 and 39 percen of he 15 Gross of Domesic Produc in Indonesia in 1990 was 210,866.5 billion rupiahs.

19 108 oal populaion, respecively, bu only received 4 and 20 percen of oal household income. Table 4.1 Characerisics of Household Groups in 1990 Populaion Househol Income Transfer from: d Income Ag. Lab. Man-Cler. Prof. Lab. Land Capial (1) (2) (3) (4) (5) (6) (7) Ag. Employee Small Farmer Medium Farmer Large Farmer Rural Low Rural Non-labor Rural High Urban Low Urban Non-labor Urban High Toal Source: CBS, Columns 3 o 7 show income ransfers from facors of producion o households. For example, column 3 shows ha 45 percen of paymens received by agriculural laborers in 1990 were ransferred o Small Farmer households, i.e. approximaely 45 percen of agriculural workers were small farmers. Noe ha only 43 percen of capial revenues in 1990 were ransferred o households. The remaining capial reurns were disribued o companies, he governmen, and inernaional insiuions. Achmadi s work provides he esimae of he number of acue and chronic pesicide poisoning cases. He esimaed ha in 1988 approximaely 3000 cases of acue poisoning were associaed wih he use of pesicides in agriculural secors. This essay assumes ha he number of acue pesicide poisoning cases in 1990 is he same as in This essay uses a figure of 35

20 109 percen (based on Achmadi s esimae, see he hird foonoe) as he proporion of farmers who uilized pesicides and conraced chronic pesicide-relaed illnesses. CBS (1991) esimaed ha approximaely 40 million people worked in agriculural secors in 1990 and approximaely 28 million of hem were farmers (and agriculural workers) who uilized pesicides. Thus, he esimae of chronic pesicide-relaed illness cases for 1990 is approximaely 9.8 million. Achmadi also noiced ha, on average, each ime a farmer conracs acue pesicide poisoning, he farmer misses work approximaely five days. Each ime a farmer conracs chronic pesicide poisoning, he farmer, on average, misses work approximaely one day. 4.5 Simulaion Scenarios This secion explains he five scenarios simulaed in his essay. I is imporan o noe ha, in he simulaion scenarios, he IPM program is only implemened in he food crop secor. 16 Anoher poin o noe is ha his essay considers he simulaion period o be 10 years long. 17 The five simulaion scenarios are as follows: 1. Base Condiion (No IPM Program): 18 This scenario assumes ha he Indonesian governmen does no implemen he IPM program a all. 19 The 16 See also foonoe Throughou hese 10 years, he Price Index is se a a consan level. Hence prices in any year of he simulaion are in real erms. 18 In all scenarios, he CGE assumes ha during he en-year simulaion horizon: world prices of goods and services remain a a consan level oal annual governmen loans from inernaional insiuions decrease a a rae of hree percen; his same reducion rae applies o oal annual privae secor loans from inernaional insiuions governmen ineres and amorizaion paymens of inernaional loans increase a annual raes of five and wo percens, respecively privae secor ineres and amorizaion paymens of inernaional loans increase a annual raes of seven and four percen, respecively

21 110 Indonesian governmen does no spend billion rupiahs each year o educae farmers. Thus no farmers are aware of IPM pracice. Pesicides coninue o be overused. 2. Basic IPM Program: This scenario simulaes he IPM program planned by he Indonesian governmen. From year one, he governmen spends billion rupiahs annually hroughou he en year ime horizon o educae food crop farmers. Each year, 200,000 farmers graduae from IPM raining. Approximaely en percen of hem are required o each wo oher farmers IPM pracices each year. I is assumed ha farmers who implemen he IPM are able o reduce heir use of pesicides by 56 percen, and increase heir yields by 10 percen. 3. IPM Plus Tax Program: I is assumed ha he Indonesian governmen implemens he IPM program by spending billion rupiahs each year o rain farmers. To furher reduce he use of pesicides, he governmen collecs a five percen sales ax on pesicides. This five percen sales ax is implemened a he sar of he en year simulaion period, and coninues hrough year en. 4. Ambiious IPM Program: In his scenario, he Indonesian governmen is assumed o double is raining budge for farmers in he IPM program, compared wih he budge in he Basic IPM Program. Saring wih he firs year of he simulaion, he Indonesian governmen spends billion rupiahs annually o rain 400,000 food crop farmers. Governmen savings provides he money for his raining. By implemening his foreign capial invesmen grows a an annual rae of 15 percen. 19 The benchmark daa se in his essay is he Indonesian economy in The IPM program in ha year was in is preliminary sage. I is, hence, reasonable o assume ha here was no IPM program ye in 1990.

22 111 Ambiious IPM sraegy, he Indonesian governmen is assumed o expec a greaer growh in he oupu of he food crop secor and a larger reducion in he number of pesicide-relaed illnesses. 5. Sraegic IPM Program: The Indonesian governmen spends billion rupiahs annually o rain 200,000 food crop farmers each year in he IPM in he firs five year simulaion period. In he sixh and laer years, he Indonesian governmen doubles is spending on his IPM raining program, i.e. 400,000 food crop farmers receive IPM raining each year from year six. 4.6 Resuls and Discussion This secion presens and discusses he resuls of all simulaion scenarios. The discussion focuses on how each scenario affecs naional economic growh and household incomes, and how he resuls from he various scenarios differ from hose of he Base Condiion scenario. Table 4.2 exhibis he Gross Domesic Produc (GDP), household incomes for differen socioeconomic classes, and he oal healh coss of pesicide-relaed illnesses in he benchmark/iniial year (0) and in he las year of simulaion (10) from he Base Condiion scenario.

23 112 Table 4.2 GDP, Household Incomes, and Healh Coss of Pesicide-Relaed Illnesses Under he Base Condiion Scenario (in billions of rupiahs) Benchmark Base Condiion Percenage Difference 0 10 GDP % Ag. Employee % Small Farmer % Medium Farmer % Large Farmer % Rural Low % Rural Non-labor % Rural High % Urban Low % Urban Non-labor % Urban High % Pesicide-Healh % Noe: 0 = iniial year 10 = year en (he las year of he simulaion period) Benchmark = he siuaion in he iniial year of simulaion Base Condiion = he governmen does no implemen he IPM program Table 4.3 shows he esimaed impac of various IPM programs on GDP, average annual GDP growh rae, household incomes, and healh coss associaed wih pesicide-relaed illnesses. These impacs are presened as percenage differences beween he resuls from he Base Condiion scenario and hose from oher scenarios. 20 From Table 4.3 one can see ha he impac 20 To calculae he percenage differences, firs deermine he differences beween resuls from oher scenarios and he Base Condiion, i.e. resuls from oher scenarios minus resuls from he Base Condiion. Then, divide hese differences by resuls from he Base Condiion and muliply by 100 percen.

24 113 Table 4.3 Esimaed Impac of Various IPM Program Scenarios on GDP, Average Annual GDP Growh Rae, Household Incomes, and Healh Coss of Pesicide-Relaed Illnesses Basic IPM IPM+Tax Ambiious Sraegic Program Program IPM IPM GDP 0.056% 0.021% 0.111% 0.145% Annual Growh 0.131% 0.050% 0.260% 0.331% Ag. Employee 0.046% 0.024% 0.090% 0.094% Small Farmer 0.009% % 0.017% 0.066% Medium Farmer 0.007% % 0.014% 0.061% Large Farmer 0.014% % 0.028% 0.067% Rural Low 0.087% 0.048% 0.172% 0.183% Rural Non-labor 0.046% 0.006% 0.092% 0.130% Rural High 0.075% 0.036% 0.149% 0.171% Urban Low 0.109% 0.069% 0.216% 0.216% Urban Non-labor 0.055% 0.010% 0.110% 0.153% Urban High 0.112% 0.071% 0.223% 0.225% Pesicide-Healh % % % % Noe: Basic IPM IPM+Tax Ambiious IPM Sraegic IPM = he governmen spends billion rupiahs o rain farmers in IPM = in addiion o raining farmers, he governmen imposes a ax on pesicides = he governmen doubles (compared wih he Basic IPM Program) is IPM budge from he firs year = he governmen doubles (compared wih he Basic IPM Program) is IPM budge afer he firs five years of he IPM programs on he average annual GDP growh rae are relaively small. The raes under he programs are o percen higher han he average annual GDP growh rae under he Base Condiion. The impacs of he IPM programs on household incomes are relaively small. The larges impac on household incomes is percen. This percenage represens he increase in income ha Urban High households experience in year en, as compared o he Urban High household siuaion under he Base Condiion.

25 114 The IPM programs, however, effecively reduce healh coss associaed wih pesicide-relaed illnesses. The range of healh cos reducion is o percen. Table 4.4 summarizes he impac of various scenarios on annual GDP growh rae and healh coss of pesicide-relaed illnesses. For he annual GDP growh rae, more sars mean a higher GDP growh rae. For healh coss associaed wih pesicide-relaed illnesses, more sars mean lower healh coss associaed wih pesicide-relaed illnesses. Table 4.4 Summary of Impac of Various Scenarios on Annual GDP Growh Rae and Healh Coss of Pesicide-Relaed Illnesses Basic IPM IPM+Tax Ambiious Sraegic Program Program IPM IPM Annual Growh ** * *** **** Pesicide-Healh * ** **** *** Noe ha more sars mean a higher GDP growh rae or lower healh coss associaed wih pesicide-relaed illnesses Base Condiion From Table 4.2 one can see ha, under he Base Condiion scenario, he GDP is growing hroughou he en year simulaion period, from 210,886.5 billion rupiahs in he iniial year (0) o 329,549.6 in year en (10), i.e. he GDP in year en is percen higher han ha in he iniial year. Table 4.2 also shows ha incomes for all household groups increase under he Base Condiion scenario. Medium Farmer households experience he highes increase in income, while Rural Non-labor households experience

26 115 he leas increase. All agriculural households increase heir incomes more (in percenage erms) han he urban households do. Since he average income of agriculural households on a per capia basis is smaller han ha of urban households (see Table 4.1), a greaer increase in incomes of agriculural households could conribue o a more equal income disribuion in he counry. Under he Base Scenario, socieal healh coss caused by he use of pesicides grow from 9.01 billion rupiahs in he iniial year o billion rupiahs in year en Basic IPM Program Table 4.3 shows ha he average annual GDP growh rae under he Basic IPM Program scenario is percen higher han ha under he Base Condiion. Table 4.3 also shows he GDP in year en under he Basic IPM Program scenario is percen higher han ha under he Base Condiion. All households receive higher incomes under he Basic IPM Program han under he Base Condiion scenario. Urban High households receive he highes increase in income from he Basic IPM Program, while Medium Farmer households receive he leas. Among he agriculural households, he Agriculural Employee households receive he highes income increase. From Table 4.3 one also can see ha he Basic IPM Program affecs he incomes of each household group differenly. These differences, however, are relaively small, hence one migh expec ha he Basic IPM Program produces he same income disribuion as under he Base Condiion.

27 116 Socieal healh coss associaed wih he use of pesicides is percen lower compared o ha under he Base Condiion, i.e. he Basic IPM Program successfully reduces he healh cos associaed wih he use of pesicides IPM Plus Tax Program The average annual GDP growh rae under he IPM Plus Tax Program is percen higher han he average annual GDP growh rae under he Base Condiion. This average annual GDP growh rae under he IPM Plus Tax Program is cerainly lower han ha under he Basic IPM Program (see Table 4.3). One, hen, can argue ha implemening a ax on pesicides adversely affecs naional economic growh. Anoher negaive impac of implemening a ax on pesicides is ha he oal incomes of Small, Medium, and Large Farmer households under he IPM Plus Tax Program scenario are lower han hose under he Base Condiion scenario. Medium Farmer households incur he highes negaive impac of his ax policy. Noe ha his negaive impac does no happen under he Basic IPM Program. The goal of combining a ax on pesicides and he IPM Program is o furher reduce he quaniy of pesicide-relaed illnesses han he reducion obained under he Basic IPM Program scenario. From Tables 4.3, one can see ha his goal is achieved. The socieal healh cos associaed wih pesiciderelaed illnesses under he Basic IPM Program is percen lower han ha under he Base Condiion. The socieal healh cos associaed wih pesicide-

28 117 relaed illnesses under he IPM Plus Tax Program is percen lower han ha under he Base Condiion Ambiious IPM Program In he Ambiious IPM Program, he governmen doubles is annual budge (compared o he Basic IPM Program) for he IPM Program o achieve faser economic growh and o decrease healh coss associaed wih pesiciderelaed illnesses. Table 4.3 shows he achievemen of his ambiion. The average annual growh rae of GDP is percen higher han ha under he Base Condiion, and is also higher han he annual GDP growh raes under he Basic IPM Program and he IPM Plus Tax Program. Under he Ambiious IPM Program, he oal incomes of all household groups in year en are higher han hose under he Base Condiion, he Basic IPM Program, and he IPM Plus Tax Program (see Table 4.3). Similar o he siuaion under he Basic IPM Program, urban household groups receive higher benefis han agriculural household groups under he Ambiious IPM Program. While he Urban High households receive he mos benefis from he Ambiious IPM Program, he Medium Farmer households receive he leas. One issue is ha his higher income received by urban households migh induce a more unequal income disribuion in he counry. However, comparing Tables 4.2 and 4.3, one can see he impac of he Ambiious IPM Program on household incomes is relaively small. The differences beween he increase in incomes ha all household groups receive under he Ambiious IPM Program and he Base Condiion are rivial. One hen may expec ha he Ambiious IPM Program generaes approximaely

29 118 he same income disribuion as ha under he Base Condiion. Since he Base Condiion scenario mosly likely produces a more equal income disribuion, a more equal income disribuion also mos likely occurs under he Ambiious IPM Program. Reviewing he performance of GDP growh and household incomes under he Ambiious IPM Program, one can conclude ha mos households would prefer he Ambiious IPM Program raher han he Base Condiion or he Basic IPM Program (see also Table 4.4). Socieal healh coss associaed wih pesicide-relaed illnesses in year en under his Ambiious IPM Program are percen lower han hose under he Base Condiion, and are also lower han he healh coss associaed wih pesicide-relaed illnesses under he Basic IPM Program and he IPM Plus Tax Program Sraegic IPM Program In he Sraegic IPM Program, he Indonesian governmen doubles is budge (compared o he Basic IPM Program) for he IPM Program from year six onward. The Sraegic IPM Program is able o increase he average annual GDP growh rae percen higher han he rae achieved under he Base Condiion scenario; i is, in fac, higher han raes in all oher scenarios (see Tables 4.3). Under he Sraegic IPM Program, household incomes for all socioeconomic classes increase. The Sraegic IPM Program increases he income of each household group more han oher scenarios do. Alhough urban households receive higher benefis han agriculural households, he

30 119 disribuion of household income group under he Sraegic IPM Program is mos likely he same as he disribuion of household income under he Base Condiion (for he same reason as in he Ambiious IPM Program). Under he Sraegic IPM Program, socieal healh coss associaed wih pesicide-relaed illnesses in year en are percen lower han hose under he Base Condiion, he Basic IPM Program, and he IPM Plus Tax Program, bu higher han hose under he Ambiious IPM Program. Hence, while he Sraegic IPM Program performs beer in increasing he growh raes of GDP and household incomes as compared wih oher scenarios, he Sraegic IPM Program does no reduce socieal healh coss lower han he Ambiious IPM Program (see Table 4.4). 4.7 Conclusion The CGE developed in his essay analyzes he oal impacs of an IPM program on naional economic growh and income disribuion. This CGE includes various relaionships including: he relaionship beween he use of pesicides and human pesicide poisoning problems (pesicide-relaed illnesses) he relaionship beween human healh problems and boh socieal healh coss and human produciviy in producion aciviies he relaionship beween he implemenaion of an IPM program and a more efficien food crop producion secor he relaionship beween he governmen budge o suppor an IPM program and fuure invesmen.

31 120 This essay hen implemens he CGE o analyze he IPM program in Indonesia. To conduc he analysis, his essay consrucs four differen scenarios -- Basic IPM, IPM Plus Tax, Ambiious IPM, and Sraegic IPM Programs -- and a scenario in which no IPM program is implemened, he Base Condiion. Before discussion of he resuls, i is imporan o noe ha hese resuls need o be qualified. Since daa are limied, he CGE in his essay canno capure perfecly all relaionships wihin he economy, wihin he environmen, and beween he economy and he environmen. The underlying assumpions for he CGE and he simulaion scenarios also should be carefully examined. Five major findings resul from he CGE. 21 Firs, a more equal income disribuion in Indonesia resuls from he Base Condiion scenario; each year during he en year horizon, his income disribuion becomes increasingly more equal. Second, he implemenaion of he IPM program, eiher he Basic IPM, IPM Plus Tax, Ambiious IPM, or Sraegic IPM Program, mos probably produces an almos idenical income disribuion as ha which occurs under he Base Condiion scenario. In effec, implemenaion of any IPM program produces a more equal income disribuion in Indonesia. Third, he implemenaion of only an IPM Program, i.e. he Basic IPM, Ambiious IPM, or Sraegic IPM Program, successfully increases he average annual GDP growh rae and he incomes of all household groups, while decreasing he healh coss associaed wih pesicide-relaed illnesses. The combinaion of an IPM Program wih a ax on pesicides is capable of reducing healh coss associaed wih pesicide-relaed illnesses o a level

32 121 lower han ha produced wih only an IPM Program, and is capable of increasing he average annual growh rae of GDP higher han ha under he Base Condiion. This combinaion program, however, reduces he incomes of farm owners. Fourh, he Ambiious IPM program is able o reduce he healh coss associaed wih pesicide-relaed illnesses o a level lower han ha of oher program scenarios. Hence, if he goal of he governmen is o reduce he use of pesicides o as low a level as possible, i.e. reducing he environmenal damage associaed wih pesicides, increasing he budge for he IPM Program from he firs year of he IPM implemenaion migh be he appropriae choice. Finally, he Sraegic IPM Program is able o increase all household incomes and produce a higher annual GDP growh rae han he raes achieved under he Basic IPM, IPM Plus Tax, and Ambiious IPM Programs. Therefore, if he goal of he governmen, besides reducing he environmenal damage caused by he use of pesicides, is o increase naional economic growh and household incomes as high as possible, i migh be wise for he governmen o periodically increase he budge for he IPM Program. 21 Please see foonoe 17 for several assumpions imposed during he en-year simulaion.

33 References Achmadi, U.F. Agriculural Injuries in Indonesia: Esimaes and Surveys. Deparmen of Public Healh Working Paper, Universiy of Indonesia, Jakara, Cenral Bureau of Saisics. Saisical Yearbook of Indonesia Jakara: Cenral Bureau of Saisics, IPM Naional Program Monioring and Evaluaion Team. The Impac of IPM Training on Farmers Behavior: A Summary of Resuls from he Second Field School Cycle. Jakara: BAPPENAS, Lewis, J.D. A Compuable General Equilibrium (CGE) Model of Indonesia. Developmen Discussion Papers, Harvard Insiue for Inernaional Developmen, Cambridge, Oka, I.N. Success and Challenges of he Indonesian Naional Inegraed Pes Managemen Program in he Rice-based Cropping Sysem. Crop Proecion, 10 (3 1991): Inegraed Crop Pes Managemen Wih Farmer Paricipaion in Indonesia. Working Papers, Food Crop Research Cener, Bogor, Pimenel, D., H. Acquay, M. Bilonen, P. Rice, M. Silva, J. Nelson, V. Lipner, S. Giordano, A. Horowiz, and M. D AMore. Environmenal and Economic Coss of Pesicide Use. BioScience, 42 (November 1992): Thorbecke, E. A Compuable General Equilibrium Model Inegraing Real and Financial Transacions. Adjusmen and Equiy in Indonesia. E. Thorbecke e al., pp Paris: OECD Publicaions, 1992.