POVERTY IN INDONESIA

Report raises hackles over sensitive rice imports issue

The World Bank's latest report on poverty in Indonesia addresses the politically-sensitive and controversial issue of rice imports, arguing as it does that the recent rise in the country's poverty levels is largely due to the recent steep increase in the price of rice.
With rice prices still going up, and the government's unconditional cash-payment welfare program for the poor coming to an end, there is a distinct possibility that poverty levels could rise again next year, unless economic growth increases significantly.
The report, therefore, suggests the lifting of the ban on rice imports so as to lower prices for the sake of the poor.
The report estimates that the 33 percent increase in rice prices that took place between February 2005 and March 2006 cast an additional 3.1 million people into poverty, as rice accounts for 21.4 percent of poor people's expenditure.
"The price increase was well beyond the food inflation rate, showing that it was not primarily caused by the rise in fuel prices," the report said.
The Central Statistics Agency (BPS) announced in September that the poverty rate in Indonesia had increased during the period from February 2005 to March 2006 from 16 percent to 17.75 percent.
This period came hard on the heels of the fuel price hikes in March and October 2005, which pushed inflation up to 17 percent at one point and forced the central bank to raise its key rate to 12.75 percent in order to contain inflation. While achieving this objective, the rate rises also resulted in a slowdown in economic growth.
Coordinating Minister for People's Welfare Aburizal Bakrie said the government would prioritize increased rice production and the revitalizing of the country's agricultural sector. If domestic supplies still proved insufficient, then importing rice to make up the shortfall would remain an option.
Rice imports are a highly sensitive issue, with critics arguing that allowing imported rice onto the domestic market would badly affect local farmers' incomes. (JP/Urip Hudiono ).