Cablegate: Indonesia's Food Security Challenges

DE RUEHJA #1583/01 2660054
R 230054Z SEP 09




E.O. 12598: N/A
SUBJECT: Indonesia's Food Security Challenges

B. Jakarta 1473

1. Summary: The Government of Indonesia (GOI) recognizes four major
challenges to food security. One is the need for human resource
development through agriculture research, education and extension.
Another is the need for substantial new investment in agricultural
infrastructure. They are exacerbated by two newer and less
predictable challenges: financial and commodity market turbulence,
and agronomic adaptation to climate change. Regional and global
cooperation are required to ensure rice supplies -- by far the most
important food security issue, although protecting and sustainably
managing its marine resources will also be critical to Indonesia's
long-term food security. Indonesia does not see maintaining open
access to food and agricultural imports as a part of a strategy
related to food security, even though it is heavily reliant on
imports of basic foodstuffs. Any APEC engagement should address
this fundamental issue. Agriculture, fisheries and forestry account
for 41 percent of employment in Indonesia and are vital areas for
food security-related research and education extension services -
and for which Post is developing proposals. End Summary.

Indonesia: The Background
2. Indonesia has made significant progress in food crop production,
and population growth remains relatively low by regional standards.
The sudden and unprecedented rise in food and fuel prices during
2008 put tremendous pressure on the Indonesian economy, particularly
on the most vulnerable. Indonesia quickly realized that
international financial and commodity market turbulence can be a
challenge to food security. Nearly 50 percent of Indonesia's
population lives on less than two dollars a day, and about two
thirds of their meager income are spent on food. Though food prices
have since stabilized, the ongoing global economic crisis and the
potential for significant job losses continue to make food security
a priority issue for Indonesia. While currently manageable, adverse
weather or external shocks in the near term could lead again to a
rapid deterioration.

Food Security Challenges: The Indonesian View
3. The GOI has four major concerns which Post recognizes as
legitimate and appropriate areas for potential action. The first is
an inadequate agriculture research, education and extension system.
There is a need for Human Resource Development, focusing on higher
edcation and agricultural research. Thi"""u d be pat of a
potential Land Grant University linkage pogram, as we promote
linkages and exchanges betwen Indonesian and U.S. uniiversities.
The second s the need for substantial new investment in
agrcultural infrastructure, both hard (irrigation faciities,
storage, and rural roads) and soft (bradband links to agricultural
research centers, for example).

4. These needs are exacerbated by two newer and less predictable
challenges which Indonesia cannot entirely address unilaterally.
One is financial and commodity market turbulence. The second is
agronomic adaptation to climate change - especially in the arid
regions of eastern Indonesia - as well as potential impacts of
climate change on ocean fisheries. Agriculture, fisheries and
forestry account for 41 percent of employment in Indonesia.
Sustainable management of this sector and anticipating climate
change impacts are therefore vitally important to the wider economy
as well as food security.

Commodity Price Volatility: It's About Rice!
5. Any discussion of food security in Indonesia begins with rice.
Rice is the most important agriculture commodity in Indonesia, in
terms of local production, consumption, and Indonesia's political
economy. Poor and near poor families, which constitute almost half
the population, spend roughly one third of their income on rice. In
early 2008, the price of rice in Indonesia increased by 12 percent
leading to real concerns about the potential socio-economic impact
on the most vulnerable. The World Bank estimates that every 10
percent increase in the cost of rice results in another 2 million
people falling into poverty. Official figures set annual per capita
rice consumption at 139.5 kg. The food security strategy as it
relates to rice is: 1) price stabilization, 2) affordable prices for
consumers, and 3) fair prices for farmers.

6. Commodity market turbulence requires regional and global
cooperation. Last year's rice export bans in major rice producing
countries showed Indonesia that interfering with free trade can have
a serious impact on food security. It also highlighted the need for

JAKARTA 00001583 002 OF 002

serious discussion and agreement among countries on the management
of rice buffer stocks, in order to avoid a repeat of last year's
situation. APEC could facilitate such a discussion. In addition,
there is room for improved Indonesians' understanding of food
commodity markets and hedging mechanisms.

Engaging for Change
7. Our engagement with Indonesia on food security initiatives,
especially through agricultural research, education, extension and
university linkages could have a significant impact on how
Indonesians perceive food security. While we define food security
as maintaining the availability of affordable and sufficient
supplies of food, the GOI tends to define it as self-sufficiency in
food production. It does not see maintaining open access to food
and agricultural imports as a part of a strategy related to food
security -- even though it is heavily reliant on imports of basic
foodstuffs such as soybeans (for tempe and tofu) and wheat-based
food products such as noodles.
In part due to this attitude there are currently a number of market
access barriers and constraints on biotechnology (commercialization
of transgenic seeds), both important elements of any strategy
related to food security.

Fish and Agroforestry...
8. In Indonesia, food security is linked to marine resources, which
are likely to be affected by climate change. Indonesia possesses
one of the world's most important fisheries. It has almost 20% of
the world's coral reefs, adjacent to the most extensive and
biologically diverse mangrove forests and sea grass beds in the
region. These coral reefs, mangrove and sea grass form the
ecological basis for spawning, nursery and feeding grounds of large
number of fish and shrimps at the coastal area. This biodiversity
is the basis for supporting the livelihood of 34 million people and
6.8 million jobs in coastal communities. In addition, more than
half of the national protein supply comes from fishery products.
Protecting these resources will be critical to Indonesia in
achieving its long-term food security.

9. Recognizing this, Post has proposed the establishment of an
Indonesia-U.S. Center for Sustainable Ocean Fisheries (ref B). This
joint research institute would explore and study waters that house
the world's highest ocean biodiversity, and the applied economic
structures that govern their use. These understudied waters are
critical not only to the 120 million people living in the maritime
nations of the Coral Triangle, but also for Americans and global
consumers of pelagic fish species. Indonesian waters provide a
significant portion of the Indian and Pacific tuna catch.
Indonesia's inability to manage its domestic fishery or participate
in international pelagic fisheries management jeopardizes both food
security and economic development. The establishment of such an
institute would address both food security and climate change
10. Similarly, another research, education, and extension effort
for promoting food security could be through an Agroforestry Center.
Post's Foreign Agricultural Service section is developing a concept
paper, taking into account the importance of forest-related industry
to employment in Indonesia as well as the severe threats to
Indonesia's biologically diverse forests. Meanwhile, agroforestry
is receiving increased global attention as a sustainable
land-management option. Agroforestry focuses on the wide range of
working trees grown on farms and in rural landscapes. Among these
are fertilizer trees for land regeneration, soil health and food
security; fruit trees for nutrition; fodder trees that improve
smallholder livestock production; timber and fuelwood trees for
shelter and energy; medicinal trees to combat disease; and trees
that produce gums, resins or latex products. Many of these trees
are multipurpose, providing a range of benefits.
11. This proposed Agroforestry Center would address livelihoods and
landscapes in future land-use planning, taking into account the
cross-cutting issues of food security, climate change and
deforestation. It could take the form of a U.S. Land Grant
University Linkage program. At least one U.S. university has
expressed interest in the concept. Local partners could include a
university or the Indonesia-based regional center of the World
Agroforestry Center (ICRAF), which is linked to the Centre for
International Forestry Research (CIFOR) in Bogor, Indonesia. U.S.
Forest Service involvement could also be considered.

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