Indonesias Agriculture Products

Milla Amelia Rajasa - I201621261

With its vast and abundant fertile soils Indonesia is a major global key
producer of a wide variety of agricultural tropical products, and although
agriculture's share of the country's gross domestic product (GDP) has declined
markedly during the last five decades, it still provides income for the majority of
Indonesian households today. In 2012 this sector employed around 49 million
Indonesian individuals, which represents 41 percent of the total Indonesian Labor
force. But although in absolute numbers the agricultural workforce keeps growing,
its relative share of the total Indonesian workforce has declined significantly from
55 percent in the 1980s to 45 percent in the 1990s and currently to 41 percent.
Only during the Asian Financial Crisis in the late 1990s this share grew
significantly because unemployment in both the industry and services sectors was
absorbed by the agriculture sector (mostly informally).

Table 1: Indonesias agricultural growth (The World Bank, 2016)

Indonesia's agriculture sector is forecast to continue growing, albeit at a
lower pace compared to the industry and services sectors. The agricultural sector of
Indonesia comprises large plantations (both state-owned and private) and
smallholder production modes. The large plantations tend to focus on commodities
which are important export products (palm oil and rubber), while the small hold
farmers focus on rice, soybeans, corn, fruits and vegetables.
The most important agricultural products of Indonesia are: Palm oil, rubber,
cocoa, coffee, tea, cassava, rice, tropical spices, etc. Thus, in this paper I will
shortly explain Indonesias Top 2 Agricultural Products: Palm oil and Rubber.
 Palm Oil
Palm oil is one of the world's most produced and consumed oils. This cheap,
production-efficient and highly stable oil is used in a wide variety of food,
cosmetic and hygiene products, and can be used as source for bio-fuel or biodiesel.
Indonesian companies engaged in palm oil are planning large investments to
expand palm oil refining capacity. This is in line with the government's ambition to
extract more revenue from Indonesian resources. The country always mainly
focused on the export of raw palm oil (and other raw commodities) but has shifted
its priority to refined products higher up in the value chain. To spur growth in the
downstream industry, export tax on refined palm oil products have been slashed in
recent years. Meanwhile, the export tax for crude palm oil (CPO) ranches between
0 and 22.5 percent depending on the international palm oil price. Indonesia has an
automatic mechanism that when the government benchmark CPO price (based on
international and local CPO prices) drops below USD $750 per metric ton, the
export tax is cut to zero percent. As this benchmark price slipped below USD $750
per ton in September 2014, Indonesia has seen a zero percent CPO export tax since
October 2014.

Table 2: Estimated Palm Oil Production in 2014

Table 3: Indonesian Palm Oil Production and Export Statistics

 Rubber

Table 4: Top Five Natural Rubber Producers 2014

As the second-largest rubber producer, Indonesia supplies a substantial
amount of rubber to the global market. Since the 1980s, the Indonesian rubber
industry has been experiencing steady production growth. Government and private
estates thus play a minor role in the domestic rubber industry. Around 85 percent of
Indonesia's rubber production is exported. Almost half of export is shipped to other
Asian countries, followed by North America and Europe. The top five Indonesian
rubber importing countries are the USA, China, Japan, Singapore and Brazil.
Domestic rubber consumption is mostly absorbed by Indonesia's manufacturing
industries (in particular the automotive sector).

Table 5: Indonesian Rubber Production & Export

Compared to its rubber producing competitors, Indonesia contains a low
level of productivity per hectare. This is in large part due to the general older age
of its rubber trees in combination with low investment capability of the
smallholder farmers, hence reducing yields. Whereas Thailand produces 1,800
kilogram (kg) of rubber per hectare per year, Indonesia only manages to produce
1,080 kg/ha. Also Vietnam (1,720 kg/ha) and Malaysia (1,510 kg/ha) have higher
rubber productivity. (Indonesia Investments, 2017)
 Bibliography
The World Bank. (2016, - -). The World Bank. Retrieved 4 8, 2017, from The
World Bank: http://data.worldbank.org
Indonesia Investments. (2017, 4 5). Indonesia-Investments. Retrieved 4 8,
2017, from Indonesia-Investments: http://www.indonesia-
investments.com/culture/economy/general-economic-outline/agriculture/item378?