By Carolyn Park and Ulisari Eslita
Food security is a top issue for the country, and Franky Widjaja is helping to solve it.
Food security is becoming a major issue for the government. In the 1980s, Indonesia had more food than it needed. Today, the country has become a net importer of a number of basic commodities, such as corn, rice, soya beans and sugar. Last year, food imports cost Rp 125 trillion. The controversy caused by higher tofu prices is a clear reminder of the necessity of having food security. This year, the government has allocated over $1 billion in food subsidies for items such as seeds, fertilizers and food-price stabilization programs.
The situation will only become more acute as the population grows bigger and wealthier. For one, higher incomes mean people can afford to eat more, thus pushing demand even higher. For another, the growing population builds housing on areas once used for farms, reducing the amount of arable land. “Our country is importing about 60% to 70% of all the food and products in supermarkets,” says Franky Widjaja, vice chairman of the Sinar Mas group and member of the Widjaja family worth $8 billion. He was speaking at an event held by the Jakarta Foreign Correspondents Club.
Thus Franky has agreed to lend his considerable influence to move Indonesia closer to food self-sufficiency. Aside from his association with food issues through Sinar Mas’s many food-related businesses, Franky holds many posts, among them the chairman for Agribusiness, Food and Livestock at the Indonesian Chamber of Commerce and Industry (KADIN) and the vice chairman of Kadin itself, plus being the chairman of the steering committee for the Jakarta Food Security Summit held in February and organized by Kadin.
To address the food security issue, the government has taken a number of initiatives. The most prominent among them are the Merauke Integrated Food and Energy Estates in Papua, in which 2.5 million hectares will be developed to feed the nation. Several major tycoons such as the Medco group’s Panigoro family are making a commitment to develop this area.
Then there is the government’s multibillion master plan for developing corridors of economic activity, the Master Plan for Acceleration and Expansion of Indonesian Economic Development, known by its acronym MP3EI. Agricultural development is a major component of the plan, focused on cocoa, fisheries, livestock and palm oil. “Sinar Mas as one of the largest palm oil producer will support the program to help the country. One of them by providing affordable cooking oil, which we already started since a few years ago,” he says.
In addition to that, last year, at the East Asia World Economic Forum, which was held in Jakarta, Trade Minister Gita Wirjawan announced the partnership for Indonesia in sustainable agriculture (PISAgro). It is a scheme of public-private partnership to achieve food security, and also aims to address Indonesia’s food, climate change and poverty challenges. Its primary goal is to achieve 20% increase in crop yields, 20% of CO2 emission reduction, and 20% of poverty reduction over the next decade. Subgoals of the PISAgro include training farmers in growing and harvesting techniques, and providing them with better technologies.
The Kadin has also take a role by organizing the Jakarta Food Security Summit, which provided a forum for bringing together experts to discuss ways to reach the goal of food self-sufficiency. With the subtitle “Feed Indonesia, Feed the World,” the summit brought a high-powered group that included President Susilo Bambang Yudhoyono, Coordinating Minister for the Economic Affairs Hatta Rajasa, billionaire entrepreneur Chairul Tanjung and noted Columbia professor Jeffrey Sachs.
Among the many problems that Indonesia must tackle is the low productivity of its agricultural sector. For example, in rice, Indonesia’s productivity is only 2.7 tonnes per hectare a year, while the government’s benchmark productivity level is more than twice that at 6 tonnes per hectare. Corn is the same, at 4.3 tonnes per hectare a year, while the benchmark rate is a minimum of 7 tonnes. To be sure, in some products, such as soybeans, Indonesia does better, at 1.4 tonnes per hectare per year versus a benchmark rate of 1.6 tonnes, and also coffee at 0.5 versus a benchmark of 0.65.
One of the most efficient crops in Indonesia is palm oil. In part, this productivity is due to climate but also it derives from the enormous amount of effort that has gone into boosting productivity of this important crop. Yet even here, Indonesia is lagging at 2.7 tonnes per hectare a year on average versus a benchmark minimum of 5 tonnes. Yet this statistic is deceiving, since about 40% of all palm oil is produced by small stakeholders, who also suffer from low productivity. Larger producers tend to have higher productivity. To help these small palm oil farmers, Franky is supporting a special scheme to help them raise their productivity called the proyek inti rakyat (PIR), which was started in the 1980s and developed over the years since then.
To help boost productivity in other crops, the PISAgro initiative has gotten the cooperation of six private companies to help develop seven key crops. The seven companies are Unilever for soybeans, Sygenta for corn, Indofood for potatoes, Sinar Mas for palm oil, Nestle for dairy and cocoa, and PT Tri Usaha Sari Tani for rice.
Distribution and logistics are another part of the equation that must be solved. At the moment, it is expensive to transport locally produced food around the country, meaning high demand areas such as Jakarta can’t get products from high supply areas. Franky notes that: “People can get oranges from China cheaper than oranges from Kalimantan.”
One irony of Indonesia is that the government has encouraged the consumption of rice, making Indonesians the largest consumers of rice on a per capita basis in Asia. Indeed, most Indonesians don’t consider they have eaten a proper meal if it doesn’t include rice. However, the high rice consumption means there is a dependence on rice to the detriment of a more balanced diet. Indonesians also consume large amounts of sugar. The high intake of sugar and rice is suspected to be linked to the growing incidence of diabetes. “Indonesia is the largest rice eater in the world and consumes plenty of sugar. That’s why many of our people suffer from diabetics,” notes Franky.
*Published on Forbes Indonesia August 2012 issue