Why the price of Indonesian rice more expensive than international?
Why is the price of Indonesian rice more expensive than international?
Retail rice prices in Indonesia have consistently been the highest compared to other ASEAN countries for the past 10 years. This was explained in December 2022 in the World Bank's Indonesian Economic Outlook (IEP) report.
The price of rice in Indonesia is 28 percent higher than the price of rice in the Philippines, the price is even double the price of rice in Vietnam, Cambodia, Myanmar and Thailand," VOA said on Tuesday (12/20/2022), citing to a World Bank report.
The high price of Indonesian rice is due to a number of factors, most notably government policies supporting farmers' market prices, according to the World Bank.
This practice includes trade restrictions. For example, import trade, quantitative restrictions, BUMN import monopolies for important raw materials and other non-trade-related measures and (political) minimum purchase prices at company level.
The World Bank further explained that another factor contributing to high rice prices in Indonesia is the lack of long-term investment in human capital.
Long supply chains and high distribution costs in parts of Indonesia due to relatively difficult geographic conditions are also affecting rice prices. The World Bank report also found that the high price of rice contributed to the country's inflation. The price issue is the main reason why Indonesian rice cannot compete with neighboring countries like Vietnam and Thailand.
In fact, the difference between the domestic rice prices in the two countries is about IDR 2,900/kg. Based on international rice prices reported by the Food and Agriculture Organization of the United Nations (FAO), the international price for low-grade export rice (25% spoiled white rice variety) from Thailand is around IDR 5395 (June 2019 data). ).So the price of rice of the same quality from Vietnam is around IDR 532/kg.
According to the National Center for Strategic Food Price Information, the cheapest domestic rice price in the DKI area of Jakarta is currently IDR 8,200/kg. The high price of Indonesian rice compared to other countries is due to several main factors. Firstly, the production factor, because rice is still produced conventionally.
This refers to the ownership of paddy fields by smallholders, leading to inefficiency in when the latest agricultural technology is used in rice production, which then leads to a high price for native rice."Why traditional? Because the land is narrow. So why is the land narrow? Because the initial selling price doesn't cover the cost of production. So these farmers don't develop because the land is narrow before.
The problem of land tenure has also kept the price of rice high in the country. Institute of Economics and Finance (INDEF) food monitor Rusli Abdullah said most Indonesian farmers are classified as smallholders or farmers who own or lease agricultural land of less than 0.5 hectares. Then he also mentioned the problem of farm workers, whose wages are quite high.
The younger generation's lack of interest in becoming farmers forces many paddy field owners to pay wages to the workers."So there is a labor force problem. Farmers are aging, the labor force is declining, young people don't want to become farmers.
There are fewer farmers, and the demand for farm labor is high. The transaction has been this year, making labor prices more expensive. Now, rice field workers in rural areas are paid between 50,000-70,000 IDR per day, so it is difficult for us to export due to high prices in Indonesia.
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