Improving Agricultural Market Performance:
Creation and Development of Market Institutions
135
policy instruments such as import monopolies, licensing, and export restrictions were
abolished during the economic reforms and deregulation of the late 1980s and 1990s 378 as the
Government of Indonesia looked to link its economy with the world economy in a response to
dropping oil prices.379 Indonesia’s agricultural trade policy reforms went further as part of the
structural adjustment component with the IMF and included reducing import licensing
restrictions which could not be justified, abolishing local content rules (e.g. for soybean meal
and dairy products), and eliminating exclusive importing monopolies to state agencies such as
the National Logistics Board and the Clove Buffer Stock and Marketing Agency.380
The current agricultural policies have the objective to assist agricultural producers on the
hand while stabilizing food prices for consumers (particularly for rice) and ensuring the
availability of food at reasonable prices across the country381 on the other hand through
national stockholding and pricing policy mechanisms:382
 National stock piling is implemented by BULOG for rice and, perhaps, in the nearby
future also for beef and sugar. 383 BULOG also contributed to ensuring the availability of
food at reasonable prices throughout the country as it re-distributes certain food
staples from production centers to consumer areas with relatively high prices in order
to stabilize prices. The Ministry of Trade provides demand data (i.e. commodity price
per region) while the Ministry of Agriculture provides supply data (i.e. harvest
locations). BULOG implements this policy together with PT Perusahaan Perdagangan
Indonesia (PPI), a state-owned trading company, which is responsible for the logistics
and distribution to and from BULOG’s warehouses. To this extent, the Ministry of
Trade together with the Ministry of Transport and PT PELNI, a state-owned shipping
operator, also arrange for logistics and distribution to ensure affordable food is
available in Indonesia’s outermost areas in order to minimize price discrepancies
between urban and rural centers. Commodity price discrepancies can be reduced up to
5% through this mechanism.
 Pricing policy is implemented through reference prices, which are set by the
Government and used by BULOG for about ten strategic agricultural commodities.
These reference prices are set for both producer and consumer prices and should
contribute to optimizing the efficiency of the market system.384
Heart of Indonesia’s agricultural policy approach is the ambition to realize self-sufficiency for
three key staples in 2017 (i.e. rice, maize, and soybeans) and another two in 2019 (i.e. beef and
sugar).385 Realizing self-sufficiency in terms of rice is important as it is Indonesia’s key staple
food, while self-sufficiency in beef, sugar, maize, and soybeans are important as part of import
substitution policies. Maize, moreover, is an important input for poultry and agro-
processing.386
378 WTO (2013), Indonesia Trade Policy Review Report by the Secretariat, Geneva: World Trade Organization.
379 FAO (2003), “WTO Agreement on Agriculture: The Implementation Experience - Developing Country Case Studies,”
available a Accessed June 2017].
380 Ibid
381 Interview with Ministry of Trade in Jakarta, July 14, 2017
382 WTO (2013), Indonesia Trade Policy Review Report by the Secretariat, Geneva: World Trade Organization.
383 Interview with Ministry of Trade in Jakarta, July 14, 2017
384 Ibid
385 OECD (2015), Indonesia Policy Brief – Agriculture, available at
[Accessed June 2017].
386 Interview conducted with Indonesian Agency for Agricultural Research and Development in Jakarta, July 11, 2017