Improving Agricultural Market Performance:
Creation and Development of Market Institutions
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The way forward for Indonesia is to re-design its existing agricultural support policies from an
predominant focus on achieving self-sufficiency through domestic market price support and
input subsidies to a more diverse portfolio of policies and instruments, which can anticipate on
various scenarios of food insecurity.471 The existing agricultural policy instruments generate
considerable opportunity and budgetary costs and require public funding, which may rather
have been invested in high-quality infrastructure, risk management, and improving the
agricultural marketing’s efficiency. Obviously, this would also have its implications for existing
market institutions such as BULOG, PTPN III, and PT Pupuk Indonesia.
In this context, it is suggested to re-structure BULOG, together with phasing out input
subsidies, substituting, the RASTRA rice distribution program with alternative schemes (e.g.
food vouchers and cash transfer programs), and reform, simplify, and streamline the imports
licensing system472 in order to realize this transition.
471 OECD (2015), Indonesia Policy Brief – Agriculture, available at
[Accessed June 2017].
472 Ibid