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Does Indonesia need corporate farms by Ben White
1. Does Indonesia need corporate farms?
Modernization, efficiency and the social function of land
International Conference on Indonesian Development
The Hague, 12-15 September 2013
Ben White
2. Three related issues for the long term
in Indonesian development:
– food security and agricultural futures
– un- and underemployment
– sustainability
3. Food security 1952 - 2012
Food is a matter of life and death for a nation …
Why do we throw away millions in foreign exchange, every year,
to buy rice from other countries, when we have the potential to
double food production at home?
[Ir. Soekarno, ‘Soal Hidup atau Mati’, Bogor 1952]
Food may only be imported if domestic production is insufficient
and/or cannot be produced at home
[Law 18 (2012) on Food]
4. From importer to exporter to importer
• 1940s – 1970s: chronic rice importer
(sometimes buying 1/3 of all rice on the world market)
• 1980s/early 1990s: (near) self-sufficiency
• 1990s-present: major rice importer again
(2012: world’s no. 2 importer after Nigeria)
5. 2012
• Indonesia imports almost 6 million tons of basic
food staples (rice, maize, soya) from Vietnam,
Thailand, India, Argentina, Pakistan, USA,
Malaysia, S. Africa
• And produces 28 million tons of palm oil
= 4 times Indonesia’s domestic needs
6. Meanwhile …
Every year 0.1 – 0.2
million ha of its most
fertile land for food
production is lost
through conversion
7. … and 0.3 million ha of
forest (timber worth US
$ 3 billion) is converted
to oil palm, making
Indonesia the world’s
biggest producer and
exporter of palm oil:
– a relatively low-
value crop with
few
up/downstream
linkages
8. This has made some experts worryp
What history will we write about this in future, if this
trend of the past 40 years repeats itself during the
next 40 years?
Indonesia will face many problems due to food
scarcity and increasing inequality in control over land.
Continuing the current push for palm oil exports not
only will not generate welfare for Indonesians, but will
place our exports at the mercy of the world market..
Dependence on imported rice, as Indonesian
population reaches 300 million, will lead to
unimaginable problems
(agric. Economist Dr. Agus Pakpahan, former Dir.
Gen of Export Crops and head of GAPPERINDO
agri-exporters’ consortium, 2012)
9. …and recent law-making suggests
some concern in political circles
• Law 41 (2009) on Protection of Land for Sustainable
Agriculture
• Law 18 (2012) on Food
• Law 19 (2013) on Protection and Empowerment of
Farmers
10. Turning to employment: ‘jobless growth’
and intermediate classes
• Indonesia’s Gini index of income inequality:
2000: 3.2
2012: 4.0
• Youth (open) unemployment: about 20%
• highest in the SE Asian region
• 3x the adult rate
• rural higher than urban
• > 40% among high school graduates
• 3.3 million (try to) enter the labour market each year
• Where will the needed jobs come from ?
11. Michal Kalecki (on Indonesia, Egypt, India 1950s):
– noted the resilience of ‘intermediate classes’ (small-/medium-
scale farmers and non-agricultural enterprises)
– but asked: will the outcome in future be ‘the final submission of
the lower middle class to the interests of big business’ ?
… in the countryside?
…..and the cities?
12. What role for agriculture, large- or small-scale?
Technocratic view:
• modern, efficient agriculture requires a shift from small-scale
(family) farming to large-scale (industrial) agriculture
• this is inevitable (to enter today’s export and domestic value
chains, and to ensure food security)
(e.g.: MIFEE)
… what is ‘modern’ agriculture, what is ‘efficient’ agriculture,
today and in the future?
13. What is ‘modern’ agriculture ?
Modern = responding to the demands [and problems] of the
present era [Koentjaraningrat 1974]
In Indonesia, that might mean:
– Providing employment and livelihoods on a large
scale
– Countering trends to growing inequalities in wealth
and income
– Commitment to sustainable agricultural futures
– Ensuring food security, food sovereignty
14. What is ‘efficient’ agriculture?
Private vs. social efficiency in land use
• Labour productivity,
• Private profitability
vs.
• Social efficiency (in meeting society’s key developmental
imperatives and goals)
In development (unlike business book-keeping), social
efficiency is the relevant goal
[Michael Lipton; Albert Berry]
15. Social efficiency today requires:
• promoting enhanced (food) production (yield per
ha)
• maximising provision of employment and
livelihoods (per ha)
• promoting better income distribution
• social & environmental sustainability
Corporate farming’s record on all of these is not good
16. What role for smallholder farming?
‘Guremisasi’:
• Average smallholder farm size: 0.75 ha
• More than half of all farms are < 0.5 ha (BPS: ‘gurem’)
17. Efficiency and the ‘inverse relationship’ (IR)
between farm size and productivity
• The smaller the farm, the higher the productivity (per ha)
• Smaller farm units tend to have
– greater cropping intensity
– less land uncultivated
– greater proportion of higher value crops
– (for many crops) higher yields per harvested ha
[JS Mill 1848, 1868;
Lipton 2009, Berry 2011]
19. The 400 experts of IAASTD (among them several Indonesians):
• industrial, large-scale agriculture is
unsustainable, due to its dependence
on cheap energy, its negative effects
on ecosystems, and growing water
scarcity
• industrial monocultures must be
reconsidered in favour of agro-
ecosystems that combine mixed crop
production with conserving water,
preserving biodiversity, and improving
rural livelihoods in small-scale mixed
farming.
[International Assessment of Agricultural
Science and Technology for Development
(IAASTD), 2009]
20. Relatively
• inefficient in land
utilization
• low productivity
• displaces more jobs
than it creates
• low quality employment
• enclave / ‘plantation
economy’ syndrome)
21. Then who needs (large-scale,
industrial) corporate farms?
• no crop (food or export) requires a large-scale farming
unit for efficient production
• economies of scale are up- and downstream of the farm
agribusiness does not need to make large ‘land-grab’
deals to engage in the agric sector
Plenty of other opportunities, that do not require
investment in land
22. Alternative smallholder-agribusiness models
• Link smallholders with agribusiness in ways that do not
require (or allow) corporate ownership or leasing of land
• long tradition of research on these models
They work best (both for production and ‘’agrarian justice’) when
smallholders have a genuine share in
• Ownership (of the business and assets, including up- and
downstream)
• Voice (in business decisions)
• Risk
• Rewards
[Cotula and Leonard 2010; Vermeulen & Cotula 2010]
23. Large size, small ‘scale’: a successful 800 ha,
smallholder owned and managed rubber plantation
24. Land deals: the ‘last and least
desirable option’
“investments implying an important
shift in land rights should represent
the last and least desirable option,
acceptable only if no other investment
model can achieve a similar
contribution to local development and
improve the livelihoods within the
local communities concerned”
(Professor Olivier de Schutter
UN Special Rapporteur on the Right to
Food:UN General Assembly 2010).
25. In other words:
smallholders, hold on to your land!
Corporate land deals
close off smallholder
options, now and for
future generations
