A New Approach to Rice Intensification-Mears

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A New Approach to Rice IntensificationLeon A. Mears

Online Publication Date: 01 July 1970To cite this Article: Mears, Leon A. (1970) 'A New Approach to Rice Intensification',Bulletin of Indonesian Economic Studies, 6:2, 106 - 111To link to this article: DOI: 10.1080/00074917012331331668URL: http://dx.doi.org/10.1080/00074917012331331668

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A New Approach to Rice IntensificationOn 20 M ay 1970 the Government of Indonesia announced itsdecision t o discontinue, afte r the 1 9 7 0 dry season crop, itsreliance on Bimas Gofung Ro jong , the rice intensificationstrategy in which foreign private contractors were involved inthe supply and distribution of current inputs, such as fertiliscrs,pesticides and credit.' Bimas Gofung Rojong is to be replacedby rejuvenated programs of National Bimas and Inmas relyingentirely on domestic administration. As intensification of riceproduction is given major emphasis in Indonesia's Five YearPlan , this important decision raises a number of questions. Whatare the reasons for this change? How have domestic conditionsaltered to permit consideration of such an abr up t changc? W hateconomic implications can be expected? Brief answers to thesethree questions arc given in the following note.These can best be discussed in relation to the original rationalefor Bimas GofongRojong. Co-operation with foreign co ntractorswas first considered in 1968. Direct support to facilitate adop -tion of new technologies, to provide dom estic and foreign creditfo r inputs and to organize related logistical activity needed tobe greatly extended if production targets were to he reached.The area required for the Bimas Gotong Rojong was expectedto amount to more than one million hectares, implying athousand-fold expansion of the original pilot Bimas Project of1964.

The domestic cost of inputs for the directly intensified areaalone (that is, Bimas hut not Inmas areas) was expected toexceed RplO billion annually. In a situation where inflationwas not yet fully under c ontrol an d in which the banking systemwas suffering from shortcomings in disbursing necessary creditto farmers for fertiliser, insecticide and other inputs, this posed'See th e Djakarta Tinrcs , 21 M a y 1970, p. 1. For a mo r e detaileddesc r ip t ion of the v a r i o u s Bimas p r o g r a m s , bee Bullelin 11, pp. 2 9 4 7 .

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a herci an ta: Moreover. a rge portion of these physicalinputs had to be imported.' For a country hard pressed forforeign exchange, financing the rcquired imports posed atremendous burden.Evidcnce had also come to light on shortcomings in thedomestic organisation for input distribution, for giving infor-mation on new techniques on such a large scale and for pro-viding other related services. Insecticides, in particular, werethe least likely of the new inputs to be used by farmers in theintensification program. It was hoped that foreign suppliersmight help demonstrate the effectiveness of insecticide as wcll asproviding short term suppliers' credit and then transportingth e fertiliser an d high-yielding seed to the farmers for repaymentin kind at harvest time. The foreign companics were alsoexpected t o help in aeria l spraying of insecticides which, it w ashoped, would maximise its effective use during the crucialphase of program expansion.More generally, the Government was aware that the riceintensification program was intimately bound up with otheraspects of its overall development program, including pricestability, rice price policies, m arke ting a nd processing activities.These other aspects that impinged directly on the success ofthe intcnsitication program had to bc improved before marketforces could be expected to play an important part and thusreduce the need for direct Government intervention.Bimas Gotong Rojong, with its foreign participation, wasfrom the beginning viewed as a temporary measure. Its phasingout had already begun with the reduction of Bimas GotongRojong areas originally planned for the dry season crop in mid-1970. T h e process would probably have continued m ore gradu-ally had it not bzen for two important factors. One was theincreasing evidence that the benefits originally expected fromthe program wcre not being fully realised. and the second wasIndonesia's improved capacity to handlc the program itself.Am ong the difficulties the program cncountered, two factorswere of particular im portance. L arg e budgetary deficits resultedfro m failure to obtain t he expected volume of credit repaymentin kind and from difficulties in handling and processing thepaddy repayments that were made. During the first year ofthe Bimas Gotong Rojong program, the consequent revenueshortcomings amounted to approximately RplO billion ($30million). Even this might have been tolerated had there beenstrong evidence that the program was achieving a material

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increase in production. Such evidence as became available onthe production effects of the program was generally discour-aging. There were also technical shortcomings. The timing ofaerial spraying frequently conflicted with requirements whenplanting periods were staggered. The insecticidcs and fertiliserssupplied by foreign contractors were not always appropriate.In other instances, the chemical formulations were undesirableas they differed from those to be expected from futu re dom esticproduction, In some cases, the pcsticides provided were reportedto be harmful to vitally important inland fishing.I M P R O V E D P R O S P EC T S F O R ANE F F E C M V E D O M E S T I C PROGRAMBetween 1 96 8 and 19 70 the economic cnvironment directlyand indirectly relevant to rice intensification programs hadmaterially improved. The runaway inflation had been broughtunder control. Go vernm ent revenues had shown sharp increases.With additional revenues and continuing foreign aid, and withthe experience gained during the first year of Repelita, it nowappea red possible to dispense with suppliers credit fr om foreigncontractors without serious risk that finance for other develop-ment activities would be impaired.The adoption by the Government of a rice price policydesigned to secure adequate incentive prices for the fanner, itwas believed, would enable m arket forces to play a much moreimportant part in inducing farmers to use production-increasinginputs and in cnabling them to make prompt repayment ofcredits provided for these inputs. O n he marketing side, roadswere being improved, and Bulog (the Food Board) hadinstalled approximately 300 small new rice mills in rural areasto help secure f o r farm ers greater returns from their production.Commercial millers were rapidly increasing operating levelsaf te r the removal of Gove rnm ent restrictions on operating,storage and transport.By 1970, the Bank Rakjat Indonesia, which was responsiblefo r providing direct inp ut credits to th e farmers, h ad successfullyinnovated and tested the use of village unit banks to providedirect credit to individual farmers over limited areas. Thesehad been sufficiently successful to encourage their expansionover extended areas. Bank Rakjat Indonesia had demonstrated

See, for example, the disappoin t ing r epor t s o n produc t iv i ty increasein the ser ies of Evalua t ion S tud ies car r i ed o u t under the ausp ices of th eA g r o - E c o n o m i c S u i v e y a t I n i t i t u t P e r t m i a n , Bogor.

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also the value of m obile credit units for improving the provisionand repayment of credit on a less intensified basis than withvillage units bu t over much larger areas. T his ncw organisationavailable for distributing cash credits gave grounds for con-fidence that serious collection losses would now be much lessthan under the procedures involved in the Gotong Rojongprogram.By 1970 the Government also fel t m ore easily able t oassume responsibility for the foreign exchange costs of theprogram. Accumulated stocks of fertilisers and insecticidesreduced foreign exchange requirements for the coming year.Required imports could be obtained on longer term credits thanusually available through Gotong Rojong contractors. In anycase, it had become increasingly evident that the one yearsuppliers credit provided by the foreign contractors yieldedits major advan tage only in the first > c a r of the program.There-after , as earlier credits had to be repaid annually, credit reliefcame only from any additional financing associated with theprograms expansion.The establishment, late in 1969, of the Bimas SupervisoryBoard (B ad an Pem bina Bim as ), with strong powers delegatedfrom the Prcsident,? was designed to centralise responsibilityand to ensure better co-ordination between the many ministriesand agencies involved in the rice intensification activities. TheBoard has prepared detailed plans to correct program short-comings and is ready to help i n their implementation. Theseplans emphasise better communications among all involved.Agency teams are expected to explain details of their programsat subdistrict levels and be available at those levels to eliminatebottlenecks. Technical teams will join them to assure thatimproved cultivation methodology is passed on. A major expan-sion is expected in the lower levels of the extension service,bringing with it more highly trained personnel who will havetime to promote and assist with more demonstration plots atvillage levels. Expansion of fertility trials throughout Bimasareas will provide improved guidance for more economic useof expensive inputs. Finally, improved guidance on insecticideuse is planned to concentrate use of this inpu t in areas wherereturns are expected to be largest. All this gives greater con-fidence that Indonesians themselves will be able to run theprogram effectively.

Presidential Decree No.95, 1969.109


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T he use of foreign contractors had been m o s t helpful inthe actual movement of fertiliser and other physical inputsdirectly to the farmcr. Even hcre, valuable experience has beengained by existing organisations and planned changes in thedistribution machinery are expected to yield further improve-ment. PN Pertani, the organisation originally responsible fordistribution of these inputs. has begun to rationalise andimprove its distribution organisation. T he C overnm cnt h as alsoagrced to allow PN Pusri (th e dom estic man ufacturer of u rea)to participate more extensively in fertiliser distribution. Fertiliserand insecticidc distribution will be opened to other state andprivate enterprises which have shown capacity for distributionover wide areas. In addition, the mobile teams will be expectedto help correct deficicncies as they arise.The new policy i? expected to yield a number of advantages.1. Budget losses should be materially reduced. Deficienciesin collections of loans made to farmers are expected to bemuch less than the losses on Gutong Rojong repayments ofcredits made in kind.2. The foreign exchange cost of imported inputs will be ata minimum in 1970 in view of the high level of stocks that hasaccumulated. As time goes on, the foreign exchange require-ments of the rice program should decline. Expanded domesticfertiliscr production will gradually reduce total import requue-ments. Wh cre inputs must still be imported, long term develop-ment credits can replace one year supplier credit to ease theeconomic burden.3 . Increased concentration is planned on areas with highestyield potentials. This is being made possible by rchabilitationof irrigation works, by improvcd knowledge about the locationof effectively irrigated areas and by tests now under way of newhigh yielding sccd varieties which may well reveal technologicalpossibilities fa r beyond those of the P B seed varieties. As theseprospects materialise, greater output can be expected fromavailable human and financial resources.

4. As the intensification program increases in effectiveness,it should prove possible to reduce the inducements now neededto compensate farmers for their expected risks. Increased par-ticipation of the private sector in input distribution and ofnewcomers in rice processing promises to have similar effects.5. The execution of the new policy will no dou bt, in p ractice,fall short of plans and hopes. Such shortcomings must be

ECONOMIC I M P L I C A T I O N S

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expected, bu t the new app roac h developed in the light of severalyears experience and the growing competence of the Indonesianadministrators of the program make it reasonable to count ona significant net gain. Some incidental losses, while regrettable,will be a price worth paying for the experience Indon esians willgain in running their own Bimas and Inmas, themselves fullyresponsible for solving the problems on the road to greatlyincreased rice production. Leon A. Mears

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