Resource information
The agriculture sector has been and will
continue to be important for poverty alleviation efforts in
Indonesia. Indonesia was very successful in increasing
agriculture productivity during the 1970s and up to the
early 1990s, but productivity stagnated during most of the
1990s, partly as a result of declining public investments.
Public spending on agriculture has increased significantly
in the last decade, but a large share of that spending has
been allocated to subsidizing private inputs. The impact of
public spending on productivity can be positive, but that
depends on the composition of spending. While public goods
and services will have a positive impact on growth,
subsidizing private inputs is unlikely to have much of an
impact. Reforms to the existing subsidies systems can be
combined with continued assistance to poor farmers, while
the freed up resources could be used to provide improved
public goods and services. A reallocation of spending should
be combined with renewed efforts to improve the efficiency
through which key services are provided, in particular in
the areas of R&D, extension services and irrigation.
