Don’t Abandon Villages

· 3 minutes read

A Central Statistics Agency (BPS) report released in July showed that rural inflation was higher than urban inflation, with food prices as the greatest cause. This is a warning.

The cost of food and education remain the largest contributors to inflation. Ironically, villages, which are food production centers, were hit by higher inflation than cities as a result of an increase in food prices. Poverty and the number of poor are greater in villages.

The BPS data shows a monthly inflation of 0.28 percent in July. This was lower than the 0.59 percent inflation in June and slightly higher than the 0.22 percent in July 2017. Specifically, inflation declined on the back of government-set prices. Core inflation increased significantly, while inflation fluctuated as a result of fixed goods prices.

Core inflation represents the long-term inflation of non-volatile components. Bank Indonesia defines core inflation as comprising the interaction between supply and demand, the external environment – the exchange rate, global commodity prices and inflation in trading partners – and inflation expectations among traders and consumers. Therefore, the July inflation could be a result of increased demand and the decline in the rupiah that caused food prices to increase.

The BPS data consistently shows that food is the greatest expense in poor and near-poor households. This daily urges the government to develop food policies and agricultural strategies to tackle food production problems, increase rural incomes and reduce the urban-rural welfare gap.

Rural communities must be able to improve their income by setting good prices for their agricultural products. This will also serve as an incentive for farmers to boost production.

Even the governments of developed countries protect their farmers’ income through subsidies. We can provide direct fertilizer assistance for farmers, irrigation or village infrastructure such as roads, sanitation facilities and electricity at affordable prices. Modern agricultural training must also be broadly available.

The post-harvest, agricultural processing and agricultural equipment industries must involve villagers to secure added value for rural communities, instead of for urban centers.

Currently, the selling price for agricultural and farm products, including unhusked rice, sugar cane and rubber, do not provide enough incentives for farmers to boost productivity. The government has set strict prices for rice and sugar. Low prices are imposed on farmers, forcing them to suffer a double burden: low selling prices for agricultural products and high buying prices for food.

Rural purchasing power must be improved. The quickest way of achieving this is through labor-intensive activities in village infrastructure development. The programs of village-owned enterprise must aim to boost rural businesses, including rice mills, agricultural product processing centers and

rural marketing. We can learn from China’s village development programs that involve micro and small rural industries. In only three decades, China has transformed into a respected global giant.

Editor:

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