Agricultural Sector of Indonesia

With its vast and abundant fertile soils Indonesia is a major global key producer of a wide variety of agricultural tropical products, and although agriculture’s share of the country’s gross domestic product (GDP) has declined markedly during the last five decades, it still provides income for the majority of Indonesian households today. In 2012 this sector employed around 49 million Indonesian individuals, which represents 41 percent of the total Indonesian labour force. But although in absolute numbers the agricultural workforce keeps growing, its relative share of the total Indonesian workforce has declined significantly from 55 percent in the 1980s to 45 percent in the 1990s and currently to 41 percent. Only during the Asian Financial Crisis in the late 1990s this share grew significantly because unemployment in both the industry and services sectors was absorbed by the agriculture sector (mostly informally).
Between the mid-1960s and mid-1980s the percentage of Indonesian land area that was used for agriculture stayed constant at around 21 percent of Indonesia’s total land area. However, in the mid-1980s this number rose to almost 25 percent until the late 1990s. Starting from 1998 another upsurge (due to the establishment of large scale plantations – in particular palm oil) made this number reach the current level of 30 percent.
Indonesia’s agriculture sector is forecast to continue growing, albeit at a lower pace compared to the industry and services sectors.

2010       2011          2012          2013          2014
Agricultural growth                              2.9           3.0              4.0              3.4¹            2.4¹
(annual percent change)

¹ indicates a forecast
Source: World Bank

The agricultural sector of Indonesia comprises large plantations (both state-owned and private) and smallholder production modes. The large plantations tend to focus on commodities which are important export products (palm oil and rubber), while the smallhold farmers focus on rice, soybeans, corn, fruits and vegetables.
The most important agricultural products of Indonesia are:
• Palm Oil
• Rubber
• Cocoa
• Coffee
• Tea
• Cassava
• Rice
• Tropical spices

The Indonesian government has placed self sufficiency in certain agricultural products high on the agenda. In particular this applies to rice which by far is the main staple food for the majority of the population; Indonesia has the highest per capita rice consumption in the world (approximately 139 kilo per capita per year). However, the country is still dependent on imports from Vietnam and Thailand to secure the domestic rice supply. Other food crops that have become target of self sufficiency programs are soy beans, corn and sugar. Government sponsored programs are currently being executed and 2014-2015 have been mentioned as the years in which self sufficiency in these food items should be reached. However, it remains doubtful whether these programs can really make significant progress. Since 2007 the government has also started revitalization programs for smallholding farmers in order to raise production.