Tuesday, March 16, 2010


Land for food production is a burning issue to day as fertile lands are being diverted for other industrial operations and food production is on the decline in many countries due to uncertainties associated with cultivation. Indonesian initiative in converting its low quality land areas into food bowls through leasing and joint ventures is based on its perception that much more returns can be derived by attracting foreign investments in agriculture and deployment of modern cultivation technologies.

"One of the main priorities related to the agricultural and economic development of the first 100 days of the second term of SBY's administration is the preparation of a regulation on a large-scale food production system, the so-called "food estates". President Susilo Bambang Yudhoyono is scheduled to launch the "food estate" program in February. There are many controversies regarding the expected positive and negative impacts of the program and consideration of the potential benefits and losses after the program implementation has been hotly debated. While the formal regulation on the food estate program has not yet been announced, various national media have reported on the main ideas behind the food estate organization, citing information from officials at the Ministry of Agriculture. Food estates will be implemented in areas where huge tracts of empty land are still available and where it is not so populous, such as Merauke in Papua. In Merauke, only 2.49 million hectares of cultivable land is suitable for food production. Food and biofuel products will be produced under the program".

"The government will invite foreign and national corporations to participate in the program. Each investor can manage 100,000 hectares of land at the most under a first management rights agreement for a 35-year term, which can be extended for up to 90 years. Foreign investors from China, the United Arab Emirates, Korea and Singapore have shown keen interest in food estate investment. Major national investors reportedly have a similar interest in taking advantage of the opportunity to benefit from the program. Investors will be given various incentives and benefits, such as the food produced will be for export as the world food market is commonly better on price. In order to promote and protect national interests, the government will impose a maximum stake ownership for foreign investors at a level of 49 percent on each food estate".

It is surprising that Indian investors are not showing much interest in bidding for a "slice of the cake", knowing their appetite for highly profitable foreign investments in other countries. Chinese adventurism in agriculture is demonstrated again by their readiness to invest in Indonesia on food estate program. How Indonesia will react to the Chinese "mode" project management involving Chinese workers in large number is worth watching since such investments cannot generate significant employment generation locally.


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