The thoughts of UGM economists on agricultural development remain relevant to this day. Economists’ contributions since the 1960s have highlighted the importance of the interaction between policy, technology, risk, and economic incentives in the success of agricultural development in Indonesia.
Professor Catur Sugiyanto from UGM’s Faculty of Economics and Business (FEB UGM) conveyed this on Thursday (Sep. 26).
Professor Sugiyanto explained that the contributions of UGM economists, spanning generations, have shown continuity, particularly about the Green Revolution policies in the agricultural sector since the 1960s.
Some of the key economists include the late Professor Mubyarto, the late Professor Ace Partadiredja, the late Professor Dibyo Prabowo, the late Dr. Soetatwo Hadiwigeno, the late Professor Sukanto Reksohadiprodjo, the late Dr. Budiono Sri Handoko, Professor Gunawan Sumodiningrat, Professor Lincolin Arsyad, Professor Catur Sugiyanto, and Dr. Bagus Santoso.
Professor Sugiyanto stated that Professor Mubyarto developed a model of marketable rice surplus, explaining that the surplus farmers sell is the difference between household production and consumption, which is influenced by rice prices and farmer incomes.
His model indicated that poor farmers tend to reduce the surplus they sell when rice prices and incomes increase, as they consume more for household needs.
“No matter how small the land they farm, farmers act rationally,” said Professor Sugiyanto.
Professor Mubyarto also proposed that increasing rice production could be achieved by raising farmers’ incomes.
Farmers would be encouraged to boost rice production by providing appropriate incentives, such as low-interest loans through programs like BIMAS.
“The BIMAS and INMAS programs, which provided farmers with access to credit, aligned with Professor Mubyarto’s views on the need to improve farmer incomes,” he said.
Meanwhile, Professor Dibyo Prabowo emphasized the importance of adequate irrigation infrastructure to boost agricultural productivity, especially in Java.
Professor Prabowo, as he was familiarly called, criticized government policies that continued to provide agricultural credit to fully irrigated areas.
He argued that the credit would be better allocated to areas with partial or no irrigation, where technological support and water resources are more critical for increasing productivity.
Economist Dr. Budiono Sri Handoko used data from annual agricultural surveys from 1976–1978 to assess the contribution of new technology, particularly high-yield varieties, to rice production.
His analysis revealed that new technology and inputs like labor positively impacted rice production. However, fertilizer was still underutilized.
“The adoption of the Green Revolution was faster among farmers in Java-Bali compared to those outside Java-Bali. The larger the farm size, the quicker the adoption,” Professor Sugiyanto quoted Dr. Handoko.
Professor Gunawan Sumodiningrat studied how risk and profitability influenced farmers’ decisions to adopt high-yielding varieties (HYVs).
Irrigation quality, credit availability, and risk factors such as potential floods or droughts influenced the adoption of new technology.
The adoption rate of superior seeds was higher in areas with better irrigation and credit access, particularly in Java and Bali, compared to regions outside Java, which often faced drought risks and lower land quality.
Indonesia achieved rice self-sufficiency in 1984, but production later declined. Dr. Bagus Santoso noted that national rice productivity dropped, which was linked to changes in farmer behavior, with reduced use of superior seeds when output prices increased.
“Farmers participating in intensification programs behaved similarly to non-intensification farmers, indicating a threat to the sustainability of rice self-sufficiency,” said Professor Sugiyanto.
Meanwhile, Professor Lincolin Arsyad studied the role of Village Credit Institutions (LPDs) in Bali as economic development tools for low-income communities.
He highlighted the importance of informal institutions like social norms and values in the practical operations of LPDs. These informal structures worked alongside formal regulations, which provided legal frameworks and governance for LPDs.
Professor Sugiyanto summarized the contributions of these FEB UGM economists and concluded that policy, technology, risk, and economic incentives are interconnected in the success of agricultural development in Indonesia.
While the Green Revolution brought significant change, long-term success depends on proper risk management, credit access, infrastructure, and stable pricing.
He noted the critiques regarding the over-reliance on rice and the focus on Java, indicating the need for diversification and more inclusive approaches to ensure future food security.
“There is a need for diversification and inclusive approaches to improve food security,” he said.
Professor Sugiyanto also mentioned that the rice market in Indonesia has been well integrated with both domestic and international markets.
This is reflected in the stable import margins and the linkage between domestic and world rice prices. Trends significantly influence domestic price fluctuations in the global rice market.
According to him, managing imports is key to maintaining price stability in the domestic market and ensuring rice availability throughout Indonesia.
Moreover, Professor Sugiyanto emphasized the importance of automatic price stabilization based on market mechanisms rather than unplanned government interventions. Price stability, he argued, is crucial to incentivize farmers to increase production.
He also suggested that Indonesia should be more involved in the global rice market to ensure stable rice supplies.
Author: Gusti Grehenson
Post-editor: Afif
Photo: Freepik