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Abstract
Since the mid-1980s, the Indonesian economy has been progressively liberalized,
following a self-adjustment process after the drop in oil prices. Despite
these adverse circumstances the country managed to maintain rapid economic
growth, as it had since the end of the 1960s. The agricultural sector has
contributed to the dynamism of the economy. Both BULOG (the national
foodcrop agency) and the Ministry of Agriculture have played a major role in
that success, providing a stable environment for producers and consumers
through use of various policy instruments, promoting adoption of new varieties
and techniques for growing crops, and providing subsidized inputs. By maintaining
rice price stability on domestic markets, BULOG, since 1967, has
diminished some of the risk associated with agricultural activities and contributed
to social stability by isolating consumers from sharp fluctuations in staple
food prices. The importance of market regulation for the welfare of the poor is
well known (Newberry, 1989; Timmer, 1992). With the intensification of international
negotiations on trade liberalization, further deregulation of the
agricultural sector is probable and there is an urgent need to assess the consequences
both for national production and for farm income. These issues will be
discussed using a micro-macro approach. The methodology is described first,
the Indonesian context is then reviewed and the results of various simulations
are described and analysed.