Thanks to fertile soils and diverse landscapes, agriculture has become one of the potential sectors in Indonesia. Indonesia is a major producer of various agricultural products, which contribute to the main income of many households, the country’s export income, and most importantly, a pillar of the Indonesian economy which is growing by 5.01 percent per year.
- The five decades have seen an increase in the area of land devoted to agriculture in Indonesia.
- Indonesia’s GDP from the agricultural industry has increased to IDR 84.578 billion (USD 6.1 billion) in the first quarter of 2018.
- Indonesia’s agricultural GDP growth is estimated at 4 percent in 2019.
- Indonesia spent IDR 30.1 trillion (USD 2.175 billion) on agricultural development in 2018.
- The existence of large water sources that benefit the agricultural sector.
- Indonesia imports food from outside each year, amounting to IDR 53.5 trillion (USD 3,849 billion).
Growth and Potential
Indonesia’s GDP from the agricultural industry has increased to IDR 84,578 billion (USD 6.1 billion) in the first quarter of 2018 from IDR 43,801 billion (USD 3.2 billion) in the fourth quarter of 2017.
Also, Indonesia’s agricultural GDP was IDR 68.147 billion (USD 4.92 billion) on average from 2010 to 2018, reaching a high of IDR 88.068 billion (USD 6.35 billion) in the first quarter of 2017. Statistics from Statista.com also predict Indonesia’s GDP growth for the agricultural sector will increase by approximately 4 percent in 2019 compared to 2018.
Despite significant growth, this sector has not yet reached its full potential. Therefore, under President Joko Widodo’s watch, progress has been made in recent years with the introduction of business-friendly initiatives to bring in foreign investment as well as domestic contributions.
Investments are used to increase the use of mechanical and automated technologies, expand agricultural areas, and improve infrastructure. Therefore, machinery, mechanization, and technology related to agriculture open up business opportunities in Indonesia.
Only in 2018 has Indonesia spent IDR 30.1 trillion (USD 2.175 billion) to develop agriculture. This development aims to bridge the structural gap to meet the food needs of the local population and export to other countries. Every year Indonesia imports food from abroad with a total of IDR 53.5 trillion (USD 3,849 billion).
The focus of the Agricultural Sector in Indonesia
The main agricultural products in Indonesia are palm oil, rubber, cocoa, coffee, tea, cassava, rice, and tropical spices. This sector includes large plantations and smallholder products, both government and private. The focus of large plantations includes products and commodities for export such as palm oil and rubber, and the main products of smallholders are large, soybeans, maize, fruit, and vegetables.
To provide for the people themselves, the Indonesian government has emphasized the importance of certain agricultural products. For example, rice and rice products are high on the agenda because they are the staple food of a large proportion of Indonesia’s population. Also, Indonesia has the highest capita consumption of rice in the world — with most of them still dependent on imports.
Indonesia, together with neighboring Malaysia, dominates palm oil cultivation. Together, they represent 85-90 percent of total world palm oil production, and the demand is still increasing — due to increasing world demand and higher production yields. Most of Indonesia’s palm oil products are exported to countries such as China, Pakistan, Malaysia, India, and the Netherlands. However, unsustainable palm oil production was an issue of many demonstrations in Europe.