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Promoting Growth And Maintaining Price Stability Through Food Commodities Downstream: The Case Of Indonesia

Author

Listed:
  • MHA Ridhwan

    (Bank Indonesia)

  • Prayudhi Azwar

    (Bank Indonesia)

  • Andree Breitner Makahinda

    (Bank Indonesia)

  • Refdamas Dwiaji Wishnumurti

    (Bank Indonesia)

  • Ilham Farizi Indrayadi

    (Bank Indonesia)

Abstract

Using a mix-methods approach, this study revealed a series of novelties while exploring multifold roles of food commodities downstream in promoting economic growth and stabilizing prices in Indonesia. In order to assess value addition at both commodity and industry levels, the research employs several quantitative methods, including Revealed Structured Comparative Advantage (RSCA) and Trade Balance Index (TBI), and identifies strategic commodities that have significant comparative advantages and potential to drive exports, i.e. cocoa, dairy milk, seaweed, and shrimp. Employing web scraping, the analysis highlights high economic returns from the processing of cocoa into butter and powder, fermented milk in the dairy sector, dried shrimp for seafood, and nori from seaweed. The paper also measures strong global demand for these high-value products, supported by strong export performance. Results from the Panel Vector Autoregression method also found that small firms experience volatile yet high-profit spikes from value addition, medium-sized firms contribute steadily to GDP growth, and large firms achieve consistent productivity gains. Furthermore, by using some qualitative approaches, we found some major challenges in the food downstream approach, such as limited technological adoption and financial constraints, mostly faced by small enterprises. The study recommends certain strategic policies in the form of business incentives, simplified licensing, human resource development and strategic partnerships in order to enhance industry resilience while ensuring sustainable development.

Suggested Citation

  • MHA Ridhwan & Prayudhi Azwar & Andree Breitner Makahinda & Refdamas Dwiaji Wishnumurti & Ilham Farizi Indrayadi, 2024. "Promoting Growth And Maintaining Price Stability Through Food Commodities Downstream: The Case Of Indonesia," Working Papers WP/02/2024, Bank Indonesia.
    • Handle: RePEc:idn:wpaper:wp022024
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    References listed on IDEAS

    as
    1. Lee, Chien-Chiang & Zeng, Mingli & Luo, Kang, 2023. "Food security and digital economy in China: A pathway towards sustainable development," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1106-1125.
    2. Zaili Rusli & Dadang Mashur & Ringgo Eldapi Yozani & Dedi Kusuma Habibie & Harapan Tua Ricky Freddy Simanjuntak & Trio Saputra, 2022. "The Governance of Downstream Oil Palm Development in the Technopolitan Area of Pelalawan Regency," International Journal of Energy Economics and Policy, International Journal of Energy Economics and Policy, vol. 12(2), pages 233-240, March.
    3. Neilson, Jeffrey & Dwiartama, Angga & Fold, Niels & Permadi, Dikdik, 2020. "Resource-based industrial policy in an era of global production networks: Strategic coupling in the Indonesian cocoa sector," World Development, Elsevier, vol. 135(C).
    4. Massie, Natanael Waraney Gerald & Mangunsong, Carlos, 2022. "Products as Network: An Empirical Approximation of the Manufacturing Production Network in Indonesia," MPRA Paper 114647, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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