Food Security and Agriculture

Discussion Paper No. 10 - Negative Effects of Non-Tariff Trade Barriers on the Welfare of Indonesians

Felippa Amanta & Iqbal Dawam Wibisono

Overview:

  • Although Indonesia managed to significantly bring down poverty from 24.2% of the population in 1998 to 9.2% in 2019, the figure still fell short of the 7%-8% poverty reduction target set for 2019 in the National Medium

  • Term Development Plan for 2015-2019. - It is estimated that on average, Indonesians spend 48.55% of their expenditures on food and beverages. For the population segment with the lowest consumption level, the figure is even greater, at 56.21%.

  • The Indonesian agriculture sector suffers from low productivity, high production costs and other factors that inhibit efficient production. But despite the apparent need for food imports, the process remained hampered by costly tariff and non-tariff measures (NTMs).

  • The analysis highlights that the most restrictive and distorting measures to trade among all non-tariff barriers are the Quantitative Restrictions or quotas on food commodities. As a result, they have the greatest impact on food prices and consequently, on poverty.

  • It is estimated that removing NTM on rice and meat could lead to an overall reduction of the poverty rate by 2.8 percentage points. Similarly, inequality is also expected to fall by 1.76%.