Newsletter April 2021 | Looking to Trade Policies for Solutions to Poverty Reduction
This week millions of Muslims in Indonesia and around the world began to fast from sunrise to sunset for the holy month of Ramadan.
In normal times, you would see the hustle and bustle of people buying snacks and iced drinks from street vendors to break their fast. The time to break the fast is also an opportunity to come together with family and friends and share special dishes like rendang (beef stew) and opor ayam (yellow chicken curry).
This year is likely to be more sombre.
Economic and financial hardship have hit the most vulnerable in Indonesia. The pandemic has pushed an additional 1.13 million Indonesian below the poverty line.
Poverty and food prices are closely interlinked. Our latest study estimates that for every 1% increase in price, the national poverty headcount also goes up 1%.
Aryani, a mother of young children, captures the compromises she had to make when money gets tight.
“Before, I used to sell enough to buy enough food, but not now. Mothers have to be smart in how they respond to a pandemic like this. If we don’t go out to sell, automatically our daily menu gets less and less. Before we had chicken, now it’s tempeh and tofu. Before there was fish, and now we switch it with something less expensive that can last through until the next week.”
This experience was also captured in our study that simulated food purchasing patterns. When prices went up, the nutritious intake of protein was sacrificed in favour of carbohydrates.
Finding a solution means having to take a closer look at Indonesia’s food trade policies.
Our latest study shows that the elimination of non-tariff measures (NTMs) in rice alone, can lead to a reduction of overall poverty rates by 2.52 percentage points.
Non-tariff measures (NTMs) include quantitative restrictions, sanitary and phytosanitary measures, pre-shipment inspections, and technical barriers to trade. They impact food prices by limiting how much is able to come into the country and the costs of compliance.
At the end of the day, it is the poor consumers who really pay the costs of NTMs.
CIPS is calling on policymakers to support poor Indonesians by eliminating trade quotas. CIPS also advocates the establishment of an automatic import licensing system that would simplify and hasten import processes and eliminate opportunities for rent-seeking behaviour.
By looking at trade and removing unnecessary trade restrictions, the future could be brighter for Indonesia’s poor. It is CIPS’ wish this Ramadan that more families will be able to enjoy delicious dishes, and that expensive food will be a thing of the past.
Wishing everyone to stay safe and healthy and all Muslims, a Ramadan Kareem.
Center for Indonesian Policy Studies
Don't forget to check out and download our policy papers here. Through these papers, we present evidence-based arguments to recommend policy changes that focus on building prosperity and better livelihoods for low-income Indonesians.
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