Rice production in Indonesia: policy and performance

Rice is a politically strategic commodity in Indonesia. The government seeks to ensure that rice production meets the needs of domestic consumption and, accordingly, is interested in its performance as a matter of considerable policy significance. This study addresses its performance in accordance with several determining factors, underlying which is the concept of technical efficiency. Panel aggregate data on input-output rice production in 23 provinces during 1993-2013 are employed for estimating frontier production functions. The results indicate that variation in rice production across regions of the country is due primarily to technical efficiency. Sources of variation within technical efficiency include intensification, training programmes, land fertility and local culture. Of the regions investigated, rice production in Bali has been the most efficient. Overall, efficiency of production is low and has marginally decreased over time in all regions. The study concludes that there is considerable room for productivity improvements through increases in efficiency. Training in relevant agricultural methods, the creation of wetlands, and an improvement in irrigation infrastructure are the best ways to enhance rice production.