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Rice Sub-Sector Growth Study in East Java

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Rice Sub-Sector Growth Study in East Java This East Java Rice Sector Study summarizes key international, national, and local level market information about the rice sub-sector; outlines the market, core value chain, supporting functions and services, and rules and regulations; analyzes problems, underlying causes and service weaknesses; and describes a strategy for change, including market potential and sequenced interventions. Rice Sub-sector Growth Study in East Java December 2017 Promark Table of Contents Executive Summary ............................................................................................................................. viii 1 Background ..................................................................................................................................... 1 2 Sector Description .......................................................................................................................... 2 2.1 Sector Profile........................................................................................................................... 2 2.1.1 Overall Context .................................................................. Error! Bookmark not defined. 2.1.2 National Context ............................................................................................................. 3 2.1.3 Local Context: East Java ................................................................................................ 13 2.2 Sector Dynamics ................................................................................................................... 16 2.2.1 Market Overview .......................................................................................................... 16 2.2.2 Sector Map ..................................................................................................................... 17 2.2.3 Core Value Chain .......................................................................................................... 18 2.2.4 Supporting Functions and Services................................................................................ 27 2.2.5 Rules and Regulations ................................................................................................... 36 3 Analysis ........................................................................................................................................ 43 3.1 Problems and Underlying Causes ......................................................................................... 43 3.2 Services, Enabling Environment and Weaknesses ................................................................ 44 3.3 Gender and Environmental Issues ........................................................................................ 46 4 Strategy for Change ...................................................................................................................... 48 4.1 Market Potential ................................................................................................................... 48 4.2 Vision of Change ................................................................................................................... 49 4.3 Interventions ......................................................................................................................... 50 4.4 Sequencing and Prioritization of Interventions .................................................................... 53 4.5 Sector Vision of Change Logic .............................................................................................. 55 5 Annexure ...................................................................................................................................... 57 5.1 Annex 1: Conclusion and Recommendations from Spire report entitled “Agricultural Value Chain Financing Study Rice Farmers in East Java – Indonesia 2017” commissioned by SAFIRA. ... 57 5.1.1 Conclusion ..................................................................................................................... 57 5.1.2 Table of Recommendations ........................................................................................... 57 i 5.2 Annex 2: Detailed Policy Descriptions ................................................................................. 59 5.2.1 Production Policy .......................................................................................................... 59 5.2.2 Price Policy for Paddy and Rice .................................................................................... 59 5.2.3 Paddy: Buying Price by Government for Various Qualities .......................................... 60 5.2.4 Rice: Buying Price for Various Qualities by the Government ....................................... 60 5.2.5 Rice Stock Policy ........................................................................................................... 60 5.2.6 Policy on Rice Price Stabilization ................................................................................. 60 5.2.7 Distribution Policy ........................................................................................................ 61 5.2.8 Import Policy ................................................................................................................ 61 5.2.9 Export Policy ................................................................................................................. 62 5.2.10 Policy on Quality Assurance and Food Safety ............................................................... 62 5.2.11 Rice Milling Business Policy ......................................................................................... 62 5.3 Annex 3: Sector Maps ........................................................................................................... 64 5.3.1 Core Value Chain Map .................................................................................................. 64 5.3.2 Irrigation Services Map ................................................................................................. 65 5.3.3 Financial Services Map .................................................................................................. 66 5.4 Annex 4: Intervention Logic Analysis Framework (ILAF) ................................................... 67 5.5 Annex 5: Interviewees .......................................................................................................... 71 5.6 Annex 6: Investigation Team ................................................................................................ 72 5.7 Annex 7: Relevant Input Companies .................................................................................... 73 5.8 Annex 8: Rice Millers and Traders: East Java ........................................................................ 74 5.9 Annex 9: Companies Selling Relevant Machinery: East Java and National .......................... 75 5.10 Annex 10: Major Formal Financial Service Providers in East Java ....................................... 76 ii Acknowledgements The literature review, initial analysis, field investigation, post-research analysis and follow-up research for this study have been a collaborative effort. We would like to acknowledge and express appreciation of the following team members: Pak Agustin Karnaen, Pak Albert Tanrian, Pak Burhanuddin, Pak Eko Prasetyo, Pak Gatot Waluyanto, Ms. Giulia Salmaso, Pak Mangapul Sinaga and Ms. Kristia Sianipar. As a member of PRISMA staff, Ms. Sianipar produced an excellent research paper on the rice sector in Indonesia earlier in 2017 which served as an important foundation for the research in this study. Our national consultant, Pak Agustin, and his two associates – Pak Burhanuddin and Pak Gatot – made vital contributions to this study. Their experience has added depth and nuance to the data, analysis and recommendations provided in this report. iii Table of Figures and Tables Table 1: Dry Paddy Production of Five Largest Rice Producers Globally (2014) ................................... 2 Figure 1: Paddy Harvest Area (ha) and Production (tons) (1994-2014) ................................................. 2 Figure 2: National Production of Seven Food Crops (2015) ................................................................... 5 Figure 3: Profile of Rice Production in Indonesia (2012-2016) .............................................................. 5 Table 2: Paddy Production in Ten Main Provinces (2012-2016) ............................................................ 6 Table 3: Five Years of Paddy Harvest Area in Top-Ten Provinces (2012–2016) .................................... 7 Figure 4: Paddy Harvest Area (2014, 1 dot = 10,000 ha) ........................................................................ 7 Figure 5: Productivity of Top Five Provinces over Five Years (2012-2016) ........................................... 8 Figure 6: Paddy Harvest by Month in Indonesia (2014) ......................................................................... 9 Figure 7: Ten Years of Indonesian Rice Imports (2007-2016, in million tons) ..................................... 10 Figure 8: Paddy Harvest Area by District in East Java in ha (2015) ..................................................... 13 Figure 9: Paddy Productivity (tons/ha) by District in East Java (2015) ................................................ 14 Figure 10: Paddy Production by District in East Java (2015) ................................................................ 15 Table 4: Highest Retail
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