Asian Development Experience Vol. 1: External Factors for Asian Development

5 The Significance of Japan’s Official Development Assistance in Indonesia’s Agricultural Development: The Case of Increased Rice Production

100 Asian Development Experience, Vol. 1 5 The Significance of Japan’s Official Development Assistance in Indonesia’s Agricultural Development: The Case of Increased Rice Production Masahiro Omura 100 1. Introduction 1.1 Awareness of the Issues In the wake of the Asian economic crisis, sweeping changes have taken place in Indonesia’s government and economy. Even considering the situation surrounding the example of food provision, problems are numerous. The amount of imported rice continued to reach new record highs in both 1998 and 1999. As a consequence of the then plummeting rupiah, costs expended on imported raw materials, such as fertilizer and agricultural chemicals, soared, and El Nino ravaged drought across the nation. Prices for both imported rice and domestically produced staple grains soared. It is said that this, coupled with increasing unemployment and poverty as a result of the economic crisis, led to civil unrest (JICA, Materials for the Reporting Session upon Return to Japan on the Interim Assessment of Umbrella Cooperation). Thereafter, the amount of imports decreased rapidly in 2000 and 2001. Since the 1980s, Indonesia’s rice production per unit has continued to be one of the highest in Southeast Asia. However, growth has reached a standstill, and there is even a trend toward decline (ibid). This chapter examines experiences in Indonesia’s development focusing on the era of the Soeharto regime, examining in particular the significance of official development assistance (ODA) in agricultural development. This chapter is written in the hope that some inspiration can be gleaned from that experience, given the fact that the significance of ODA in development taking place in such countries as those in the sub-Saharan region of Africa is also being considered. As Robert Bates points out, a special feature in economic strategy within African nations following their independence was the element of preferential treatment accorded to urban cities over The Significance of Japan’s Official Development Assistance 101 rural villages (Robert H. Bates 1981). The rationale behind this lay in the fact that developmental economic studies at the time regarded as a given that industrialization was brought about through the transfer of resources from the agricultural sector and in the fact that in terms of maintaining political power, the rural sector had little importance. The same policies were adopted in Indonesia too, in the era of the Sukarno government. However, the Soeharto government carried out policies attaching much importance to agriculture. I believe the key to Indonesia’s economic growth is inherent in this point. If we tentatively take that as a fact, what kind of role did Japanese ODA play in the agricultural development of Indonesia? This issue is not simply an historical question. As I discussed in the foregoing, I believe it has a contemporary significance. 1.2 Prior Research ‘The East Asian Miracle’ by the World Bank focuses in particular on economic growth and the role of government and gives various assessments of policies in each of the East Asian countries (The World Bank [1993] ‘The East Asian Miracle: Economic Growth and Public Policy’ [Oxford University Press]). In this publication, references are made to the facts that each of the governments of the East Asian countries supported agricultural research and the spread of technology, that large-scale investment was carried out in regional infrastructure in such areas as irrigation, and that tax rates were lower in the agricultural sector. However, analysis of agricultural development is not treated as a central theme of the publication. In particular, one cannot find any analysis on the role that ODA played in this development. As for research on the role Japanese ODA played in the development of Asia, in particular Thailand, Chuo University in Japan and Chulalongkorn University in Thailand have carried out joint research (‘Comprehensive Research on Japanese ODA’). The International Development Center of Japan has carried out quantitative evaluations on the impact of Japanese ODA on the respective macroeconomies of Thailand, Indonesia, and Malaysia (International Development Center of Japan, Quantitative Evaluation of Japanese ODA in the Development of East Asian Economies, 1995). In recent years, the Japan Institute of International Affairs has been involved with research on experiences in Asia’s development. In one of the initial products of this research, namely a report titled ‘Significance of ODA in ASEAN External Relations’, Ryokichi Hirono states the following: In order to assist these developing countries in East Asia and in particular ASEAN to promote outward-oriented industrialization policies, Japan, far [18.116.40.47] Project MUSE (2024-04...