PROMOTING GROWTH AND MAINTAINING PRICE STABILITY THROUGH FOOD COMMODITIES DOWNSTREAM: THE CASE OF INDONESIA

Mha Ridhwan, Prayudhi Azwar, Andree Breitner Makahinda, Refdamas Dwiaji Wishnumurti and Ilham Farizi Indrayadi
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Mha Ridhwan: Bank Indonesia
Prayudhi Azwar: Bank Indonesia
Andree Breitner Makahinda: Bank Indonesia
Refdamas Dwiaji Wishnumurti: Bank Indonesia
Ilham Farizi Indrayadi: Bank Indonesia

No WP/02/2024, Working Papers from Bank Indonesia

Abstract: Using a mix-methods approach, this study revealed a series of novelties while exploring multifold roles of food commodities downstream in promoting economic growth and stabilizing prices in Indonesia. In order to assess value addition at both commodity and industry levels, the research employs several quantitative methods, including Revealed Structured Comparative Advantage (RSCA) and Trade Balance Index (TBI), and identifies strategic commodities that have significant comparative advantages and potential to drive exports, i.e. cocoa, dairy milk, seaweed, and shrimp. Employing web scraping, the analysis highlights high economic returns from the processing of cocoa into butter and powder, fermented milk in the dairy sector, dried shrimp for seafood, and nori from seaweed. The paper also measures strong global demand for these high-value products, supported by strong export performance. Results from the Panel Vector Autoregression method also found that small firms experience volatile yet high-profit spikes from value addition, medium-sized firms contribute steadily to GDP growth, and large firms achieve consistent productivity gains. Furthermore, by using some qualitative approaches, we found some major challenges in the food downstream approach, such as limited technological adoption and financial constraints, mostly faced by small enterprises. The study recommends certain strategic policies in the form of business incentives, simplified licensing, human resource development and strategic partnerships in order to enhance industry resilience while ensuring sustainable development.

Keywords: Food commodities downstream; economic growth; price stability; value addition; comparative advantage (search for similar items in EconPapers)
JEL-codes: E31 F43 Q18 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2024
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