Indonesia’s Garlic Puzzle: Can Local Farms Compete Against a Flood of Imports?

The Big Garlic Question

Hey there! Let’s talk garlic. Not just any garlic, but the spicy, aromatic kind that’s a staple in Indonesian kitchens. You’d think with how much Indonesians love garlic, the country would be swimming in its own supply, right? Well, here’s the scoop: Indonesia actually imports a staggering amount of garlic – over 95% of what it needs! That’s a massive number, and it got me thinking (and the folks behind this study too, obviously): Is growing garlic in Indonesia even worth it anymore? Is it profitable? Can it compete?

This isn’t just a simple question for farmers; it’s a big deal for the whole country. When you rely that heavily on imports, you’re vulnerable to price swings and supply chain hiccups. And let’s be honest, nobody wants garlic to become a luxury item because a shipment got delayed!

A Look Back: Trade, Tariffs, and Trouble

So, what happened? The demand for garlic has exploded, thanks to a growing population, a booming food industry that uses tons of it, and even the tourism sector needing it for hotels and restaurants. Plus, garlic’s got that health halo, showing up in traditional medicine. Everyone wants more garlic!

But here’s where the plot thickens. Back in 1998, Indonesia went through trade liberalization, slashing tariffs on imported goods, including garlic. Then came the ASEAN-China Free Trade Area (ACFTA) in 2006, dropping import duties on garlic from 5% all the way down to zero! Talk about a dramatic change.

The result? A massive surge in imports and a sharp decline in local production. Why? Because imported garlic, often from China (the world’s biggest producer), is generally cheaper and performs better (maybe bigger cloves, better yield, who knows exactly, but it’s preferred). Local garlic just couldn’t keep up. Farmers started switching to other crops, and let’s not forget that sometimes local farming methods aren’t as efficient due to less access to advanced technology. It’s a tough spot for the folks tilling the soil.

Right now, domestic production only covers about 5% of the demand. Imports are essential to keep prices stable and prevent inflation, as garlic is a major player in the food inflation game here. In 2022 alone, Indonesia imported about 566 thousand tonnes – nearly ten times more than in 1996! This makes Indonesia the world’s top garlic importer. China is the main supplier, leveraging its scale and efficiency.

Government Steps In… But Is It Enough?

Naturally, the Indonesian government wants to reduce this import dependency. They’ve launched a National Garlic Development Program with a roadmap aiming for self-sufficiency by 2045. This includes setting up regional production centers, managing imports, and boosting production capacity. They’ve even got programs like government assistance and mandatory planting obligations for importers.

Sounds good on paper, right? But the reality on the ground is challenging. The whole local garlic supply chain is facing issues:

• Not always using the best farming practices.
• Shortage of high-quality seeds.
• Pests and diseases causing problems.
• The constant pressure from imports.
• Sometimes, local consumers just prefer the imported stuff.
• Post-harvest handling is often still manual, adding to costs.

These issues make local garlic more expensive and less appealing, making farmers hesitant to produce it. So, with all this effort and money being poured in, we have to ask: Is Indonesian garlic production truly profitable and competitive? If not, maybe the policies need a serious rethink.

Past studies have shown profitability in some regions, which is encouraging. But farming conditions are influenced by all these government programs, so a deeper dive was needed to see the real picture – the competitiveness and the impact of policies.

Getting Down to Business: The Research

This study set out to answer some key questions:

• Is garlic farming profitable financially (private) and economically (social)?
• Can the potential (comparative advantage) turn into actual market success (competitive advantage)?
• How do government policies mess with things (divergence) and do they help or hurt farmers?
• How does the government’s strategy actually boost competitiveness?

To figure this out, the researchers went to major garlic production areas across Java (Cianjur, Magelang, Temanggung, Malang, Batu) and Lombok (East Lombok). These spots were chosen because they’re key production hubs and where government programs are active.

They used a method called the Policy Analysis Matrix (PAM). Don’t let the fancy name scare you; it’s basically a way to look at costs and profits under real-world conditions (private prices) and compare them to what they *would* be in a perfect market without any government interference or distortions (social prices). It helps figure out the impact of policies like taxes, subsidies, and trade rules. It’s a non-statistical approach that’s been used for other important Indonesian commodities, like soybeans, which also rely heavily on imports.

The process involved:

• Gathering data on farming costs and income from farmers.
• Estimating those “perfect market” prices (shadow prices).
• Separating costs into things that can be traded internationally (like seeds, fertilizers, pesticides) and things that are purely domestic (like labor, land rent, organic fertilizer).
• Calculating a bunch of indicators (13, to be exact!) from the PAM matrix to understand profitability, competitiveness, and policy impacts.

They interviewed over a hundred farmers, plus farmer groups, traders, and agricultural officers. They were super careful to get consent and protect everyone’s well-being, which is really important when doing research with people.

They collected data in 2021, asking about costs and income per hectare per season. They focused on garlic sold for consumption, as seed prices are different. They also talked to stakeholders to understand market conditions, wages, interest rates, taxes, and tariffs to figure out those social prices.

For example, calculating the social price for inputs like pesticides involved taking the average market price and subtracting import tariffs and VAT. For land, they used prevailing rental rates. For labor, they used actual wages. Capital interest rates were adjusted for inflation to get the shadow price. It’s all about trying to see the picture without the policy “noise.”

They classified inputs: seeds, chemical fertilizers, pesticides, herbicides, and fungicides were considered 100% tradable. Garlic output was also treated as fully tradable because imports meet most demand. Domestic factors were organic fertilizer, lime, most labor costs, land rent, and capital interest. Even transportation costs were split between tradable and domestic components.

What the Numbers Say: Profitability and Competitiveness

Alright, let’s get to the juicy part – the results! Turns out, garlic farming in all the studied areas, both Java and Lombok, *is* profitable, both at the farmer’s level (private profit) and from a national economic perspective (social profit). That’s good news!

But there’s a big difference depending on where you are. Temanggung Regency in Central Java came out on top for both private and social profits, making over IDR 15 million/ha/season privately and a whopping IDR 88 million/ha/season socially. Cianjur Regency in West Java, a newer production area, had the lowest profits – just over IDR 3 million/ha/season privately and IDR 23 million/ha/season socially. This shows that location matters a lot, influencing things like productivity, land size, pests, and selling prices.

Now, about competitiveness. The study looked at two types:

• Competitive Advantage (Private Cost Ratio – PCR): Can farmers cover their domestic costs and compete in the market *as it is*? A PCR below 1 is good.
• Comparative Advantage (Domestic Resource Cost Ratio – DRCR): Is it efficient for the country to use its domestic resources (land, labor, capital) to produce garlic instead of importing it? A DRCR below 1 is good.

The results showed that all locations had both competitive and comparative advantages (PCR and DRCR values below 1). However, the DRCR values were consistently higher than the PCR values. What does that mean? It means while garlic farming is competitive in the market, it relies relatively more on domestic resources compared to the private costs farmers face. It’s competitive, but maybe not *as* competitive as it could be if domestic resources were used even more efficiently relative to tradable inputs.

Temanggung, the profit leader, also had the lowest PCR (0.648) and DRCR (0.247), showing the highest competitiveness. This makes sense; it’s a long-established area with farming traditions. Cianjur, on the other hand, had the highest PCR (0.913) and DRCR (0.589), indicating the lowest competitiveness. Being a new area, it faces challenges like poor seed access, unsuitable climate/land, and farmers being hesitant to take risks. This highlights the difficulties in starting new production centers compared to established ones.

The Policy Effect: Incentives or Disincentives?

This is where the PAM really shines – showing how government policies and market distortions impact farmers. The study looked at “transfers” (Output Transfer, Input Transfer, Factor Transfer, Net Transfer) and “coefficients” (NPCO, NPCI, EPC, PC, SRP) to understand this.

Let’s break it down a bit:

• Output Transfer (OT) e NPCO: This looks at the difference between the price farmers get (private) and the price they’d get in a perfect market (social). Negative OT and NPCO elt; 1 mean farmers are getting lower actual prices than they would in a perfectly competitive world. This is a disincentive. All study areas showed negative OT and NPCO elt; 1, meaning farmers are getting less for their garlic than they “should” from an economic perspective. Malang had the biggest negative transfer, Cianjur the smallest.
• Input Transfer (IT) e NPCI: This looks at the difference between what farmers pay for tradable inputs (private) and what they’d pay in a perfect market (social). Negative IT and NPCI elt; 1 mean farmers are paying less for inputs than they would in a perfectly competitive world. This is an incentive. All study areas showed negative IT and NPCI elt; 1, meaning policies on tradable inputs (like maybe subsidies or lower tariffs on inputs?) are helping farmers by making inputs cheaper. Malang had the biggest negative transfer here too.
• Factor Transfer (FT): This looks at the difference for domestic factors (labor, land, capital). Positive FT means farmers are paying more for domestic factors than they would in a perfect market (a disincentive), while negative FT means they’re paying less (an incentive). This varied a lot by location, likely due to differences in minimum wages and capital interest rates.
• Net Transfer (NT): This is the overall impact of all transfers. Negative NT means farmers are transferring value *to* consumers (or others in the chain) because of policies/distortions. It’s an overall disincentive. All locations had negative NT, meaning policies and market issues are hurting farmers’ overall profitability compared to a perfect market.
• Effective Protection Coefficient (EPC): This shows the overall protection or disincentive for the farming activity itself, considering both input and output policies. EPC elt; 1 suggests policies are *not* providing adequate support, leading to lower returns than in a perfect market. All EPC values were positive but less than 1, confirming that policies are not effectively protecting or incentivizing garlic farming, leading to lower profitability and competitiveness.
• Profitability Coefficient (PC): This compares private profit to social profit. PC elt; 1 means farmers’ profits are smaller than they would be in a perfectly competitive market. All PC values were positive but less than 1, reinforcing that farmers are getting less profit than they “should” economically.
• Subsidy Ratio to Producer (SRP): This indicates whether policies are effectively subsidizing (positive) or taxing (negative) producers. Negative SRP means farmers are essentially being taxed or facing increased production costs due to policies/distortions. All SRP values were negative, indicating a detrimental impact on farmers – they are effectively paying a “tax” or facing higher costs because of the policy environment.

So, the big picture from the policy analysis is a bit of a puzzle. While input policies seem to offer some incentives (cheaper inputs), output policies and overall market distortions create significant disincentives, leading to lower prices received and higher costs for farmers than would exist in a perfectly competitive world. This explains why, despite being profitable and having a comparative advantage, local garlic struggles to compete directly with imports.

What About Seed Prices?

Seeds are a major cost for garlic farmers. The study did a sensitivity analysis to see how vulnerable the competitive advantage (measured by PCR) is to increases in seed prices. If PCR hits 1 or more, the competitive advantage is gone.

All locations started with a competitive advantage (PCR elt; 1). But they reacted differently to rising seed costs. Cianjur could handle a 90% seed price hike before losing its edge. Magelang was okay up to 70%. Temanggung, despite being the most competitive initially, was surprisingly sensitive, losing its advantage at just a 20% increase! Malang was resilient up to 40%, Batu up to 25%, and East Lombok up to 35%. This shows that managing seed costs is crucial, especially in places like Temanggung.

Putting It All Together: The Path Forward

So, what have we learned? Indonesian garlic farming *can* be profitable and has a comparative advantage (it’s efficient to use domestic resources for it). Some areas, like Temanggung, are already quite competitive. However, current government policies and market distortions create significant disincentives for farmers overall, making it hard to compete head-to-head with cheaper, better-performing imports.

The study confirms that it’s not just about natural conditions; policy matters! The PAM analysis clearly shows how subsidies, taxes, and trade rules influence whether that potential (comparative advantage) can actually become market success (competitive advantage).

The good news is, because domestic production is feasible and efficient in using local resources, Indonesia *should* focus on expanding it, especially in those high-potential areas. Just because a commodity is heavily imported doesn’t mean it can’t be competitive domestically.

Based on these findings, here are some ideas (and the study’s recommendations):

• Support Farmers: Keep supporting farmers! Help them improve their skills and adopt better practices.
• Technology Boost: Promote advanced technology to increase productivity and reduce costs. We need quality seeds at affordable prices, and technology can help produce them. Extension workers and researchers are key here.
• Infrastructure: Improve agricultural infrastructure, like irrigation and post-harvest facilities (maybe move beyond manual handling!).
• Policy Refinement: This is crucial. Policies on inputs and outputs need work.
• Import Tariffs: Consider adjusting import tariffs on garlic. Increasing them could narrow the price gap between local and imported garlic, giving local farmers a fighting chance. But, gotta play by WTO rules and existing trade agreements!
• Non-Tariff Measures: Think about things like food safety certifications. This protects consumers *and* gives local producers an edge.
• New Production Centers: While strengthening existing hubs is vital, Indonesia needs more garlic! Develop new production centers, but learn from places like Cianjur and address challenges quickly (seed access, climate suitability, farmer risk aversion).
• Value Chain Focus: Refine policies to better align with market realities. This could mean more targeted subsidies, better market access, price stabilization tools, and helping farmers get a better deal in the value chain.

This study looked at multiple locations, which is great because it accounts for different ecological and even social conditions. It helps identify priority regions and potential new ones. However, the world of farming changes fast, and technology is always evolving. Future research could look deeper into socio-economic factors and the actual effectiveness of these policy ideas.

Ultimately, Indonesian garlic farmers are making a profit, but not as much as they could in a fairer market. Policies and market issues are holding them back. By implementing smart policies focused on technology, infrastructure, and strategic trade measures, Indonesia can help its garlic farmers thrive, reduce import dependence, and ensure this beloved ingredient stays accessible and affordable for everyone.

Source: Springer