The Impact of Market Support in Developed Countries on The Competitiveness of Indonesian Soybean

Soybean in Indonesia is the main raw material of food industry, namely tofu, tempe, soy-sauce, tauco, cooking oils, snacks, etc., while soybean meal is used for feed industry. The development of these industries as well as population growth has caused an increasing demand for soybean. On the other hand, the domestic production was continuously decreasing, hence could not meet its growing demand. For the last three decades, Indonesia has been a net importing country on soybean. The low competitiveness of Indonesian soybean has caused a decrease in area planted to soybean and then decreasing domestic production. Market supports implemented by developed countries combined with the absence of import tariff and untimely import of soybean in Indonesia have made the domestic soybean production less competitive. The price of imported soybean was lower than that of domestically produced. The domestic output protection and input subsidy were not sufficient to make Indonesian soybeans production attractive. The soybeans farming in Indonesia was inefficient. The Domestic Resource Cost Ratio DRCRs in Java were mostly greater than 1.00, meaning that Indonesia has to spend domestic resource more than US$ 1.00 to save US$ 1.00 foreign exchange from import reduction. All of these factors have led to a continuous decline in area planted to soybeans and its production. Therefore, the dependence on soybeans import is increasing. To encourage farmers to grow more soybean, the strategic policies needed are: (i) implementation of proper tariff and import schedule; (ii) development and promotion of new high yielding varieties; (iii) improvement of seed industry; (iv) seed subsidy; and (v) soft credit with a simple procedure