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Abstract
In the past 15 years, the Indonesian economy has grown rapidly, and, since 1973-
1974, increased oil revenues have reduced foreign exchange constraints and
allowed rapid increases in capital and consumer goods imports. Despite growth
in the industrial sector, the subsistence oriented farm sector is still the largest
employer in the country. About 80 percent of the present population of 150
million live in rural areas. The food security of both the urban and rural
populations has been a prime goal of the government. It has been achieved
principally through the regulation of the domestic rice market by the National
Logistics Agency (BULOG), the total cost of which fluctuates considerably from
year to year, depending on world price movements and domestic production
performance. The prospect that domestic energy demand may erode oil export
revenues suggests that food policies which focus less on the level and stability
of rice prices need to be evaluated.
Since food consumption patterns and preferences differ markedly between
income groups, changes in policies affecting relative rice prices have different
impacts on the quality and stability of the food intake within each group. This
paper describes results from a stochastic simulation model which disaggregates
consumers into two urban and two rural income groups, and food production and
consumption into five staple food crops. Results from the model support the
hypothesis that higher and less stable rice prices would have their most
deleterious impact on the urban poor; however, less severe regulation of the
domestic rice market is shown to lead to significant increases in the food risk
faced by all groups.