Revitalizing agriculture is critical forrural Indonesia's economic prosperity. Historically,Indonesia's dramatic poverty reduction was driven byprogress in agriculture and agriculture continues to be apotent driver of growth and poverty alleviation.Agricultural sector growth strongly induces non-agriculturalsector growth in rural areas, particularly through demandfor locally produced and services. Agricultural sectorproductivity growth (along with price changes) has remainedthe most important way out of poverty. To shift agriculturealong these dimensions, Indonesia needs to transition fromits current and ineffective public stance, growing subsidiesand selective output protection, to a more aggressiveprovision of public goods and services that build supportsystems for farmers to achieve continuous productivitygains. This will require an enabling agriculture policyenvironment, significant improvement in the delivery ofservices, agricultural research and extension in particular,and supporting enabling investments, which will encouragesmall farmers to move to high value agricultural activities.This will boost employment and raise incomes in rural areaswhile creating a bigger rural market with greater trade andinvestment opportunities.
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