Market-Approach-Based Policy to Achieve Rice Price Stability in Indonesia—Can It Be a Complement?

Abstract

Food price volatility broadly impacts the country’s food security. Rice price stabilization in Indonesia is carried out by BULOG, the food state-owned enterprise (SOE) that the WTO has identified as Indonesia’s state trading enterprise (STE). This study was conducted to evaluate the price stabilization program in Indonesia by reviewing the efforts that have been made and analyzing the factors that influence the price of rice at the consumer level using Autoregressive Distributed Lag (ARDL) analysis. The analysis showed that BULOG’s market share affected consumer-level rice prices with a negative coefficient sign, which means that the larger BULOG’s market share, the lower the price of rice will be. Other variables that affect the price of rice at the consumer level are the price of rice itself at the previous time lag, the producer-level paddy price, rice production, rice consumption, and BULOG’s operational rice stock. On the basis of the results of these studies, to realize the stabilization of rice prices in Indonesia, the government can complement stock management through a public policy approach with market-approach-based policies by optimizing the role of Food SOEs as market players in the rice industry.