Food is a highly interesting issue to discuss, as it often has many interconnections and can be viewed from various perspectives, including political, economic, social, and cultural aspects. Given the large portion of household income spent on food consumption, an increase in food prices at the community level can have a significant impact not only on the less fortunate but also on the government's efforts to maintain economic stability and, ultimately, achieve food security.
According to data from the Global Food Security Index (GFSI) released by The Economist Intelligence Unit in 2014, Indonesia ranked 72nd, placing it in the category of somewhat weak food security. As a country with a population approaching that of the United States, Indonesia should ideally have food reserves similar to those of the United States, which ranks first. Furthermore, considering Indonesia’s location in a disaster-prone region, this situation presents considerable risks.
The government has taken several strategic steps to address and anticipate key food-related issues. On the supply side, these include challenges such as production surpluses during harvest seasons and deficits during lean periods, financing difficulties in food production where bank credit is difficult for farmers to access, and infrastructure and distribution constraints. On the demand side, issues include increasing income disparities, growing diversity in demand, and highly fluctuating prices.
To implement effective macroeconomic policies, support from policies across various related sectors, including food and trade, is essential. The Warehouse Receipt System (SRG) was introduced as an innovation to address these challenges. The implementation of SRG in various countries has proven to impact not only food-related issues but also economic strengthening and stability.
Therefore, achieving food security must be a shared responsibility between the government and the private sector, involving various sectors from upstream, where agricultural cultivation takes place, to downstream, where agricultural food commodities are stored and distributed to various regions. Here, a scheme is needed that can serve as both a logistics and distribution instrument while also empowering farmers as producers who are often marginalized. Farmers, as the primary producers of food commodities, must continue to have the motivation and resources to produce agricultural commodities—especially food crops—on a scale that meets both quantity and quality standards for domestic needs, thereby achieving food self-sufficiency. Moreover, the food products generated must have added value to compete in regional and global markets.
The government is keen to develop the Warehouse Receipt System at the regional level, as fluctuations in food commodity prices significantly contribute to regional inflation rates, which in turn influence the national inflation rate. The nationwide implementation of SRG can help the government control the availability and smooth distribution of food commodities, thus reducing inflation levels.
On the other hand, trade within ASEAN countries has become increasingly open since the establishment of the ASEAN Economic Community in December 2015. This requires Indonesia to prepare for the rising volume of goods and services transactions in Southeast Asia. This situation is not only a challenge but also an opportunity to accelerate Indonesia’s economic growth. Therefore, improving the quality of domestic products and commodities must continue through the creation of a trade financing instrument that can be easily accessed by business actors, both SMEs and manufacturers, to enhance cash flow. This ensures that they can continue to add value to their products even with limited capital. The Warehouse Receipt System has also proven to be an effective solution to address these challenges.
It should be noted that through Law No. 9 of 2006 on the Warehouse Receipt System, as amended by Law No. 9 of 2011, Indonesia has introduced a new trade and financial instrument that provides options for farmers, SMEs, and other business actors to obtain financing from financial institutions using only warehouse receipts as collateral. SRG repositions agricultural commodities as valuable economic assets that can be used as collateral for financing from financial institutions without requiring other guarantees, such as fixed assets (land, houses, motor vehicles, etc.).
This instrument represents the government’s commitment to empowering farmers and SMEs who often have weak bargaining positions and limited options beyond selling their produce at harvest time when prices are typically at their lowest. In many cases, farmers even sell their crops before harvest.
It is important to emphasize that SRG plays a role beyond simply delaying sales and providing financing. SRG helps stabilize prices, shortens the long supply chain of traders, and ensures that quality standards are met. Through SRG, the availability of quality food commodities at affordable prices for consumers and fair profits for farmers can be achieved, while managing both oversupply and commodity deficits effectively. Additionally, with the SRG Information System, data availability and stock distribution become accurate and reliable. This system enables the government to make informed policy decisions regarding food distribution and supply across regions to establish national food sovereignty.
Since its launch in 2008, the Warehouse Receipt System has continued to grow. Initially implemented in Indramayu and Jombang, its reach has expanded to 72 districts/cities across 20 provinces. As of May 31, 2016, a total of 2,287 warehouse receipts had been issued, covering a volume of 84,987.5 tons, consisting of 70,815 tons of paddy, 7,361 tons of rice, 5,589 tons of corn, 631 tons of coffee, 3.14 tons of cocoa, 555 tons of seaweed, and 31 tons of rattan. The total value of issued receipts reached IDR 474.8 billion. However, given the large volume of national agricultural harvests, the quantity of commodities stored in SRG warehouses still needs to increase to serve as a benchmark for the government in calculating national food stocks.
As a financing instrument, the Warehouse Receipt System has provided tangible benefits to business actors, especially farmers, farmer groups, cooperatives, and agribusinesses, through the Subsidized Warehouse Receipt Scheme (S-SRG) with an interest rate of 6% per year or 0.5% per month. Warehouse receipt financing has been carried out by banking institutions such as BRI, Bank BJB, Bank Jatim, Bank Kalsel, Bank Jateng, Bank Lampung, and BPRS Bina Amanah Satria Purwokerto, as well as non-bank financial institutions such as PKBL PT Kliring Berjangka Indonesia (Persero) and the LPDB of the Ministry of Cooperatives and SMEs. As of May 31, 2016, the total financing provided amounted to IDR 281.6 billion, averaging 70% of the pledged warehouse receipt value.
As a system with highly strategic roles and functions, the implementation of SRG has not been without challenges. The most critical challenge is maintaining the integrity of SRG in the eyes of the public, business actors, and financial institutions. The absence of a comprehensive guarantee mechanism covering all potential losses in SRG implementation poses a major obstacle to creating a conducive and competitive business environment. To address this challenge and demonstrate the government’s commitment to maintaining SRG integrity, regulations have been introduced to ensure legal certainty, protect stakeholders, and foster a healthy business climate, ultimately creating a system that is trusted by both SRG participants and financial institutions.
These regulations are outlined in Government Regulation No. 1 of 2016 concerning the SRG Guarantee Implementing Agency, which designates Perum Jamkrindo as the implementing agency responsible for managing the Guarantee Fund. This fund protects commodity owners and financing institutions from risks arising from non-compliance or the inability of warehouse operators to fulfill their obligations in maintaining the quality and quantity of stored goods as stated in the warehouse receipt.
Looking ahead, we hope that with the establishment of the SRG Guarantee Implementing Agency, farmers and other business actors will feel more confident and secure in utilizing SRG, while financial institutions will no longer hesitate to provide SRG financing, thereby driving regional economic growth with a national impact.
We invite all parties, including farmers, SMEs, traders, manufacturers, exporters, state-owned enterprises, financial institutions, insurance companies, associations, academics, and both central and local governments, to collaborate optimally in making SRG a working capital instrument for farmers and SMEs, an investment tool, a facilitator of export and import transactions, a legal instrument in trade transactions, and an integral part of the National Food Policy.
A shared understanding of SRG policy and implementation must always be pursued. One effective approach is through outreach efforts to relevant stakeholders, ensuring that each party understands and participates in SRG implementation in accordance with their respective roles and responsibilities. This outreach is a valuable step toward a comprehensive understanding of SRG.
Finally, we extend our appreciation to all parties who continue to support the government in implementing an integrity-driven SRG. The government remains open to cooperation with any party that shares the goal of improving societal welfare.
Source:
Menteri Perdagangan Thomas Trikasih Lembong
(Delivered at the event of Socialization of People's Business Credit Guarantee, Warehouse Receipt System, and Microfinance Institutions with the theme "Increasing Trust in Warehouse Receipt System Through Guarantee Institutions" held by Perum Jamkrindo in Medan, June 16, 2016)