In this edition of the SMERU Newsletter, we focus our attention on rural issues and the agricultural sector. Even though the numbers have been declining, around 60% of Indonesia’s people still live in rural areas, and the agricultural sector still provides the main source of income for around 45% of the population. In terms of the incidence of poverty, the role of rural areas and the agricultural sector is even more significant, since around 75% of the poor live in rural areas, and around 60% of the poor make theirliving from agriculture. Hence, no poverty reduction effort in this country will be successful unless adequate attention is given to rural areas and to the agricultural sector in particular.

The implementation of regional autonomy, which began early this year, will have an impact on the agricultural sector, specifically on food security for the poor and those vulnerable sections of society. In the past, food security policies were primarily the responsibility of the central government with minimum involvement of local government. Regional autonomy policy creates the opportunity for local governments to determine their own food security policy. This issue is one of the areas of focus of this newsletter.

Many have argued that one of the major obstacles to the development of the agricultural sector is the lack of credit. During April 2001, SMERU’s field researchers visited several rice-growing centers to investigate the availability of credit for farmers in these areas. We summarize the findings of this study in the From the Field column. Meanwhile, SMERU’s Quantitative Analysis Division has recently completed a study of poverty dynamics at the household level, based on a panel database derived from four rounds of the “100 Village Survey” conducted by BPS in 1998 and 1999. We present the central findings of this study in the And the Data Says column.