Stakeholder Analysis Case Study: The Indonesia Rice Tariff PSIA

This PSIA conducted prior analysis of the poverty impacts of an increase in rice tariffs in
Indonesia (Leith and others 2003). The context for the policy reform was broadly characterized
by two opposing arguments:
• Supporters of a high rice tariff policy argued that higher prices were associated with higher
incomes for farmers and rural workers; and
• Supporters of rice tariff abolition argued that poor people are net rice consumers, who will
suffer due to high rice prices.

In the Indonesia PSIA, computable general equilibrium (CGE) modeling provided the economic
evidence for policy making. To assess the poverty effects of the proposed policy, the model
focused on short-run and medium-run effects of the proposed tariff increase across the
economy using 10 categories of consumers and producers of rice.

However, in the highly political environment in Indonesia in 2002, with its fragile democracy,
evidence was often not the primary factor in government decision making. In addition to the
economic evidence, a matrix of key stakeholders was created to identify their policy positions,
why those position were held, sets of interests that those positions represented, and the degree
of influence over the decisions (see table). This matrix helped to identify natural coalitions with
similar perspectives, as well as the most powerful and influential interest groups, and to create a
clearer, more transparent policy environment at a time when many people spoke out with
contradictory views.

The matrix was generated done through content analysis of published policy statements (official
documents, newspapers, secondary data studies, and other data sources), key informant
interviews, and focus group discussions. This information was triangulated and cross-checked
during focus group discussions, using flip charts and draft matrices.

The key players identified in the first column (in this case) were government departments,
influential government officials, external donors (such as USAID and the World Bank),
academics, influential policy advocates, citizen’s groups, and NGOs. The top row categorized
the policy position of each key player (by the explicit and implicit objectives of the position),
followed by the rationale of the position held. The next columns on the matrix identified the
benefits and constraints of the position held in the short-, medium-, and long-terms. The
following columns listed how the policy position would be implemented, sets of interest or beliefs
the position represented, and finally, the degree of influence of the policy actor.

The matrix was able to show how the pro-tariff and anti-tariff positions were not as polarized as
many believed by explaining the rationale behind the positions, which helped to identify room for
maneuver. The informal policy objectives, sets of beliefs, and the official rationale for the
position helped to provide insight into why agencies, institutions, and individuals held certain
positions, in addition to identifying their vested interests. Unexpectedly, many NGO positions
were shown to be very similar to positions held by large landowners who would benefit from a
protectionist environment of high tariffs and higher costs for imported rice, making rice in fact
more expensive. Finally, the transparency that resulted from the matrix meant that institutions
and individuals could be held accountable for their positions.

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Table: Key Actors Policy Interest Matrix, Indonesia Rice Tariff PSIA
Key players Policy objective Argument Benefits Constraints Transmission Interests Degree of
rationale channel influence

Explicit Inform Short- Medium- Long-term Short-term Medium-

al term term term
Bulog ((the high tariff, source protect local stable rice increase rice self- don’t have tariff less high pricemeans source of high, linked to
state regulate of farmers market, production sufficiency, control of binding, higher wages for income ruling party fund
commoditie imports finance from import domestic increase control of rice policy, creation of labor, benefit to raising
s logistical dumping productio farmers’ economy smuggling black market farmers
agency)) n profitability
Ministry of high tariff, it is higher maintain more rice none stated, political, high (less than
Agriculture encourage their returns to high availability unsure if it high tariff, local Bulog)
domestic job, rice farmers income of would rice prod.
prod. of perform farmers encourage
rice, based high wages
self- on agri.
sufficiency prod.
Bappenas/ no tariff, none, Java should low price stable efficient sustainabilit low price for rice Pro free market, high, but
DAI to maintain DAI diversify out benefits economy, resource y of allied with intl. declining
(consultant low rice represen of rice poor food allocation diversity community and
s) prices ts available removes World Bank
US distortion,
interests farmers will
? plant high-
yield crop
Ministry of no tariff, no Not having increase flexibility to better farmers will shortage of prices and wages stabilized, lower Ministry of
Finance & to maintain a rice tariff purchase plant high- resource suffer in rice, no self- price of basic Economy high,
Ministry of low rice will help power price crops, allocation short term, sufficiency needs Finance high but
Economy prices poor people less employment less so, lower than
dependent problems Bulog
on govt.

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Key players Policy objective Argument Benefits Constraints Transmission Interests Degree of
rationale channel influence

Explicit Informal Short- Medium- Long-term Short-term Medium-

term term term
Ministry of no tariff, lower efficient low price macro no power to low price for rice industry/ prices, medium (less than
Trade and more open direct/ resource eases economic enforce clean govt. Ministry of
Industry trade indirect allocation pressure benefit Agriculture) and
costs to on wage declining
indust., demands
less
politics

Ministry Contradict none low food low price less burden on high (more than
for Peoples ory price for benefits them! Bappenas; some
Welfare statements poor poor say no influence
and on tariff setting
Poverty
Alleviation]
Poverty high tariff none protect agri. higher high price rise increase maybe political no (has no allies)
Reduction prod., rural wage productivity wages ambition?
Coordinati increase lowers in agricultural
on Board productivity poverty sector
before
industrialize
Ikhsan low tariff economic high price low price increased academic based medium (some
(Univeristy principles bad for poor helps poor consumptio on theory and access to key
Researcher) who are net n data ministries and
rice media
consumers
USAID, no tariff trade increase cheap stabilize market not policy like Bappenas free trade high (can block),
World liberalizati welfare of price price efficiency, makers usually informal
Bank, on world, helps poor better
IMF, ADB high price resource
leads to allocation
black
market
Producers, high tariff business higher benefit higher not part of high pricemeans low but vocal
NGOs interest prices farmers productivity government higher wages for
protects labor, benefit to
farmers farmers

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Key players Policy objective Argument Benefits Constraints Transmission Interests Degree of
rationale channel influence

Explicit Informal Short- Medium- Long-term Short-term Medium-

term term term
Governor ban populist protect greater higher expansion of not blockages at election 2004 access to media
of East imports rent farmer sales of incomes for rice enforceable ports, customs and politicians
Java seeking interests domestic farmers production
rice

Source: Adapted from Tools for Institutional, Political and Social Analysis of Policy Reform: A Sourcebook for Development Practitioners (Conference Edition) (2007) The World Bank, Washington, DC.
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