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Abstract: This paper describes the benefits and costs of managing food price instability in the context of promoting economic growth and poverty reduction in order to improve food security. Some key costs of stabilizing domestic food prices include disruption of international markets, crowding out of private traders if government procurement is too large or destabilizes expectations, and large financial costs if the gap between domestic and world prices is too large, although a well-run program need not incur most of those costs. In poor countries, stable staple food prices help prevent poor farmers and consumers from falling into poverty traps, promote farm-level investment, and encourage investment throughout the economy by reducing the “noise” in prices of other goods and by promoting social and political stability. Because of these benefits, domestic rice price stabilization has been an integral part of the development vision in Asia. [Copyright &y& Elsevier]

The article focuses on the special issue of rice policy in Indonesia. Rice is the primary and significant commodity in the country wherein 220 million of Indonesian consumed it. It also described as the most important part of the rural economy. Rice policy discusses several important issues including the major impact of high rice prices to the public, the production stability of rice over the next few years and the issue of the importation of Indonesian rice. The implication of rice policy are identified in five aspects such as selection between self-sufficiency and poverty reduction, revitalization in agriculture through in "crop-neutral" approach, automation and based on prices in rice price stabilization. The primary goal of the rice policy is to improve the economy of the country.

Indonesian rice production grew rapidly between 1977 and 1982, but the self-sufficiency achieved in 1984 was short-lived. Growth declined gradually from about 1982, eventually stabilising at a low rate in the late 1990s. This paper discusses factors that have influenced these outcomes over the last five decades, in an attempt to inform policy makers interested in trying to restore self-sufficiency. The earlier experience showed that self-sufficiency was technically feasible, but also that its achievement was costly, both fiscally and in economic opportunities forgone. Little appears to have changed in this regard, and recent attempts to shift this cost to consumers by raising rice prices have increased poverty. We show that increases in rice production could best be achieved by rehabilitating irrigation infrastructure and revitalising research and extension activities. However, large investments by the government in rice should not be undertaken in the absence of thorough economic cost-benefit analysis. [ABSTRACT FROM AUTHOR]

The present paper describes the benefits and costs, in qualitative terms, of managing food price instability in Asia in the context of promoting economic growth and poverty reduction to improve food security. The experience of Asian governments in actual practice with price stabilization is discussed in the context of managing an efficient transition to market-mediated food security. Recent experience in Indonesia, where a sharp increase in rice prices (caused by a ban on rice imports) pushed 4 million people into poverty, provides continued motivation for the analytical story in this paper. [ABSTRACT FROM AUTHOR]