Government Support to Boost Rice Production and Improving Credit Availability to Drive Growth in Indonesia Agricultural Equipment Market: Ken Research



Agricultural tractors are the most durable agricultural machinery. An agricultural tractor in Indonesia can efficiently perform up to 10-15 years on an average. In many cases, the owners could only operate the tractor in a limited radius due to fragmented fields and inadequate access to users’ fields due to consequence of poor infrastructure conditions. As tractor annual use increases, the repair and variable costs per hectare tend to slightly decrease. Hence many farm owners focus on maintaining the tractors to increase its life
The Indonesian Economist Association (ISEI) and Indonesia Chamber of Commerce and Industry have laid down a new scheme PISAgro, which stands for Partnership for Indonesia’s Sustainable Agriculture. The scheme has been devised to create more effective associations between institutions and small farmers in order to optimize production methods and overcome issues of insufficient access to high quality seeds and fertilizers. Moreover, in 2014, the agricultural tools and machineries support was formed as a grant and was given to farmer groups/farmer associations/UPJA in the form of hand tractors, water pumps, transplanters, choppers and cultivators.
Farms under food crops on the other hand are owned by farmers and cooperatives. Majority of agricultural land under food crop is owned by small farmers due to which 56% of farms are below or equal to 0.5 hectares. The current situation has been changing with the consolidation of farm land by cooperatives and contractors. Indonesia has been experimenting with new machines in specific pilot areas both on operational capabilities and testing procedures. To promote agricultural mechanization, the Ministry of Agriculture (MOA) formulated a strategy called “Custom Hiring for Rental Services of Agricultural Machinery (CHRSAM) in 1998.As a result of a strong governmental support, Indonesia has more than 12,000 institutions that support the rice production by custom hiring. The number of agricultural machinery increased very slowly with utilization under 35% of its optimum capacity. This raises the demand for custom hiring in Indonesia because the usage of agricultural machinery goes underutilized in Indonesia, leading to losses to the farmers.
There are other rental hiring methods as well which are popular in Indonesia such as Farmers owning agricultural machinery also receive contracts for hiring from neighboring farmers. The contractual work between tractor owner and hiring farmer is made directly and agreed on in advance at the beginning of the season

“According to Research Analyst at Ken Research, there are multiple agricultural events which are organized in Indonesia that allows farm equipment manufacturers to display their products in the market. These events offers a great opportunity to build a business to network with both the local and the overseas palm oil industry and other related industries right on the spot. Moreover, the farmers in Indonesia have lower credit worthiness due to limited farm income, which refrain them to purchase farm machinery. In lieu to this, the farm equipment companies should instigate separate leasing department that can provide farm machinery to the farmers with limited finance”
The report titled “Indonesia Agricultural Machinery Market Outlook to 2020” provides an inclusive analysis of the Agricultural Equipment Market in Indonesia and will help a reader to identify the ongoing trends in the industry and anticipated growth in future depending upon changing industry dynamics in coming years. The report will help industry consultants, agricultural equipment manufacturers, dealers, retail chains, potential entrants and other stakeholders to align their market centric strategies according to ongoing and expected trends in the future.


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