An Empirical Evaluation of Policy Options for Increasing Dairy Production in Indonesia: A System Dynamics Approach

Abstract

Domestic dairy production in Indonesia grows slower than consumption, resulting in an excess demand that imports must fulfill.  Accelerating dairy production can no longer be solved partially; a holistic system approach is required.  This study aims to empirically evaluate the policy options for accelerating dairy production in Indonesia.  The data used in this study were secondary data from Badan Pusat Statistik, the Ministry of Agriculture, the Ministry of Trade, the Ministry of Industry, the Coordinating Ministry for Economic Affairs, the Ministry of Cooperatives and SMEs, Bank Indonesia, and FAO.  A system dynamics approach was used to construct the model and describe the short-, medium-, and long-term impacts based on policy scenario options.  The empirical results showed that the calf rearing program policy, increased female dairy cattle imports, higher conception rates, and import tariffs all positively impacted the share of domestic dairy production to dairy demand.  On the other hand, a policy of increasing dairy consumption, if not accompanied by an increase in domestic dairy production, harms the domestic dairy production share.  Except for the policy of increasing dairy consumption, all policy scenarios increased the long-term share of domestic dairy production more than the short- and medium-term.  It is concluded that an optimistic policy through calf rearing, increased import of female cows, conception rate, and maintaining import tariffs was the best policy with the highest impact on increasing the share of domestic dairy production compared to pessimistic and moderate policies.