Pierre van der Eng – Australian National University

In Brief

Indonesian President Prabowo Subianto has raised concerns about economic practices in which greedy traders prioritise profit over social interests, but has not yet specified concrete measures to address these issues. Past famines and corruption scandals have proven the inefficacy of Prabowo’s proposed state control over rice distribution, yet other strategies, such as lifting restrictions on rice imports, do not align with the government’s policy rhetoric.

In a speech given at the launch of the a new village cooperatives scheme on 21 July 2025, Indonesian President Prabowo Subianto promise to combat what he labels ‘greednomics’. His main concern was reports of rice traders in Indonesia buying low quality paddy, rough rice grain, at below-market prices to then sell milled rice dishonestly as premium quality rice, disenfranchising farmers and consumers. More broadly, Prabowo took issue with economic practices in which greedy traders prioritise profit at the expense of social interests.

Ad-libbing on how to resolve such fraudulent practices in rice distribution, Prabowo pointed to Article 33 of Indonesia’s Constitution, which mandates state control over important sectors of production and natural resources. But, except for a threat to ‘confiscate the rice mills and hand them over to cooperatives’, his speech was devoid of concrete proposals.

Speculation was rife in Indonesia as to whether this was an off-the-cuff comment without practical consequences or the start of a broader campaign to liberate Indonesia from the scourge of ‘greednomics’. So far, Prabowo has broadened his rhetoric against ‘greedy businessmen’, but has not yet specified concrete measures.

Focusing on fraudulent practices in rice distribution, Prabowo’s concerns about disenfranchised farmers and consumers are the latest iteration of an almost 90-year sequence of government attempts to control Indonesia’s rice market. Past governments’ justifications included arguments that middlemen exploit rice farmers and consumers. Jakarta’s solution was to establish rice logistics parastatal organisations to regulate or control the acquisition and milling of paddy and the distribution of milled rice, operating through village authorities or farmer cooperatives. Their stated aim was to guarantee fair prices to farmers and consumers and eradicate excessive greed of middlemen.

Indonesia has very mixed historical experiences with such parastatals. They contributed to the causes of disastrous famines in 1944–45 and 1964–65. In both instances, accelerating inflation eroded official purchase prices, after which administrative and military forces colluded to force farmers to surrender quotas of rice. Rice was siphoned off to black markets, fuelling illicit riches. Eroded purchase prices led farmers to decrease surplus rice production.

Things seemed to change with the establishment of the state food logistics agency Bulog in 1967. Increasing oil revenues allowed government subsidies that guaranteed farmers higher paddy prices, contributing to the success of Indonesia’s Green Revolution. But Bulog soon became a cesspool of greed. In 1968, Prabowo’s father, then minister of trade and industry Sumitro Djojohadikusumo, vowed to abolish it. But he failed — Bulog received a monopoly on rice distribution and became an ingrained feature of Suharto’s presidency.

Corruption scandals surrounded Bulog until it was stripped of its monopoly powers in 2003 following Suharto’s resignation. But a degree of control remained in the form of the government licensing of rice imports. Indonesian rice prices steadily exceeded prices in Thailand and Vietnam, major rice exporting countries. Anyone who could persuade the Indonesian Ministry of Trade of impending rice shortages to secure a licence to import rice gained a licence to print money. Several rice import scandals followed.

Indonesia already has extensive experience with efforts to control the perceived greed of middlemen. The previous, ineffective solutions are what Prabowo has again implicitly proposed — state control over rice distribution. In the past, each solution nurtured new rent-seeking opportunities. Will a Bulog 3.0 be any different?

Prabowo noted that the manipulation of rice distribution had caused ‘losses’ of 100 trillion rupiah (US$6 billion) annually in the form of unrealised revenues from taxing rice millers and traders. The implication was that resolving ‘greednomics’ in rice distribution would boost tax revenues by this amount. Eradicating ‘greednomics’ in rice distribution may lead to fair prices for farmers and consumers and more regular profits for rice millers and traders, but taxing those regular profits will not generate the same amount as the untaxed ‘greednomics’ profits of millers and traders.

Taking control of rice distribution would also come at a time when Indonesia’s rice is considerably more expensive than rice that can be imported from mainland Southeast Asia. At the same time, per capita production and consumption of rice is decreasing, not just because rice farmers are disincentivised by greedy middlemen, but because demand continues to shift to other food products.

The easy solution to ‘greednomics’ in rice distribution would be to lift restrictions on rice imports. Lower domestic rice prices will benefit consumers. Lower rice profitability will drive the greediest middlemen out of rice distribution and encourage rice farmers to diversify to farm products with higher value added and growing demand.

But such deregulation may not sit well with the policy rhetoric that Indonesia should have ‘food security’, even though Indonesia is importing record amounts of non-rice staples such as wheat and soybeans. Nor would it sit well with Prabowo’s strict reading of Article 33 in the Constitution that state control should take charge of securing social welfare for Indonesia’s people.

Pierre van der Eng is Associate Professor at the Research School of Management, The Australian National University.

Published Date: September 26, 2025