Introduction

Agriculture and food production are critical to Indonesia’s economy. Between 2018 and 2023, the agriculture, forestry, and fisheries sector contributed 13 percent to the country’s total GDP, and the food and beverage manufacturing industry contributed 6.5 percent (BPS 2024a; BPS 2024b). The agricultural sector employed up to 30 percent of Indonesia’s productive workforce, employing about 50.2 million workers in 2023 (BPS 2024c), 56 percent of them women (FAO 2019a).

The sectors also hurt both the economy and the well-being of the Indonesian people, in various ways. Indonesia is experiencing both undernutrition and obesity. In 2022, a national nutritional survey reported that 21.6 percent of children under five suffered from stunting (Kemenkes 2022)—well above the 2024 target, set in the National Medium-Term Development Plan 2020–2024, of 14 percent. The prevalence of obesity among adults also increased, rising from 10.5 percent in 2007 to 23.4 percent in 2024 (Kemenkes 2023). Both undernutrition and obesity are signs of malnutrition and co-exist in areas of rural transition, as a result of changes in the availability of traditional and wild food, market access, and women’s use of time (Purwestri et al. 2019).

The agriculture and food production sectors also contribute to deforestation, rapid land use change, uncontrollable peat fires, loss of biodiversity, and water and air pollution. The World Bank (2016) estimates the total cost of land and forest fires in Indonesia in 2015 at $16.1 billion (1.9 percent of 2015 GDP). Kiely et al. (2021) provide a higher estimate, of $28.0 billion (3.3 percent of 2015 GDP).

In 2020, the government articulated a low-carbon development agenda in its National Medium-Term Development Plan (2020–2024), which included measures to improve food systems and land-use management in Indonesia. However, the proposed policy reforms have so far fallen short.

Key Findings

  • The hidden costs of Indonesia’s food system are estimated at $210.7–$622.3 billion—28.5–45.4 percent of Indonesia’s GDP in 2023 (we provide a range to incorporate uncertainty). Even the lower value of 28.5 percent of GDP suggests an alarming health, environmental, and social impact of the food system. The largest cost categories are air pollution, obesity, undernutrition, water scarcity, greenhouse gas emissions, and food loss and waste.
  • Understanding these hidden costs is essential to transforming Indonesia’s food system. This paper emphasizes the importance of incorporating comprehensive costs, including societal losses from health, environmental, and social problems that are the result of food production and consumption and land use practices but are not reflected in the market prices of the sector and therefore require policy reforms.
  • Understanding these hidden costs is critical to informing policy decisions aimed at mitigating the impacts of the food system and reducing unintended consequences as a result of intervention. Health costs contribute the most, but environmental and social costs are also significant. For example, food choices are shaped by land-use change, particularly in rural transition areas, where shifts in land use affect food availability, access to markets, and women’s time use—all of which influence household food choices (Purwestri et al 2019).
  • Estimating the cost of the food system is difficult, because of data limitations and uncertainties in cost calculation methods. There is also the problem of setting boundaries on what a food system encompasses. Similar problems are cited by global studies, including the State of Food and Agriculture 2023 flagship report by the Food and Agriculture Organization of the United Nations (FAO 2023b) and The Global Consultation Report by the Food and Land Use Coalition (FOLU 2019).