Internal Efficiency and Competitiveness of Maize Farming in Indonesia: Evidence from Batang Regency Using the Policy Analysis Matrix

Abstract

Maize is vital in Indonesia’s agricultural economy, serving as a staple food and the primary component of livestock feed. Rising demand from Indonesia’s livestock industry has intensified pressure on domestic maize production, raising concerns about farm-level competitiveness and the effectiveness of existing support policies. Despite the strategic role of maize in Indonesia, empirical evidence on internal efficiency and policy distortions at the farm level remains limited. This study contributes to the literature by providing farm-level evidence on the interaction between competitiveness and policy distortions in a representative maize-producing region of Indonesia. This study evaluates the competitiveness, comparative advantage, and policy effects of maize farming using the Policy Analysis Matrix (PAM) framework. Batang Regency, a representative maize-producing area in Central Java, was selected as the study area. Data from 217 farmers were analyzed to assess profitability, comparative advantage, and policy effects. The results show that maize farming generated positive private and social profits, indicating both financial viability and economic efficiency. A DRCR of 0.72 and an SBCR of 1.17 confirm the comparative advantage of maize farming and the efficient use of domestic resources. Policy indicators suggest mixed impacts: NPCI of 0.23 (<1) enhances profitability, while NPCO of 0.87 (<1) reduces farmers’ revenues. The EPC of 1.43 (>1) indicates net government protection, however, farmers remain highly dependent on input subsidies. These findings suggest that enhancing farm productivity and reducing market distortions would provide a more sustainable pathway for improving the long-term competitiveness of Indonesia’s maize sector than continued reliance on input subsidies.