The Indonesian Coffee Industry

Abstract

The purpose of this paper is to outline the salient features of the Indonesian coffee industry, and to examine the economics of smallholder coffee production on Sumatra and the other Outer Islands. The evidence presented demonstrates that the return to smallholder coffee production on these islands, both real and relative, has been very favourable throughout the last twenty-five years and it is suggested that significant economic rents are accruing to smallholders. The paper argues that it is the availability of these economic rents which stimulates the growth of coffee output. The conclusion is that coffee exports are a promising source of foreign exchange for Indonesia, and that in the light of the recent rise in coffee prices on world markets and suspension of ICO quotas, Indonesia should embark upon a vigorous promotion and extension campaign.

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Notes on contributors

Robert McStocker

Most of the background work for this article was done while the author was a postgraduate student at the School of Oriental and African Studies, University of London.