GLOBAL MARKETS, FARMERS AND THE STATE: SUSTAINING PROFITS IN THE INDONESIAN COCOA SECTOR

Abstract

The rapid expansion of cocoa farming among Sulawesi smallholders since 1980 has transformed the island into a hub within the global cocoa industry. It hosts a number of multinational trading firms and has an expanding grinding sector. In recent years, however, the cocoa sector has been struck by severe pest, disease and quality problems, which are undermining the long-term sustainability of one of Eastern Indonesia's most important rural industries. Some form of intervention is needed if the cocoa industry is to avoid steady decline. This paper examines the role of informal institutions, cocoa multinationals and government in attempts to maintain farm profits in Sulawesi.

Notes

¹This levy is currently set at Rp 30 per kilogram of cocoa beans exported, implying an annual income for Askindo in 2005 of approximately $1.2 million.

²The slightly derogatory designation ‘tengkulak’ refers to collectors using interlocked markets (through credit provision) to ensure an exclusive supply relationship with small farmers. Unlike most banks, the tengkulak accepts cocoa pods on the tree as collateral against a loan. Tengkulak are often tied to the farmers by social and family relationships as well as economic ones.

³<http://www.worldcocoafoundation.org>.

⁴ACRI merged with the WCF in 2000.

⁵<http://www.acdivoca.org>.

⁶A stronger research emphasis is needed on farmer decision-making models and institutional arrangements in Sulawesi, to generate greater insights into the determinants of technological adoption.

⁷Details are available at <http://www.worldcocoafoundation.org>.

⁸News reports in 2006 (Jakarta Post, 15/2/2006; 24/2/2006) suggest, however, that the Minister of Trade has approved the removal of the VAT from cocoa processing.

⁹Warehouse receipts are ‘documents issued by warehouse operators as evidence that specified commodities of stated quantity and quality have been deposited at particular locations by named depositors’ (Coulter and Onumah 2002: 323).

Additional information

Notes on contributors

Jeff Neilson∗

The author undertook fieldwork with support from an Australian Research Council (ARC) project, ‘Traceability as a Mode of Ordering: Implications for Developing Countries’ Agriculture’, and through two consultancies performed for the IFC–PENSA (International Finance Corporation – Program for Eastern Indonesia Small and Medium Enterprise Assistance) Agricultural Linkages Program (cocoa activity) in Makassar