Research Report Needs Assesment of Cocoa Business Development Using the Value Chain Approach & National Movement of Cocoa Pr

Research Report

Needs Assesment of Cocoa Business Development Using The Value Chain Approach & National Movement of Cocoa Production and Quality Improvement (GERNAS KAKAO)

Case study on Sikka Regency, East Nusa Tenggara RESEARCH REPORT

Needs Assesment of Cocoa Business Development Using The Value Chain Approach

IN COOPERATION:

FORD FOUNDATION and Regional Autonomy Watch

Jakarta 2013 Research Team KPPOD:

Ig. Sigit Murwito Sri Mulyati

2013

Komite Pemantauan Pelaksanaan Otonomi Daerah Regional Autonomy Watch

Permata Kuningan Building Fl.10th Kuningan Mulia Street Kav. 9C Guntur Setiabudi, South Jakarta 12980 Phone: +62 21 8378 0642/53, Fax.: +62 21 8378 0643 LIST OF CONTENTS

List of Contents ...... i List of Figure and Table ...... ii

I. Introduction ...... 1 1.1. Background ...... 1 1.2. Formulation of Problem ...... 2 1.3. Study Objectives ...... 2 1.4. Study Benefi ts ...... 2 II. Terms of Thought ...... 2 III. Methodology of The Study ...... 3 3.1. Study Approach ...... 3 3.2. Location and Time of Study ...... 3 3.3. Types and Sources of Data ...... 3 3.4. Method of Data Collection and Selection of Respondents ...... 3 3.5. Method of Analysis ...... 4 IV. Potential, Obstacles, and Opportunities of Cocoa Development in Sikka ...... 4 4.1. Background of Cocoa Farming in Sikka ...... 4 4.2. Problems Faced by Farmers ...... 5 4.3. Identifi cation of Cocoa Development Internal Factors in Sikka ...... 5 4.4. Identifi cation of Cocoa Development Value Chain in Sikka ...... 7 4.5. Regulations Associated with Cocoa Business Activity Value Chain in Sikka ...... 9 4.6. Identifi cation of Cocoa Development External Factors in Sikka ...... 9 4.7. Development Strategy Analysis ...... 14 4.8. Stakeholders and their Role in the Cocoa Value Chain in Sikka ...... 18 V. Closing ...... 24

i LIST OF FIGURE AND TABLE

Figure 1. Agribusiness Systems in Indonesia (Baga, 2003) ...... 2 Figure 2. Study Framework ...... 3 Figure 3. Cocoa Business Value Chain in Sikka Regency ...... 8 Figure 4. Cocoa Farming Stakeholders in Sikka Regency ...... 19

Table 1. Land Area of Cocoa Trees, Production, Productivity, and Number of Households Involved in Cocoa Cultivation in Sikka (2012) ...... 6 Table 2. Matrix of Problems and Action Plan of Cocoa Development Value Chain in Sikka Regency ...... 14 Table 3. Matrix of Cocoa Development Stakeholders Analysis in Sikka Regency ...... 20 Table 4. Matrix of Stakeholders with a Non-Optimal Role ...... 23

ii Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

I. INTRODUCTION

1.1. Background potential, farming is likely to be addressed, both technically and in terms of institutional governance. One approach to agricultural development is through agribusiness activities that are oriented Given the strategic position of the cocoa commodity, to increasing the competitiveness and ongoing a large number of Local Governments (LG) has economic development of the people’s economy, launched the cocoa farming business as a regional conducted within the regional autonomy framework economy powerhouse. But of the many local to strengthen the regional economy. Agricultural governments as drivers of the regional economy, sector development involves various aspects of the not many have concrete programs in cocoa business value chain, both at stages of cultivation, collection, development. It can be said that there is no specifi c trade as well as processing. Thus, in order for the intervention in the form of programs and regulations production of agricultural products to have high to accelerate cocoa agribusiness development in the competitiveness, its implementation should consider regions. Cocoa business activities are left to grow the business aspects of the value chain. alone without signifi cant support from the local government. One of the strategic agricultural products is the cocoa crop. Cocoa (Theobrema cacao L.) is one of the At the central level, there is the National Program for important crops that have historically fi rst become Improvement of Production and Quality of Cocoa known in Indonesia in 1560, but has only become (GERNAS). The purpose of the GERNAS program an important commodity since 1951. Later the is to increase cocoa production, farmer’s income government began to pay att ention to and support the and economic growth in the regions. The GERNAS cocoa industry in 1975, ie aft er the PTP VI managed program also serves as a momentum for the revival to increase production of this crop through the use of of the Indonesian cocoa industry to behighly quality seeds, the Upper Amazon Interclonal Hybrid competitive, sustainable, and to make Indonesia as the (Sunanto, 1992). largest cocoa producer in the world. The government claims that GERNAS has signifi cantly impacted on According to the Food and Agriculture Organization the improvement of cocoa productivity, farmers (FAO), Indonesia is the number three largest income, economic growth, and also the empowerment producer of cocoa in the world with a production of farmers.This requires a further evaluation of the of 809,583 tonnes aft er the Ivory Coast with a implementation of the GERNAS pogram. production of 1,223,150 million tonnes. With such production amount, this commodity contributed KPPOD as an institution that is concerned on eff orts to to foreign exchange earnings of U.S. $ 1.4 billion in improve the regional economy intends to contribute 2009 as the third largest foreign exchange earnings on improving the quality of local policies associated in the plantation sector aft er oil palm and rubber. with cocoa development, as well as to provide During 1998 to 2011, cocoa farming area recorded an input and evaluation of the implementation of the increase by 9% per year. Of the 1,746 million hectares GERNAS program. With the assistance of the FORD of cocoa plantations, 94% is managed by the people, Foundation, KPPOD has designed a program called 3.1% by the government and 2.9 % by private sector “Business Climate Development for Improvement of plantations. (Ditjenbun, 2012) the Cocoa Production Value Chain”. This program is expected to contribute to eff orts of creating a favorable Cocoa is strategic for at least two reasons. First, investment environment for cocoa business activities. because this commodity is an international trade This program is also intended for evaluation and commodity with high value, and Indonesia is the feedback of the implementation of the GERNAS third largest producer of cocoa in the world. Second, program. Given the wide scope of the cocoa value 95% of this business activity involves small farmers chain, this program is more devoted to highlighting with land ownership levels between 0.5 ha - 2 ha. the institutional factors in cocoa cultivation. Thus cocoa business development has directly or indirectly aff ected the economy of the community. The early stages of the implementation of this activity are to conduct research related to cocoa business Although classifi ed as a superior commodity, cocoa development in the region. Research activities have small farming business has several shortcomings been designed as the basis for the implementation of that need to be improved. These shortcomings three other activities (dissemination, advocacy, and are associated with various aspects, ranging from technical assistance to local governments), as well as cultivation, harvest/post-harvest maintenance, aligning the policy of government priority towards processing to marketing. But with the current provinces and regencys. The study has sampled two

1 regions to be assisted, namely Sikka Regency in NTT II. TERMS OF THOUGHT and Majene Regency in West Sulawesi.

1.2. Formulation of Problems In general, the agribusiness system includes sub- systems ranging from supplier production facilities, This study aims to get an idea of business climate agricultural (farming) business, processing to development problems for the improvement of the marketing (Baga, 2003). To support the existence of cocoa production value chain, and to get an overview agribusiness sub-systems, there are needs for research of the GERNAS cocoa program implementation and development support, information, education, results. Specifi cally, the study objectives are as training, counseling, consulting, insurance, and follows: regulation (Figure 1). 1) How is the overview of the cocoa business in the study region? As a source of livelihood for the majority of the 2) How are the problems of every cocoa business people of Sikka, cocoa farming is expected to support value chain in the study region? the economic life in the region. But in reality, cocoa 3) How is the business climate development action business does not give enough benefi ts to the cocoa plan for cocoa business value chain improvement farmers. This is because farmers are lacking strength, in the study region? especially in marketing. In cocoa marketing, farmers’ bargaining position is low so that the benefi ts from 1.3. Study Objectives cocoa farming are less optimized. The low bargaining position is due to several problems, such as disruption The objectives of this study are as follows: from merchant collectors who buy directly from 1) Describe the general picture of cocoa in Sikka farmers, low farmer productivity, and long chain of Regency; cocoa trade. 2) Analyze the problems that occur in any cocoa business value chain in Sikka Regency; To optimize the role of cocoa farmers and improve 3) Analyze the action plan for each problem in each their bargaining position, an analysis of cocoa of the business climate value chain for the future business value chain in Sikka is required. Value chain improvement of cocoa business development is an activity that starts from raw material to aft er value chain in Sikka. sales management. Value chain includes activities that occur because of relationships with suppliers 1.4. Study Benefi ts (Supplier Linkages) and relationships with customers (Customer Linkages). Value chain analysis needs to Results of this study are expected to provide be done to improve and streamline each value chain information about problems and stakeholder analysis of the cocoa business in the region which in turn can in each cocoa value chain in Sikka. Hopefully, the boost the economy of Sikka. results of this study feed into adequate policies to address cocoa problems forthe improvement To support value chain analysis, analysis of of cocoa productivity in Sikka. In addition, this stakeholders is required to describe the role of each study is expected to help identify key points for the stakeholder in any value chain. With the stakeholder implementation of capacity building in the fi eld within analysis, stakeholder roles can be identifi ed which the framework of business climate development for still need improvement in any cocoa value chain. operational improvement of business value chain. Recommendations are expected from this analysis

Figure 1. Agribusiness Systems in Indonesia (Baga, 2003)

Production Agricultural Marketing Facilities (Farming) Processing Business

Fertilizers, pesti- Food crops, hor- Handling, Advertising, pro- cides, machinery, ticulture, planta- processing, motion, negotia- tools, seed/ani- tions, ﬁ sheries, packaging, and tion, and distribu- mal feed trans- husbandry, and portation forestry storage tion

Research and development, information, education, training, counseling, consulting, insurance, and regulation

2 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

Figure 2. Study Framework

Cocoa farming is the main Cocoa is the largest con- Sikka is one of the centers livelihood of the Sikka tributor to the economy of for cocoa production community Sikka

Farmers’ role is less optimal and farmers’ bargaining power is low

Cocoa value chain eﬃ ciency by optimizing stakeholder role and business climate development

Increased welfare of Sikka cocoa farmers

Improved economy of Sikka

to improve stakeholder performance in any cocoa an approach to obtain an inductive interpretation business value chain in Sikka. and understanding of the meaning of the cocoa value chain and business climate development problems as Cocoa agribusiness development policies can be well as interaction among the stakeholders involved. viewed from several aspects related to: (1) potential, For that purpose, the study is typically descriptive: constraints, and opportunities for development; describing and explaining analytically why and how (2) development strategy analysis; and (3) cocoa patt erns of problems have occurred. development policy operational steps. Potential, constraints, and opportunities for development are 3.2. Location and Time of Study identiﬁ ed and analyzed using the SWOT analysis (Strength, Weakness, Opportunity, and Threat). The study was conducted over three months from SWOT analysis begins by identifying Sikka Regency 20 November 2012 until 2 February 2013 in Sikka from the aspects of strengths and weaknesses of Regency. internal factors, as well as opportunities and threats of external factors (Sianipar dan Entang, 2001 in 3.3. Types and Sources of Data Manikmas, 2003). Types of data used in this study are primary data Furthermore, development strategy analysis is and secondary data. Primary data is derived from approached through a matrix on understanding interviews and focus group discussions (FGDs) the key aspects of the problem, source of problem, with cocoa stakeholders in Sikka Regency. Besides roots of the problem, intervention/action plan, in Sikka interviews and focus group discussions and the stakeholders that play a role. Meanwhile, are also conducted with cocoa stakeholders at the development policy operational steps are taken national level. Secondary data is obtained from the within the institutional analysis framework in cocoa Department of Agriculture and Plantations of Sikka farming business development. Regency, Sikka Central Bureau of Statistics, Ministry of Agriculture as well as from other institutions/ agencies. III. METHODOLOGY OF STUDY 3.4. Method of Data Collection and Selection of 3.1. Study Approach Respondents

This study is using the qualitative approach that put Primary data collection in this study is performed in the problem of business climate development and two ways, namely: value chain improvement as a result of interaction 1) Observation, which is a technique of collecting among the stakeholders at every point of the data through direct observation of background value chain, both involved in policy making and and objects of the research. implementation in the ﬁ eld. It is expected with such 2) In-depth interviews, which is a technique in the

3 study conducted through in-depth interviews of 4.1. Background of Cocoa Farming in Sikka selected resource persons or stakeholders in the cocoa business in Sikka and at the national level. In essence, cocoa farming activities include two 3) Focus Group Discussions (FGDs) with cocoa aspects, namely technical and institutional aspects. stakeholders in Sikka Regency, as well as cocoa Technical aspects include: (1) commodities covering stakeholders at the national level. aspects of production, means of production, post- harvest, processing, and marketing; (2) land and The selection of resource persons in this study is water resource use; (3) waste and water management essentially based on purposeful sampling, where and water; and (4) soil and water conservation selection of samples is done based on the type of (Badan LitbangPertanian, 2004b). While in terms information or consideration in existence/previously of institutional aspects, it is expected to improve set and the identifi cation of groups/people who have the performance of agribusiness institutions which certain specifi city (related positions, expertise/expert will further impact on improving the accessibility sampling, and experience in cocoa business). But of farmers to input and output markets, capital and on the ground, as part of purposeful sampling it is superior technology. The improved performance of possible and even encouraged for the development both technical and institutional agribusiness aspects of other categories/resource persons based on the is next expected to impact positively on farming snowballing technique (based on linkage information, yield performance, especially the lives of farmers and recommended names, and so on). rural communities in general in the form of increased employment and income. Starting from this technique, the resource persons interviewed are cocoa stakeholders directly related The farming patt ern in SikkaRegency is relatively to the cocoa value chain in Sikka regency, namely similar to other regions in NTT province especially farmers, wholesalers, village/sub-regency merchant onthe island of Flores, namely implementation collectors, major merchant collectors, production of dryland farming using the integrated system. facilities providers, extension workers and the Cultivated commodities are food crops, plantations Department of Agriculture, Forestry and Plantations and livestock. The implementation of these of Sikka Regency, Bappeda, etc. commodities is adapted to the social, economic and physical conditions of the regions. 3.5 Method of Analysis Land area developed for cultivation in Sikka is In response to the formulation of problems, this study 101,858 ha or 58.81 % of the total land area available. is using the qualitative approach, namely value chain Of the 27,785 ha (16.04%) used for food crops, 1,749 analysis method. Porter (2001) defi nes Value Chain ha is wetland and 26,036 ha is dry land. Horticultural Analysis as a tool to understand the value chain and annual crops can be developed on land that is that forms a product. Value chain is derived from available and can be combined with food crops. activities performed, ranging from raw materials from suppliers to fi nal products to consumers, including Most of the farming system in Sikka is based on aft er-sales service. The goal of value chain analysis is plantation crops such as cocoa, cashew, coconut or to identify the value chain stages in which value chain coff ee and cloves. This system is very diff erent from actors can increase product value for consumers or the farming system in Timor and Sumba which is reduce costs and streamline work. Cost reduction or based on food crops such as rice, corn and beans increase in added value can create a more competitive serving as food security. In Sikka, particularly in business or industry. the cocoa centers, food crops play a very small role and even in many regions farmers do not grow food There are two business activities in value chain analysis crops. Sikka farmers rely heavily on income derived namely primary activities and support activities. from the cocoa crop and they use the proceeds to buy Primary activities are all activities directly related food such as rice or other foodstuff s. to added value from inputs and the transformation to products needed by customers. These activities Cocoa (Theobroma cacao, L) which means “Meal for include: inbound logistics, operations, outbound the Gods” or in Flores is bett er known as cacao is one logistics, services, marketing and sales. Support of the plantation crops for the people. This crop bears activities are all activities which support or enable fruit throughout the year and thus is a source of daily all major activities to function eff ectively. Support or weekly farmers’ income. Cocoa was introduced activities include: infrastructure, human resources, to Flores Island one year aft er the independence of science and technology. Indonesia, and has begun to be known by the people of Sikka since the 1960s. At fi rst cocoa was brought by individual missionaries. At that time cocoa trees were IV. POTENTIAL, OBSTACLES, AND planted around the churches and missionary offi ces, OPPORTUNITIES OF COCOA DEVELOPMENT IN and then grownon farmer lands. It was only in the SIKKA early 80s that the government began to intensively

4 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT promote cocoa. Although loss of revenue from cocoa is caused by pests and diseases, the essence of the main problem is In the early 1970s, in practice cocoa production was old age of trees coupled with serious pest and disease only centered in the sub-regencys of Kewapante and att acks. This problem is widely encountered in all Bola. As further development this crop is developed cocoa producing sub-regencys in Sikka. in almost all sub-regencys in Sikka Regency at an altitude of 500 - 1000 m above sea level. Currently If pests and diseases are left alone this can result in loss as many as 17 sub-regencys of the 21 sub-regencys of 80-100% of farmers’ income derived from cocoa. (except the sub-regencys of Alok, West Alok, and Sikka cocoa production until 2003 reached 14,333.2 Magepanda) produce cocoa, and cocoahas become tonnes with a nominal value of Rp.372,663,200,000. a major plantation crop. Cocoa crop is important Beginning in 2004, cocoa production continued to for Sikka Regency as the major commodity revenue decline to 54% or 7,739.93 tonnes or equivalentt o a contributor for farmers. At least 32,738 farming family GDP loss of Rp.201.2 billion per year. Such GDP loss lifes depend on the cultivation of the cocoa crop. has resulted in decreased multiplier eff ect activitieson the economy of Sikka. Reduction in consumption of 4.2. Problems Faced by Farmers goods and services, decreased production, decline in labor uptake and raw materials, decrease in income The outbreak of pests and diseases to cocoa trees in distribution and ultimately collapse of society. Sikka from 2006 to the present caused a signifi cant change in situation to the livelihood of cocoa farmers. Currently a cocoa farmer with 1 hectare of land can Pest explosion caused by plant pests (OPT) to cocoa only harvest 497 kg per year. Assuming that cocoa trees resulted in low productivity and destroyed price is Rp.17,000.-/kg, farmers’ income only reaches the income source of many families. In addition to Rp.8,449,000.- per year or Rp.704,083.- per month, pest att acks the old age factor of cocoa trees - some before deducting production costs. Such small income are more than 30-45 years old - is also a signifi cant causes diffi culty in meeting basic needs, and means problem for cocoa farmers in Sikka. Old age cocoa that other needs can also not be met. trees are suspected to make this crop vulnerable to pests and diseases as well as decreased productivity. 4.3. Identifi cation of Cocoa Development Internal Factors in Sikka This case has been going on since 2006, and in 2008 was considered the peak explosion in farmers’ income Identifying internal factors include: (1) availability decline (BPTP NTT). The agricultural research and of family labor; (2) acquisition of business land; (3) development (R&D) of NTT province in Maumere acquisition of venture capital; (4) production; (5) claimed that the types of pest/disease that oft en marketing; (6) social institutions; and (7) economic att ack the cocoa crop in the province include: cocoa institutions. From these identifi cation results are fruit borer (Conopomorphacramerella), ladybugs obtained an overview as follows: suction cocoa pods (Helopeltisspp), and rott en fruit disease (Phytophthorapalmivora). The condition of A. Labor/Human Resources pest and disease att acks is complex. Pest and disease is the most notorious problem faced by cocoa farmers Cocoa farmers in Sikkaare as many as 33,278 anywhere including in Sikka. However, technically households (Department of Agriculture: 2011). this problem can be addressed by methods and Cocoa farming can be considered the main source of approaches appropriate to the specifi c conditions of livelihood of the population in Sikka. Therefore, the the region. amount of time made available and the allocation of household labor of local farmers is far greater for The ageingcocoatrees and intercropping planting this farming activity. As an illustration, the average patt erns that paid less att ention to environmental proportion of labor in the family is about 60.23% sanitation in Sikka have also been assessed by of total manpower required for cocoa farming experts as the cause of easy pest att acks. Cocoa trees management. can only survive on a stable temperature between 300C–320C and at a humidity level of about 1100 ml/ The average age of farmers is 45 years. Currently year. When air temperature is unstable and rainfall cocoa business development in Sikka is faced with is irregular, all of this would aff ect air humidity. the fact that the younger generation is less interested Insuffi cient sunlight would aff ect the physiology of to work in the agricultural sector. cocoa trees. Heavy rainfall between just 3-6 days may cause high humidity and allows the growth of the B. Production Phytopthorapalmivorafungi which causes the rott en fruit disease. As a sign of infected cocoa fruit there are Cocoa plantations are spread over 17 sub-regencys of dark brown spots that usually start from the tip or the the 21 sub-regencys in Sikka with a total land area base of the fruit. of 21,657 ha and a total production of 6,409 tonnes (Department of Agriculture and Plantations of

5 Table 1. Land Area of Cocoa Trees, Production, Productivity, and Number of Households In- volved in Cocoa Cultivation in Sikka (2012)

LUAS AREAL (Ha) Produksi Produktivitas NO KECAMATAN Jumlah KK TBM TM TTM/TR Jumlah (TON) (kg/Ha) 1 ALOK 5 7 165 177 2 286 272 2 NITA 822 1.358 298 2.478 730 538 3.812 3 MEGO 462 754 138 1.354 259 344 2.083 4 PAGA 310 504 68 882 173 343 1.357 5 KEWAPANTE 230 487 132 849 323 663 1.306 6 WAIGETE 355 616 118 1.089 248 403 1.675 7 BOLA 475 967 209 1.651 412 426 2.540 8 TALIBURA 457 758 48 1.263 562 741 1.943 9 PALUE 146 250 26 422 230 920 649 10 LELA 402 722 92 1.216 474 657 1.871 11 NELLE 175 705 56 936 350 274 1.440 12 ALOK TIMUR ------13 ALOK BARAT 11 15 386 412 5 333 594 14 MEGEPANDA 205 339 75 619 91 268 952 15 TANAWAWO 383 614 35 1.032 183 298 1.588 16 HEWOKLOANG 793 1.442 429 2.664 875 607 4.098 17 KENGAE 218 366 99 683 325 888 1.051 18 DORENG 638 909 102 1.649 400 440 2.537 19 MAPITARA 273 542 115 930 312 576 1.431 20 WAIBLAMA 206 330 - 536 230 697 285 21 KOTING 387 302 126 815 225 745 1.254 JUMLAH 6.953 11.987 2.717 21.657 6.409 10. 497 29.156 Source: Department of Agriculture, Sikka Regency, 2012 TBM = Immature Crop TM = Productive Crop TTM/TR = Non-Productive Crop/Damaged Crop

Sikka Regency, 2011). Cocoa plantation business in 1 plot, and only 10% of farmers have land size of 1 Sikka uses traditional agriculture, with an average ha or more. Increase in cocoa farm land with private productivity of 497kg/ha/year well below the national plantation scale is no longer possible, except through average (900kg/ha/year). Meanwhile, production replacement of existing crops with cocoa. In this case quality is low, because it is not dealt with to the fullest there is no government policy to maintain extensive particularly aft er the harvest. cocoa business, or provide land for developing cocoa business in Sikka. Cocoa in Sikka Regency is one of the cocoa types with the best quality. Cocoa potential in Sikka Regency With the average available land area, it is quite was previously very promising and capable of reasonable for local households to make cocoa producing about 7,880 tonnes per year. But currently farming as their main source of livelihood. However, 90% of cocoa plantations are seriously damaged and land tenure expansion, especially outside the village can no longer produce substantially so that in 2011 either through purchase or hiring or pledging, did cocoa production in Sikka only reached 6,409 tonnes. not happen in Sikka.

C. Land Tenure Agricultural and population density has curbed available land for cocoa cultivation. Another issue Lands for cocoa cultivation are privately owned by associated with land tenure is land conﬂ icts caused by farmers (households), none of which is rented to the return of migrants from abroad who feel they still other parties, with an average land ownership of less have ownership overthe land they have previously than 0.5 ha. Only 7% of farmers have land more than left behind. Meanwhile, there is no government policy

6 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT to maintain an extensive cocoa business, or provide it should be underlined that existing roads are not land for cocoa development in Sikka. entirely in good condition.

D. Capital Tenure 4.4. Identifi cation of Cocoa Development Value Chain in Sikka Sikka farmers so far have been proven capable of fi nancing cocoa farming on their own, although the There are several value chains in cocoa business fi nancing amount depends on the ability of each development in Sikka. The fi rst value chain is the farmer. In other words, local farmers have limited provision of inputs or production facilities (saprodi) capital tenure, thus limited eff orts to implement value chain, followed by agricultural production/ technology cultivation value chain, processing value chain, and fi nally trade value chain. However, because of E. Socio-Cultural Environment the limitations of this study, the cocoa value chain discussed ranges from suppliers to marketing at In Sikka communities there is a mutual aid farming regency level only. The fi nal consumer value chain tradition called “Sakoseng” and “Ulababag”. Actually of cocoa beans and cocoa products as derivatives this tradition means helping each other to ease the has not been addressed in this study. In summary, work of their fellow farmers. However, lately this cocoa business and stakeholder value chain in their phenomenon has degraded and becomes rare. respective value chains in Sikka can be illustrated in the next page fi gure 3. Farming is still done traditionally and not accompanied by a valid plan for the whole year. A. Production Facilities/Inputs Factors Att achment to land is still there, and the majority of the people still like to farm. There are three sources of inputs factors, namely 1) of commercial nature, 2) subsidies (government, However, cocoa development in Sikka is currently NGOs, church), 3) the farmers themselves. In terms faced with the fact that the majority of the younger of commercial inputs/production facilities, supply generation is less interested to work in the agricultural comes only from two stores, namely “Dirgahayu” sector. The average farmer age is 45 years. and “Putra Remaja”, in which the supply of inputs comes mainly from Java. The rest comes from the There has been a shift in the community of the government or NGOs through various assistance economic development concept from capitalist programs, one of which is the Gernas program. economy to democratic economy characterized by the However, the sustainability of supply derived from existence of cooperatives, credit unions, savings and subsidies could not be guaranteed. One mechanism loans cooperatives, social gathering (arisan), farmer for farmers to get subsidized fertilizers is by obtaining organizations, and otherswith a new awareness of the fertilizers at subsidized prices from Dirgahayu Store importance of self-help eff orts from the bott om. with a lett er of recommendation from the Department of Agriculture and Plantations. In general, farmers F. Facilities and Infrastructure feel that fertilizers are still expensive. Fertilizers are generally used for food crops, thus refl ecting less Production facilities and infrastructure with limited awareness of farmers to use fertilizers. capacity is available in Sikka. However, complete production facilities and infrastructure can only be B. Cultivation Value Chain found outside the village, which is in the regency capital (Maumere). Farmer groups which role is The central position is on-farm activities where expected to help accomodate farmer needs did not farmers are the main actors. On-farm activities function properly. This is because the groups have include farm treatments such as pesticide spraying, not been active locally. pruning, fertilizing to cocoa harvesting. Other stakeholders in the cultivation value chain are local Supply of inputs for commercial purposes is governments, companions, and farmer groups. Cocoa controlled by two stores. Most supply of inputs production in Sikka has been carried out through for development programs come from NGOs, the generations independently. In addition to individual Provincial Government and the Central Government, farmers, farmer groups (Poktan) and Farmer Group while the Regency Government is lacking the initiative Associations (Gapoktan) have been institutionalized to develop cocoa. Supply of inputs for farmers is in Sikka’s agricultural production processing. dependent on government and NGO programs to meet the needs of production facilities. C. Processing Unit (UPH)

In terms of infrastructure support, conditions of UPH is one of the activity packages in the cocoa facilities and infrastructure (especially transportation) Gernas program. In the package, any regency that has in Sikka Regency are relatively adequate. However, implemented the Gernas program would get one unit

7 Figure 3. Cocoa Business Value Chain in Sikka Regency

END CONSUMERS

cessing Food Processing Industry and Chocolate In- Food Processing Industry and Food Pro- dustry (America, Europe, Asia Paciﬁ c, dll) Chocolate Industry in Java

Exportir in Makassar and International Com- Processing in pany Aﬃ liation West Java, East Export Liquor, But- Java, DKI Jakarta, ter, Powder Banten, Surabaya & Tangerang Processed in Makassar (Liquor, Butt er, Powder) Processing

All Big Company in Makassar Warehouse in (Mix Cocoa Beans) Makassar

Frans Seda Airport, Traders 3 Traders Shipping) (Packing & (Packing Inter-Island Traders in Wuring Seaport Maumere Maumere

Regency Traders (Maumere) in Company Gelitang (Comextra) Company (Bumi

Storage) Tangerang) Traders 2 Traders

(Drying & Sub-Regency Traders (Maumere)

Collectors Traders Collectors Traders Processing Collectors Traders in Village in Village Unit in Village

Trader 1 Trader Collectors Collectors Collectors Collectors (Collectors &

Intermediaris) Traders Traders Traders Traders

Farmer Farmer Farmer Farmer Farmer (Type I) (Type II) (Type III) (Type IV) (Type V) Drying) Production (Cultivation & (Cultivation

Input of Subsidy: Commercial Input: Input Provided by the Fertilizer, Equipment, Rahayu store, Fertilizer, Farmers: Seed (Government, NGO, Equipment, Seed. Seed, Compost, Drying Church) of UPH per year. While selection of farmer groups to D. Distribution and Marketing manage UPH is based on farmer group capacity and its strategic location. UPH development is expected to Currently there are approximately 30 local traders be the forerunner for cocoa cooperatives/associations. in Sikka. Of the 30 traders 5 of them belonged to the Third, UPH is expected to accommodate cocoa large category and 5 others to the medium category production activities. However, this eff ort would not with all of them located in the regency and a few in be easy. An institutional initiative such as the UPH the sub-regencys. Meanwhile, the other 20 traders are must supposedly get technical assistance. scatt ered in the small villages as vendors. Eff ective marketing is needed to market cocoa beans. Improved Despite the availability of UPH, the farmers in the marketing is aimed at increasing marketing effi ciency regency are still selling their cocoa beans individually, pursued by enhancing value to be received by not through the UPH. There are several reasons why farmers, reducing marketing costs and the creation of farmers did not sell their cocoa beans to the UPH, a fair selling price for cocoa farmers. including fi nancial and credit system of production Here are the three main channels of cocoa marketing facilities between farmers and merchant collectors in Majene regency: that force farmers to sell their crops to them. In 1) Farmers »» village merchant collectors »» sub- addition, sometimes there is great distance to the regency merchant collectors »» wholesalers »» location of the UPH so that farmers prefer to sell to factories merchant collectors who come to their homes. 2) Farmers »» sub-regency merchant collectors »

8 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

wholesalers/ companies »» factories C. For Goods Distribution Activity: 3) Farmers »» UPH »» sub-regency merchant collectors »» factories Associated with the distribution of goods, there are several regulations that must be adhered to, 4.5. Regulations Associated with Cocoa Business namely Law No.16 of 1992 on the Quarantine of Activity Value Chain in Sikka Fish and Plants, Law No.31 of 2004 on Fisheries, and Ministerial Regulation No.26 of 2008 on Format Associated with business activities in Sikka Regency, Storage Authority and Health Inspection Certifi cate in there are several regulations that must be adhered to. the Field of Quality and Security of Research Results. The above regulations stipulate the obligations of A. To Start a Business/Invest Capital: businesses to have several supporting documents for goods distribution activity, namely: As set forth in Local Regulation No. 6 year 2011 on 1. Export Documents: the work structure of KPPT and Investment, to start Costs to get export documents depend on the a trading business as well as a processing industry, volume of goods distributed, while processing an entrepreneur must own a business license. Several time is three days before delivery. permits that must be obtained by businesses in Sikka 2. Certifi cate of Domestic Exit (inter-island): in the context of investment are as follows: Costs to get certifi cate of domestic exit depend 1. Supporting License consisting of: on the volume of goods to be delivered, while Trading Permit for commodities, registered and processing time is 2 – 3 days. Company Registration Number (Tanda Daft ar 3. Certifi cate of Domestic Entry: Perusahaan, TDP) and Industrial Permit; Costs to get certifi cate of domestic entry depend 2. Implementation License consisting of: on the volume of goods, while processing time Location Permit, Building Permit, SITU and depends on inspection. Nuisance Permit (HO). The documents mentioned above can be obtained B. For Trading Activities (Exports/Imports): by the service user by submitt ing and fi lling out an application form which contains: identity, sender’s Furthermore, in running company operations (trade), address, type of goods sent, delivery purpose. Usually there are national regulations that must be adhered the sender must report 2 days before delivery. In case to in the regions, namely Law No.16 year 1992 on the the PAP and Expedition have goods that are unfi t for Quarantine of Animals, Fish and Plants, Government delivery, the goods will be destroyed. Usually in other Regulation No. 16 year 2002 on the Quarantine of regions, there is a special regulation in accordance Plants, and Government Regulation No.82 year 2000 with the law, while in Sikka it is tailored to the needs on the Quarantine of Animals. Based on the above of the customers. regulations, service users are obliged to report their import and export plans to the quarantine offi cer. In Especially for shipments of agricultural commodities essence, these regulations require several documents, there should be an exit permit (clearance certifi cate) such as: from the Sikka regency government. Exit permit can be obtained free of charge, and processing time is 1 1. Certifi cate of Domestic Entry: day. For forest products there should be a Certifi cate Costs to get certifi cate of domestic entry depend of Forest Products (Surat Keterangan Hasil Hutan, on the size of the cargo, while processing time is 3 SKHH). In this case entrepreneurs should report days before delivery. the types of commodity to be delivered consisting 2. Certifi cate of Domestic Exit: of: name of owner, destination, type and quantity of Costs to get certifi cate of domestic exit depend on goods. In addition to the above documents, businesses the size of the cargo, while processing time is 3 should also have 3 licenses namely: SITU, Trading days before delivery. License (SIUP), Nuisance Permit (HO) and perform 3. Export Certifi cate: a MOU with the Sikka Regency Government. Inter- Costs to get export certifi cate depend on the size island traders and expedition companies that did not of the cargo, while processing time is 3 working comply with the above regulations will be banned days. from doing business in Sikka, while investors will have their business licenses revoked. A quarantine offi cer will check the completeness of documents and the contents of the cargo at the 4.6. Identifi cation of Cocoa Development External time of entry or exit of goods. Violation of the Factors in Sikka above provisions shall be liable to confi scation and destruction of traded goods. In addition, based on Identifying external factors include: (1) population; Law No.16 year 1992, the imposition of sanctions can (2) condition of facilities and infrastructure; (3) be in the form of fi nes of up to 50 million rupiah and economic conditions; (4) access to capital sources; imprisonment for 3 years. (5) bargaining position of farmers; (6) introduction

9 of technology; (7) coaching by offi cers; (8) partner B. Access to Capital companies; (9) regional autonomy; and (10) economic liberalization. Identifi cation results show that the It is diffi cult to get seeds according to Sikka conditions, opportunities are greater than the threats. This while production facilities and infrastructure as well indicates that the local region has a relatively large as business capital are lacking. Lack of funding is one potential for opportunities in cocoa agribusiness issue to start and develop businesses through the development compared to the threats. cocoa farming groups.

A Population and Human Resources (HR) It is diffi cult to get a loan from the bank and the Department of Cooperatives and SMEs due to One factor closely related to population is human convoluted procedures. Farmers do not have good resources. Associated with this, human resources managerial skills in fi nance and organization so that (farmers) in Sikka Regency may be said to have a lot it is diffi cult to develop organization and business of experience in cocoa farming management. Facts capital. Information about banking programs is not on the ground indicate that experienced human conveyed properly to farmers. There is no bank that resources in cocoa farming are numerous in Sikka. directly provides capital. Capital is still in the form However, young people tend to be less interested in of KUR, with convoluted terms. Financial institutions farm business management. They are relatively more still have a lot of give confi dence to farmers to access interested in working in the non-agricultural sector. credit due to lack of collateral and guarantors. Despite having considerable experience in cocoa Moreover socialization of programs or fi nancial cultivation, generally traditional and farming institution services products to farmers is less well practices have not been followed properly (Good socialized. Agriculture Practices – GAP). Technical knowledge of farmers is still lacking. This is evident from the lack of Poor communication and socialization is one of the habit to properly take care of farms. Farm sanitation causes of farmers’ diffi culty to access capital. Banks is very poor with intercropping and overlapping of and cooperatives in Sikka have been providing credit various plants that are competing to acquire natural schemes to farmers, but these have not been properly nutrients, water, air and sunlight. Fertilization has not socialized. Another problem is the distortion by grant been carried out correctly (the right dose, the right programs organized by NGOs, the government and type of fertilizer, the right time and the right way of other institutions. As a result, existing facilities are application). Neglect of soil and water conservation not widely used which lead to a negative impact on makes cocoa crop defi cient in nutrients and water, farmers to always expect aid through programs. especially during the dry season. Distribution of credit schemes in collaboration with Farmers consider cutt ing down trees as taboo because companions (PNPM) is already running. In addition of the strong emotional bond with the trees that have there is the use of the local budget for Credit Program given life to them, besides worries that cutt ing down Channeling in collaboration with Banks at low trees will cause loss of revenue so long new trees are interest rates. This has been implemented on coff ee at not yet productive. Lack of incentives/subsidies from Bajawa with considerable success and no bad debts. the local government to farmers who have cut down their trees is another factor, so that they are worried Meanwhile, source of capital from other fi nancial about loss of income source aft er their trees have been institutions such as traders and moneylenders exists cut down. in Sikka. At least banks such as BRI Unit Desa can be found at the regency level, while traders and Actually Sikka farmers have a desire to learn and are moneylenders at the village level. However, lack easy to teach and this is evident from their ability of information and knowledge of the farmers and to produce quality products according to market diffi culty to meet requirements for working capital needs. Currently farmers do not conduct post-harvest loans from banks has caused limited access to these processing (fermentation and drying) as well as fi nancial institutions. Meanwhile, other sources of proper farm maintenance due to lack of motivation capital such as from traders andmoneylenders tend and no incentive from buyers - high price for good to be more binding and cause hardships to farmers. quality cocoa beans - and lack of capital for post- harvest activities. Due to the absence of incentives, C. Marketing/Price many farmers did not continue or implement the knowledge they have acquired from trainings, in Cocoa is one of Indonesia’s export commodities that addition to coaching limitations from the Department are directly in contact with the competitive nature of Agriculture and Plantations. At least until the year of international trade. In terms of cocoa commodity 2012 there was no sustainable cocoa development trade, Indonesia is only a price taker and cannot program. Existing programs are only in response determine the world price. Cocoa trade price is to the programs from the Provincial Government, determined in the New York and London Stock Central Government, or NGOs. Exchanges.

10 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

In general, Sikka’s cocoa has specifi c advantages, investors to invest in Sikka and break the chain of namely high fat content up to 54% and does not long distribution lines detrimental to farmers. Cost melt when stored at room temperature. However, and benefi t issues is one of the reasons why PT. Mars limitations in technology and capacity of farmers, closed down its buying station in Flores. To that end, especially in post-harvest processing have resulted one of the requirements to enhance appeal so that in less competitive cocoa crop in the liberalized buyers would come to Maumere is suffi cient quantity (globalized) economy. and good quality. Program set-up, specifi cally for processing activities should involve the private sector/ Price changes constantly to keep a breast of the world entrepreneurs from the beginning, so that support price based on quality and volume. In terms of pricing, from other parties, particularly from the government the formula on price reduction of the prevailing price should be adjusted to produce products according to in New York is applicable so that the local price in the needs of the market/private sector, both in quality each region is subject to a diff erent formula. At the and quantity. Buyers have not been able to set high local level, the price quoted to farmers is determined prices because products sold are not in accordance by wholesalers who are a few and farmers do not with the required quality. always getup to date price information. Actually there is cocoa price information available which can be D. Role of Non-Governmental Organizations accessed by all parties, both at buyer and government (NGOs) levels. But the erratic market price for plantation commodities coupled with the weak farmers’ access There are several Non-Governmental Organizations to capital has resulted in a tendency of low pricing by (NGOs) in Sikka with experience in coaching/ fi nanciers. Farmers do not have a strong bargaining empowerment of cocoa farmers, namely Swisscontact, position. This is partly due to the lack of a good World Vision International (WVI), Caritas, YPMF, and strong organization to control prices or to look for PLAN. The majority of cocoa development programs bett er marketing. Meanwhile, the government has so have been initiated by these NGOs. However, regional far not given enough moral and fi nancial support to implementation is limited and program plans are also this business. The government could not stabilize the limited. Program development in the economic fi eld cocoa price and could not intervene in the market. In has not been oriented to att empts to break free from addition to no governing regulations, there are also no the poverty line. concrete programs to address the price issue. People like to borrow by mortgaging goods and merchants However these NGOs have been instrumental in commit bonded crops before harvest. increasing cocoa productivity through on farm and off farm activities. The idea about Field School is Cocoa farming is the main source of the household an initiative from these NGOs in the framework of economy in Sikka. Therefore, price volatility will have capacity building of farmers. The activities they a direct impact, especially on the income of farmers. carry out include improving the quality of life of Most serious is if the price declined drastically, which farmers, education and health, cocoa commodity would impact on farmers’ income and indirectly marketing eff orts and the formation of modern also aff ected the optimization of cocoa farming farmers. Problems since the early stages included management. less SKPD involvement in program implementation. However, with the establishment of a Cocoa Forum In selling cocoa, farmers in Sikka have direct access coordinated by the Bappeda, good coordination in to traders (merchant collectors). Most of them can cocoa development began to take shape among the sell cocoa freely (no ties) to the traders. Some of these stakeholders in Sikka. farmers sell to traders already known to them, and some others because of bonded loans. Regardless One of the NGOs with experience in community of this, many local farmers have no choice in terms development, especially in Sikka, is Swisscontact. of marketing, except by selling to the merchant This institution has direct access (affi liated) to collectors concerned. cocoa exporters, such as PT. Mars and Comextra. Currently NGOs in Sikka have participated in farmer The majority of farmers in the regency are relatively empowerment activities. In addition to the role free to choose traders (merchant collectors) that they of supporting technical guidance in the fi eld, this think off er the highest price. But the true reason is institution also plays a role in promoting the local their weak bargaining position so that cocoa price is region to exporters. Partially, this institution has predominantly determined by the traders. begun to engage in cooperation activities including development/empowerment of farmers in the study Not many companies have been included in the study region. However, the existing cooperation should (in Sikka only Comextra – in the past, PT Mars) and be formalized in the form of a memorandum of farmers do not have direct access to large corporations understanding so that the responsibility of each party in Makassar. The government should provide a bett er is transparent, at least among implementers (Sikka business environment in order to encourage cocoa Regency Government), farmers (groups), and NGOs.

11 E. Export Tax Implementation Policy method has started to be implemented in Sikka Regency. Based on observations, the fi eld school This policy can become a development opportunity method has been considered the best when viewed for the domestic processing industry to move closer from the process of knowledge transfer and human to cocoa production centers. This policy encourages resources development of farmers. There are currently the reduction of cocoa exports in raw form and 6 Master Trainers and 80 Key Farmers, namely encourages downstream activities in the country experts who have skills in cocoa cultivation. With so that cocoa processing industry can thrive. The this approach there is a need for ongoing assistance cocoa processing industry has been establishing to farmers. Buyer Stations at production centers thus benefi ting farmers. Export tax implementation policy breaks the However, in terms of regulations there is currently chain of commerce so that farmers get a bett er price. no adequate regulatory support associated with the Prior to the application of Buyer Stations, farmers Aspects of Cocoa Cultivation Value Chain in Sikka. only received 80% of the terminal price, and aft er the The lack of regulations has made cocoa development establishment of Buyer Stations they receive more programs not sustainable. Another regulation is the than 90% of the terminal price. But unfortunately Regulation of the Department Head of Food Crops the increase in the price received by farmers is not Agriculture and Plantation and Husbandry of Sikka accompanied by an increase in productivity. On Regency No.520 01/01/SEKR/2009 on the Strategic the other hand, increased capacity (demand) of the Plan of the Department of Food Crops Agriculture cocoa processing industry in the country is also not and Plantation and Husbandry of Sikka Regency for accompanied by an increase in domestic production. 2009-2013. Despite the existence of regulations such Given the conditions as stated above Indonesia will as above unfortunately follow-up is lacking although not be able to meet its future needs for exports of SKPDs have been restructures to deal withcocoa cocoa beans and instead will become a cocoa beans business development. importer. Although not strict enough, there is Regent Decree F. Role of Local Government No.245/HK/2012 on the Establishment of the Regional Economic Cooperation Council (Dewan One of the aspects of regional autonomy policy is Kerjasama Ekonomi Daerah, DKED) which formed local government authority (regency) to manage the the Sikka Cocoa Forum. Sikka Cocoa Forum is a potential resources of the local region. This condition forum consisting of cocoa stakeholders from the local is one of the opportunities to improve cocoa farming government (each related SKPD), farmers/association as a superior commodity in the region. Nevertheless, of farmer groups, companies, traders, cooperatives, there are needs for commitments, regulations and banks, etc.). policies that support the att empts to that direction so that implementation activities can be carried out Lack of coordination of development programs optimally. and program implementation among stakeholders arethe roots of the problem of less optimal cocoa The role of Sikka local government which has been development in Sikka. Improvement and optimization most obvious is through extension workers (PPLs) of coordination among all parties is necessary to as a medium for farmers to get information and also improving cocoa productivity in Sikka. Actually in guidance in carrying out their farming activities. Sikka there is an institution that serves to coordinate However, so far the existing extension workers have all stakeholders from the government, private sector, rarely provided guidance, so that their guidance farmers, NGOs and others for economic development, function is arguably less optimal. namely the DKED. DKED was established by Decree No.245/HK/2012 on the Establishment of Regional The farmer mentoring program conducted by Economic Cooperation Council (DKED) in Sikka Distanbun and BKP2 has been carried out with Regency. DKED then established the Sikka Cocoa limited availability of budget as well as number and Forum serving to fi nd solutions to cocoa business capacity of PPLs. Mentoring carried out by PPLs has problems. Given its strategic role, DKED should be been adapted to the limitations of the number and revitalized by strengthening its legal basis. capacity of PPLs, their polyvalent/general nature and budget availability. As an illustration, the role of DKED is as follows: • Provide input, suggestions, proposals and On the other hand the lack of coordination between address problems in the regional economy Distanbun and BKP2 is partly due tosectoral ego and is instrumental in formulating policies persistence. For certain matt ers, each party has on development and empowerment of the asserted its authority, while for other aff airs a party community in the economic fi eld; considers the other party as having the authority. • Coordinate, organize, facilitate studies of local economic potential and opportunities for follow- In order to increase productivity, the fi eld school up by the local government in the context of

12 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

economic empowerment of the people; strive to cross- check the local price with the world • Being mediator among state/local enterprises, the price. However, policy implementation must yet be private sector and stakeholders in the context of coordinated with other relevant policies. regional economic development; and • Perform monitoring, evaluation and control of G. Institutional Economics general program implementation of the regional economy. There are no Production Cooperatives in Sikka but only Savings and Credit Cooperatives. But in the Revitalizing DKED can be done through issuing Local community there are still negative perceptions about Regulations/Perbub namely to: Clarify, Reinforce, and cooperatives. Cooperatives are less trusted because Extend the Scope/Function, Structure, and Authority their marketing paths are not clear and transparent. of DKED. In addition to the absence of production cooperatives, farmers are less organized thus unable to intervene Unfortunately the Government is currently less in price levels. There is less awareness among committ ed towards Sikka’s cocoa development. farmers/farmer groups to perform marketing/sales. Plantations are not under a separate Department so Gapoktan has been formed for the benefi t of certain that allocation of funding is very limited. In fact, if government agency projects (forestry, agriculture, cocoa is considered a sub-sector that has signifi cant plantations, etc.) only, for distribution of funds at infl uence on the economy it should have special a certain moment and not for sustainable economic fi nancing sources. development. In this case the government is expected to play an important role, but unfortunately there are The existing regulation on cocoa is Local Regulation no regulations or government programs related to No. 4 of 2008 (SOTK Dinas PTP3) on the Formation of marketing and institutional economics of the farmers. Organization and Work Procedures of Departments The absence of institutions to strengthen the role in Sikka Regency, in which the plantation sub- of farmers such as cooperatives or associations has sector comes under the section on plantations at resulted in the farmers to not have market strength or PTP3 Department. There are 3 sections: Plantation protection thus only acting as a price taker. Farmers’ Production; Plantation Crop Protection; Plantation marketingweaknesses have led to the lack of capacity Technology Application. to fulfi ll contracts directly with manufacturers.

Ego sectoral issues at the program implementation Many small cooperatives did not run well because level have become an obstacle to Sikka’s cocoa they were only established due tonew programs and development. This is evident from the lack of thus resulted in less guaranteed survival. On the coordination among SKPDs so that each SKPD is other hand, the existence of clear institutional farmers carrying out programs/activities which are not its in the form of cooperatives is to meet the challenges responsibility. Each SKPD has a diff erent perception of the market that prefer to deal with groups or of the task and function -Tupoksi (Disbuntan and cooperatives and also as one of the requirements BKP2 on PPLs), so that implementation is not to access fi nancial institutions, in particular Banks optimal, and results are less eff ective. There needs to for working capital purposes and joint marketing be an eff ort in the future to strengthen the DKED as activities. But the decision to institutionalize small a coordination media for cocoa development in Sikka groups into cooperatives needs to be reconsidered, as and to formulate joint programs. to whether small cooperatives can truly help improve the local economy. In this case there is a discourse to Program design must also exist to synergize strengthen the capital for Village Unit Cooperatives programs among cocoa stakeholders. Many cocoa (Koperasi Unit Desa, KUD). But in practice, business development programs are implemented by management assistance should be provided to farmer stakeholders, namely the Government, NGOs, and groups/cooperatives in order to increase confi dence others but on an individual basis (due to strong in them. sectoral ego) because each stakeholder feels more superior. Existing programs are temporary, not long- Farmers are generally incorporated into farmer term and not sustainable thus having less impact. groups, but in reality, not all farmer groups are active Supposedly, assistance is carried out from upstream thus resulting in low motivation of farmers to join to downstream, thus providing higher motivation to farmer groups. Oft en programs are introduced to farmers. Implementation of programs including the the villages followed by the formation of new farmer GERNAS program does not fully utilize the existing groups without proper coordination, so that it is PPLs. quite confusing for the farmers because of the many farmer organizations with the same goals. Therefore, Cocoa is an export commodity that depends on the companions are advised to not form new farmer fl uctuations in the world price and this price cannot group organizations but strengthen existing farmer be intervened by the local government. In this regard, group organizations as well as the Gapoktan. the Department of Industry and Trade constantly

13 4.7. Development Strategy Analysis facilities are located outside the village, and limited capital provider institutions. Cocoa agribusiness problems in Sikka Regency can be grouped into four aspects, namely: (1) production; The innovations needed as an alternative for cocoa (2) post-harvest; (2) facilities and infrastructure; and agribusiness development in Sikka Regency are (4) institutional. The problems and future action plan related to several aspects, namely: (1) Production: related to cocoa cultivation value chain in Sikka are innovation requirements including the Field School, brieﬂ y summarized in the matrix below replanting techniques, provision of inputs, fertilizer analysis recommendations, and improvement of the Broadly speaking, the main cocoa agribusiness drainage system; (2) Post-harvest: innovations are problems in Sikka Regency are: (1) production: cocoa necessary for this activity such as improved post- production quantity and quality has decreased by harvest technology for drying and sorting as well about 30-40% (from 900-1200 kg/ha to 450 kg/ha); as processing; (3) Facilities and Infrastructure: road (2) post-harvest: low quality cocoa (water content construction program, village axis roads, and bridges is approximately 30-35%) so that cocoa price is are the main prerequisites to support acceleration of also low; (3) facilities and infrastructure: disrupted innovations; and (4) Institutional: this aspect requires transportation of production facilities or substandard innovations associated with the sustainable guidance results; and (4) institutional: farmer groups do not of groups, partnerships, and strengthening farmer function optimally, suppliers of complete production marketing institutions.

Table 2. Matrix of Problems and Action Plan of Cocoa Development Value Chain in Sikka Regency

FACTS – SOURCE OF ROOTS OF THE RESPONSIBLE OBJECTIVE ACTION PLAN PROBLEM PROBLEM PARTY CONDITIONS PRODUCTION FACILITIES: • There are only • Supply of inputs • In the provision • Provision of other • Provincial two commercial comes mostly ofmeans of pro- sources in the supply government stores providing from Java. duction such as of inputs so that the • Regency fertilizers and • Fertilizers are fertilizers, seeds, price is more com- government inputs. perceived still and others, farm- petitive. (Distanbun, • Limitations of expensive by ers are still rely- • The need for coop- BKP2). fertilizers for farmers. ing on subsidies eration between pro- • UPH farmers • Suitable fertiliz- from the govern- vincial/city govern- • Banking • Limitations of ers are not yet ment, NGOs and ments and Litbang • DKED organic pesticides available; Ferti- church programs. and Puslit Cocoa for farmers. lizers are gener- • Low fi nancial ca- (coff ee and cocoa • Limitations of ally used for food pacity of farmers research center) for inputs/ tools such crops. to buy fertilizers. the development of as sprayers (pes- • Excellent inputs • Farmers can local seeds. ticides spraying are not available get fertilizers at • The need for coop- tool), scissors for nearby. subsidized price eration with fi nan- farmers. • Farmers’ access from Dirgahayu cial institutions in • Scarcity/no cocoa to capital/com- Store with a terms of capital, for seeds suitable mercial loans for lett er of recom- instance collective to the climate in working capital mendation from loans through farmer Sikka. is still lacking. Distanbun but groups. against a diffi cult • Creating and using procedure. organic fertilizers. • Lack of coordi- • Coordination among nation between stakeholders both in government the government and agencies and outside the govern- stakeholders in ment in the provi- the provision sion of means of ofmeans of pro- production through duction. DKED.

14 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

FACTS – SOURCE OF ROOTS OF THE RESPONSIBLE OBJECTIVE ACTION PLAN PROBLEM PROBLEM PARTY CONDITIONS CULTIVATION/PLANTATION BUSINESS: Production: • Low Cocoa • Most cocoa trees • HPT control tech- • Conduct intensive coach- • Local govern- Productivity: are old (>20 years). niques, sanitation, ing to farmers to implement (Distan- the quantity and • Pests and diseases and waste management GAP. bun) quality of cocoa att acking cocoa ment have not been • The need to increasefarm- • Extension production has fruit: HPT (rott en fully understood ers’ knowledge how to workers (BKP2) decreased by fruit, PBK, and can- and implemented use fertilizers. • DKED about 30 - 40% cerous stem). by farmers. • Replanting by farmers • Farmers/ from 1,500 - 1,700 • Not many farm- • Farmers did not through side-graft ing/ farmer groups. kg/ha to 300 - 400 ers take good care know the correc- shoot- graft ing. • NGOs kg/ha; of their farms treplacement (reha- • Institutional strengthen- • Cocoa produc- (Good Agricultural bilitation) system. ing & capacity building tion in Sikka Practicess-GAP). • Non-utilization of of extension workers in a until 2003 = • Lack of awareness proper fertilization sustainable manner. 14,333.2 tonnes of farmers to man- techniques. • Optimizing coordination with a nomi- age and take care • Lack of knowledge among stakeholders by nal value Rp. of their farms with of farmers to re- DKED. 372.663.200.000 optimal fertiliza- plant and take care Starting in 2004, tion. of farms. cocoa produc- • Replanting is • Lack of incentives/ tion continued to scarce and cur- subsidies from the decline to 54% or rently performed local government 7,739.93 tonnes, by way of side- for farmers who equivalent to a graft ing and rehabilitate cocoa GDP loss of Rp. shoots-graft ing trees, so that they 201.2 billion per techniques. The are worried about year. success rate of losing their source • Cocoa quality is side-graft ing and of income due to low (about 30-35 shoots- graft ing immature trees. % moisture con- techniques has • Diﬃ culty of gett ing tent) been recognized seeds in accord- as more successful ance with Sikka than seeding. conditions. • Reluctance of farm- • Lack of production ers to cut down infrastructure and and replant cocoa working capital. trees. • Lack of coordination among the authorities.

Institutional: • Modern farmer • Farmers are gener- • Farmer groups are • Establishment of modern • Local govern- groups are still ally cooperative not functioning farmer groups, as an ef- ment (DKED) scarce. members, but optimally. fort to empower farmers • NGOs • There is already involved in savings • Limited capital to be more focused and • Farmer groups a Field School and loan activities provider agencies. ongoing mentoring by the • UPH (FFS) with teach- only. • Lack of coordina- local government. ers who are local • There are no busi- tion and coopera- • Strengthening of UPH farmersselected ness service and tion amongparties as a forumof farmers to by the local production coop- (government, conduct joint marketing. government as eratives, which can farmer groups, pri- • Strengthening of farmer well as Buyers, be used as agen- vate sector, NGOs). groups through facilities but their role cies for marketing and capital so that they have not been cocoa. can jointly buy wet cocoa optimized. to be dried and fermented in a bett er and more ef- ﬁ cient manner. • Optimization of the role and function of the DKED in coordinating competent stakeholders.

15 FACTS – SOURCE OF ROOTS OF THE RESPONSIBLE OBJECTIVE ACTION PLAN PROBLEM PROBLEM PARTY CONDITIONS CULTIVATION/PLANTATION BUSINESS: Human Resources: • Farmers’ knowl- • Less awareness • Group organizing • Improving farmers’ • Local govern- edge and skills are of farmers to use and benefi ts mus- knowledge ofcocoa ment (DKED) limited. fertilizers. tyet be understood. bean standards re- • Extension • Limited capacity • Cultivation of • Imperfect farmer quired by manufactur- workers/BKP2 (ability) and num- cocoa is carried organizations. ers and the market price • UPH ber of extension out in a traditional • Cooperatives are of cocoa. • Church/ Com- workers(PPLs) manner and farm- not functioning • Increasing motivation munity Lead- • Capacity building ers’ knowledge optimally. of cocoa farmers to ers of farmers is mostly is low in terms of • Marketing agencies implement GAP. • Farmers done through NGO cultivation, sanita- are yet to be organ- • Motivation to increase • NGOs programs that exist tion, fermentation, ized. plantation land area for • Financial in- in Sikka with lim- marketing, and • Farmer mentor- business. stitutions and ited coverage and quality of cocoa ing programs by • The need for capital banks. sustainability level beans that the mar- Distanbun and support of farmers and in accordance with ket demands. BKP2 are car- to encourage farmers to the duration of the • Lack of awareness ried outsubject to outright buy wet cocoa program. of farmers to take budget constraints for joint production. good care of their and availability of • Optimizing role of farms. the number and master training and key • Farmers’ depend- capacity of existing farmers to be enabled ence to get help PPLs. in conducting training from the govern- • Existing PPLs are to other farmers in one ment / local gov- of polyvalent / group. ernment. general nature and • Institutional strengthen- • Group culture to subject to budget ing and capacity build- jointly grow “sa- constraints. ing of cocoa extension koseng” begins to • Distanbun’s institu- workers in a sustainable decrease. tional design caus- manner. • Farmers are reluc- es less fl exibility for • The strategy of exten- tant to undertake cocoa development sion workers can be joint marketing especially in terms changed throughregu- thus farmers’ bar- of program prepa- larly visiting farmers, gaining power is ration and budget in an eff ort to motivate low. allocation. them and as a means of • Farmers are • Lack of coordina- more eff ective transfer reluctant to come tion between SKP- of technology. to training and Ds in implement- • Improvement and prefer to come to ing and optimizing optimization of inter- meetings just to get existing resources. agency coordination att endance money. in the empowerment of farmers and farmer groups (Distanbun, BKP2, DKED).

POST-HARVEST MANAGEMENT: • Post-harvest • The drying ma- • Drying technology • Cocoa quality training • Local processing, such chine from the gov- is still simple. is appropriate to market govermment as drying is done ernment is not used • Farmers need cash interest and supporting • NGOs traditionally in by UPH, because it (cash money) im- tools. • Financial insti- front of the house/ takes a longer time, mediately to make • The local government tuions on asphalt with no the large capacity ends meet. is collaborating with • Buyers regard to sanitary engine is not eff ec- • Not performing fer- NGOs, large buyers or • DKED factors. Ideally a tive because it has mentation because fi nancial institutions for drying fl oor or rack to accommodate it takes time and the provision of dryers is required. cocoa from a lot of there is no price so that each farmer • Most farmers only farmers with dif- incentive group owns one thus dry for 1 day and ferent quality and • Group organizing the utilization and use then sell directly to thus incur higher and benefi ts must of dryers will be more village traders. production costs. yet be understood. extensive and bett er.

16 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

FACTS – SOURCE OF PROB- ROOTS OF THE RESPONSIBLE OBJECTIVE ACTION PLAN LEM PROBLEM PARTY CONDITIONS POST-HARVEST MANAGEMENT: • Only a small num- • The constraints of • Lack of guidance ber of farmers uses making tedengkoko, and mentoring simple technology is the expensive from the local for drying, called UV plastic used for government. “tedengkoko” cover. • Development • Large buyers such as of sustainable PT Mars &Comextra groups: give special ﬂ uid 1. Partnership used during drying 2. Strengthening to provide a stronger of institutional scent of the cocoa. marketing for farmers

MARKETING AND SELLING PRICE: • Price of cocoa is • Very low bargaining • Group organizing • Enhancing the role of • Local govern- fl uctuating fol- power of farmers in and benefi ts must the local government ment lowing the New determining cocoa yet be understood in facilitating and • DKED York commodity selling price. There • Lack of coopera- encouraging farmers to • Farmers exchange price: is common practice tives that serve to undertake joint market- • Local traders Price at farm level among traders to do marketing for ing eff orts to increase • Wholesalers is Rp 13 thousand manipulate cocoa cooperative mem- their bargaining power. • Banking fi nan- for half wet cocoa price bers. • Enhancing the role of cial institutions (1 day drying); Rp • Farmers’ access to • Lack of incen- the local government in • Cooperatives 17-18 thousand for price information is tives for farmers encouraging and guid- • Farmers tester 7 (3-4 days very limited. Despite to manage cocoa ing farmers to improve • NGOs drying ), while sell- the possibillity of beans bett er. cocoa quality with GAP ing price at buyer short texting (sms), • Lack of mecha- and bett er post- harvest level is Rp 21thou- not all farmers have nisms to ensure processing, and to sell sand. made use of this the economic se- perfectly dried quality • Farmers prefer facility to ask about curity of farmers’ cocoa beans in accord- to sell directly to current international subsistence. ance with international village traders, and local prices. • Lack of support/ market standards in or- despite the low • Volume of cocoa government der to get higher prices. price due to driven beans produced by budget constraints • Conduct joint mar- by need for cash. individual farmers of road construc- keting both through • Knowlede level is insignifi cant, thus tion and improve- farmer groups and of farmers about inhibiting direct ac- ment. cooperatives. cocoa bean quality cess to wholesalers. • Strengthening of UPH in accordance with • Quality of cocoa to accomodate farmer market standards/ beans produced yield. needs is still low. (post-harvest) is low • Enhancing the role of • There is still a thus the selling price the local government system of bonded is also low. to develop alternative labor from mer- • Traders come every strategies through exist- chant collectors. morning and aft er- ing regulations such as: • Inadequate infra- noon, thus many 1. Warehouse receipt structure in most farmers are interest- system: to accom- areas of cocoa ed in selling on the modate farmer yield production centers. spot. as value hedging • UPH has not been measureif the price optimized in the goes down (adopting marketing chain. practices in Ghana Fermentation and and the Ivory Coast). drying should be 2. Develop joint mar- done collectively keting systems as with traders/ farmer maintained by state groups; UPH’s role enterprises should be further 3. Implemening enhanced to outright forward auction of buy cocoa beans in cocoa. wet condition.

17 FACTS – SOURCE OF ROOTS OF THE RESPONSIBLE OBJECTIVE ACTION PLAN PROBLEM PROBLEM PARTY CONDITIONS MARKETING AND SELLING PRICE: • Broad distribution 4. Determination of the of cocoa crop ar- minimum selling price easso that pursuing of cocoa, strengthen- joint marketing is ing the role of the local technically diffi cult, government by way of and narrow land establishing agencies ownership caus- like Bulog or a policy ing insignifi cant that requires the private production. sector to buy cocoa at the minimum price, etc • Capacity building of farmers in the use of communications media and access to information related to cocoa development. • Interventions from consumption industry stakeholders outside Sikka. • Increased effi ciency at trader’s level. • Development of road infrastructure linking production centers to the market.

4.8. Stakeholders and their Role in the Cocoa Value In connection with this, the existence of farmer groups Chain in Sikka should be guided by the principle of participation. In other words, farmers groups are formed by the Cocoa agribusiness development in Sikka Regency farmers themselves, while outsiders only act as a involves the active participation of several parties facilitator. What should be underlined is the need of (stakeholders) such as farmer groups as the center debriefi ng farmer groups that have been facilitated or focus of activities: Farmers as the focus of the core by the facilitator. Debriefi ng materials that need to program, as well as the local government, banks, be prepared are related to empowerment such as and other institutions as supporting elements. The functions, tasks, planning, supervision, and so forth, mechanism is illustrated in Figure 4 beside: so that farmer groups can grow and develop into independent (empowered) organizations. Debriefi ng Each stakeholder member has itsrespective role. In should not only be facilitated by the facilitator or carrying out its role, there are stakeholders that have team of experts, but also by inviting other parties contributed signifi cantly and thus infl uencing the (stakeholders) of the supporting elements, as has cocoa business development in Sikka. But on the other been stated previously. This activity can be utilized hand there are those that did not act as expected. as a meeting forum for exchanging ideas among all stakeholders in order to develop the cocoa A. Farmers/Farmer Groups agribusiness.

In essence a farmer group is an organization that B. Local Government serves as a medium for discussion/deliberation by farmers. In addition, these organizations also have In line with regional autonomy policy, local a role in accelerating agricultural development governments have a greater role in advancing program activities. However there are many cases that their regions. Therefore, the development of cocoa farmer groups have only been formed in relation to agribusiness is one of the opportunities to promote the implementation of speciﬁ c programs. As a result, the local region. Related agencies such as the the existence of such farmer groups oft en ended with Bappeda, Department of Agriculture, Department the completion of the relevant program activities. As of Plantations, Department of Trade, Department of a broader result, program beneﬁ ts are only felt at the Industry, Cooperatives, or local legislatures (DPRD) time of implementation without any sustainability. are considered institutions that should be able to

18 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

Figure 4. Cocoa Farming Stakeholders in Sikka Regency

Financial Institution Local Government/ University Legislative/ Province

Farmer Groups

Cooperative

Business Association Trader/ Processing Company Exporter

participate in the implementation of the operational But above all, it should be noted that so far many steps of cocoa agribusiness development. banks still regard farmers as a party of dubious character and capabilities to comply with banking C. Banking Institutions requirements. Therefore, one applicable solution is through cooperation with certain parties (traders/ The banking sector has proved to be one of the pillars companies) that buy cocoa from farmer groups and for sustainable economic development. However, the act as an avalyst (credit guarantor) to the bank. involvement of the banking sector in agriculture is relatively limited for large-scale business activities, D. Non-Governmental Organizations (NGOs) among others for large exporters or large plantations. The role of banking institutions for small-scale There are six NGOs that play and active role in businesses such as farmers in the countryside may be mentoring and development of cocoa business. One said to be rare. Most prominent is lending to farming of the NGOs experienced in terms of community business as hasbeen done by Bank Rakyat Indonesia empowerment, especially in Sikka, is Swisscontact. (BRI). Most banks grant working capital loansto non- This institution has direct access (affi liated) to cocoa agriculturalbusinessand rarely grant loans to farmers exporters, namely PT. Mars and Comextra. Currently although they can in fact be categorized agricultural the NGOs in Sikka have been participating in farmer entrepreneurs. Yet so far farmers have been known as empowerment activities. In addition, Swisscontact the weaker party in terms of capital and marketing also plays aimportant role to supporting technical transaction process. assistance in the fi eld and promoting the local region to exporters. This phenomenon is prevalent considering that a bank is a profi t institution that is certainly not willing E. Exporters to bear the risk of loss. One of the weaknesses of farmers is lack of certainty (uncertainty) of farm yield In terms of trade, relationships with export companies that cannot be stored for a long time (perishable). In in Sikka Regency are with PT. Comextra and PT. Mars addition, farmers themselves are likely to act on their that have offi ces in Makassar and in direct contact own or at least only in informal and limited collective with Sikka traders. Therefore, the role of these activities. two companies is expected to be integrated in the operational steps of cocoa agribusiness development. One opportunity that currently needs to be followed up inSikka Regency is collaboration with Bank BNI. F. Traders/Companies Preliminary discussions with this Bank have hinted an opportunity for participation in the development Many allegations have so far been directed to traders of operational measures on cocoa agribusiness. This as a party that oft en takesunfair advantage when is consistent with one of the schemes ofBNI itself, purchasing agricultural commodities compared to namely micro scheme aimed to small-scale unit the profi t level of farmers as producers. They are activities at the grass root. Financing form can either very dominant in determining the price of cocoa be profi t sharing or sale and purchase of commodities. beans, resulting in a very weak bargaining position The fi rst category is based on business feasibility, of farmers. Therefore, the role of the traders in the while the second category is based on contract price operational steps of cocoa agribusiness development (fi xed price). needs to be pursued. One concrete form is to invite

19 certain traders (companies) in related activities so that Table 3 below provides an overview of the role of they can be expected to play a role as an avalystfor local each stakeholder, and the additional roles expected farmers. This support element can be strengthened by from them in the future in order to be more optimal. involving the Department of Industry and Trade.

Table 3. Matrix of Cocoa Development Stakeholders Analysis in Sikka Regency

PARTIES CURRENTLY CURRENT ROLE EXPECTED ROLE INVOLVED Ministry of Agriculture • Assist in increasing cocoa productivity • More sustainable programs and through the Gernas Pro Cocoa Program (Co- programs that are not only physi- coa Gernas). cal but more focused on capacity building of farmers. NTT Provincial Govern- • Support the Gernas Pro Cocoa program, such • Encourage the local government in ment as procurement and distribution of replant- creating cocoa development pro- (NTT Province Plantation/ ing activities (SE seeds, fertilizers, fungicides), grams, such as giving incentives to Estate Department) rehabilitation (fertilizers, insecticides, fungi- cocoa farmers who want to develop cides) and intensiﬁ cation (fertilizers, insecti- the cocoa sector. cides and pheromones) • Provide mentoring and coach- • Conducting the “Red Wine”program of which ing programs to the Regency/City one of the programs is to improve the quality Governments in developing the of life of cocoa farmers. »» Implemented by cocoa sector. Programs can be both Bappeda. physical assistance program and • Assist the local government in gett ing/propos- policy program ing projects from/to the Government. • Provide clear direction of coordination ﬂ ow between SKPDs associated with the development of the cocoa sector, in this case Distanbun and BKP2 so that they can provide guidance in an integrated manner to cocoa farmers in the area. • Reduce dependency on central government assistance programs. SIKKA REGENCY GOV- • Funding support to cocoa business empower- Increase commitments to cocoa busi- ERNMENT ment activities in a limited portion. ness development, through: • Responding to cocoa empowerment activities • Increased budget allocation from made by the Central Government or NGOs, the local budget in the context of although limited to the customization of the cocoa business development. program.Currently there are no sustainable • Regulatory support to cocoa busi- programs so that cocoa development pro- ness development, according to the grams have not been running optimally. needs of each aspect of the value chain (Aspects of Input Availability; Production; Business Administra- tion/Marketing, etc) REGIONAL ECO- • Establish Cocoa Stakeholders Forum. • Optimizing the function of each co- NOMIC COOP- • Capacity building of farmers in terms of crop coa stakeholder forum member in cultivation and processing, including market- fostering cocoa business develop- ERATION COUNCIL ing. ment, according to the value chain (DKED) • Coordination between stakeholders, to discuss in which they participate. and advocate cocoa issues. BAPPEDA OF SIKKA • Implement the “Red Wine”program as a del- • Restore the function of Bappeda as REGENCY egation of tasks from provincial programs. planner rather than implementor of • Being secretariat (with SwissContact - SC) in programs. the coordination of the Regional Economic • Coordinate the tasks and authority Cooperation Council (DKED). of SKPDs in accordance with their • Through the stakeholders forum, the mobili- task and function (tupoksi). zation of PPLs and provision of operational • Strengthen the coordination across budget for BPK and PPLs (Transportation and SKPDs (Distanbun& BKP2). Fee). • Strengthen the role of Distanbun in • Selection of Master Trainers (MT), Key farmers every activity associated with their (KF), and mobilization of farmer groups. tupoksi. • Provide direct support both morally and mate- rially to the SL and provide budget allocations for the SL • Monitoring implementation of the SL

20 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

PARTIES CURRENTLY CURRENT ROLE EXPECTED ROLE INVOLVED Department of Agriculture, • Implement the Gernas program through pro- • Create cocoa sector development Forestry and Plantation viding fund sharing to fi nance the implemen- programs intensively and continu- (DISTANBUN) of Sikka tation of fi eld operations. ously. Regency • Provide fertilizers at subsidized prices to • Actively participate in stakeholders farmer groups. forums. • By way of the Gernas program select prospec- • Coordinate with BKP2 and other tive farmers and land area as the location of SKPDs in creating program devel- activities. opment. • By way of the Gernas program provide • The local government has a role in equipment assistance and carry out capacity marketing and market pricing, thus empowerment of farmers. farmers get a bett er selling price. • Provide information on cocoa market price. • Provide regulatory framework for integrated development of the cocoa sector »» including coordination framework with BKP2 or across other SKPDs. Agency for Food Security • Implement the Gernas program through pro- • BKP2 coordinates with Distanbun and Agricultural Extension viding fund sharing to fi nance the implemen- in mentoring and training farmers. (BadanKetahananPangan- tation of fi eld operations. • Strengthen coordination between danPenyuluhKabupaten- • Provide fertilizers at subsidized prices to BKP2 and Distanbun Sikka, BKP2) farmer groups. • Enabling BKP2 as extension agency • By way of the Gernas program select prospec- in charge of assisting the Technical tive farmers and land area as the location of Department. activities. • By way of the Gernas program provide equipment assistance and carry out capacity empowerment of farmers. NGOs: • Instrumental in increasing cocoa productivity, • Involving SKPDs in relation with • Swisscontact on farm »» off farm program implementation. • WVI • Capacity building of farmers through the Field • Program coordination between • Caritas School (FFS). NGOs and the local government. • YPMF • Improving quality of life of farmers, education • Plan and health. • Promote marketing of cocoa. • Establishment of modern farmers. Farmers/Farmer groups • Conduct cultivation and post-harvest activities • Farmers do not keep on hoping on • Farmers have not been too motivated to partic- aid programs from central govern- ipate in training activities (not at a maximum) ment/local government. • Farmers’ capacity and knowledge has improved thus motivated to take good care of their farms. • Farmers are motivated to undertake joint marketing. Master trainers • Conduct training, coaching and mentoring • Increase the number of master to farmers related to cultivation, production, training in order to optimize farm- post-harvest and marketing activities. ers’ empowerment activities. • Training and guidance to farmers is strived to be more intensive and sustainable. Key farmers • Conduct training and mentoring to farm- • The local government needs ers related to cultivation, production, to pursue more training for post-harvest and marketing activities. farmers thus assisting the local government in farmer capacity building and mentoring. • Coaching and mentoring intensively by farmers in order to improve the quality of cocoa and always give motivation to them to always take good care of their farms.

21 PARTIES CUR- RENTLY IN- CURRENT ROLE EXPECTED ROLE VOLVED Local traders (Vil- • Currently merchant collectors • Local traders quote cocoa price according to lage/Sub-regency go directly to the homes of market price and quality. traders) farmers to buy cocoa beans in • Local traders provide correct market price infor- wet or half dry condition from mation to farmers. them. • Increased knowledge capacity of local traders • Merchant collectors will again on good quality cocoa. dry the cocoa beans which in general take about 3-4 days. • Merchant collectors sell the cocoa beans to sub-regency collectors or to regency merchants. Regency traders • Obtain cocoa beans from local • Provide fair cocoa price to match with the qual- (-/+ 20 actors) traders. ity. • Regency merchants sometimes • Increased knowledge capacity of local traders provide capital support to lo- on good quality cocoa. cal traders to buy cocoa beans • Give guidance to farmers on crop cultivation directly from farmers. and marketing. • Regency merchants resell their cocoa beans to wholesalers in Makassar or Surabaya (PT. Mars Comextra Majora). PT. Mars, Comex- • Training and mentoring of MT • Conduct intensive training to local traders tra Majora, PT. and KF at the time of SL imple- related with cocoa quality in accordance with Bumi Tangerang mentation, including transfer of quality standards as required by the market. knowledge about quality • Price and purchasing information • In cooperation with certifi cation bodies to socialize “Cocoa Sustainability Certifi cation” to all stakeholders. Farmer Groups • Accomodate cocoa yield from • Establish joint marketing programs Yield Processing farmers/farmer group members • Encourage farmers to sell their cocoa at UPH, Unit (UPH) with pricing according to the for example by seeking return of buliran funds quality and volume »» farm- (cooperation with fi nancial institutions/local ers get bett er bargaining price government). (tester 7 Rp 17-18 thousand). • Provide education to farmers on good quality cocoa for sale. • Perform fermentation and drying of cocoa beans again. • Sell dry cocoa beans to Comex- tra (minimum 1 tonne).

Dirgahayu Store • Supply of agricultural equip- • The local government is expected to seek several ment and fertilizers »» Most other stores so that in terms of distance they can fertilizers are used for food facilitate farmers and cocoa price can be more crops competitive. • Dirgahayu store may contribute further to accommodating agricultural products from farmers thus able to assist farmers in terms of marketing. Expedition com- • Inter-island transportation of • Goes according to market mechanisms. panies commodities (Makassar and Surabaya)

22 Needs Assesment of Cocoa Business Development Using the Value Chain Approach, Case Study on Sikka Regency, NTT

Based on analysis of cocoa stakeholders in Sikka, who have been playing a small role, and in the future there are several stakeholders that should have a are expected to play a larger role, in order to create more important role, but their role so far is still not changes to improve the business climate in the cocoa optimized. The following is the list of stakeholders value chain in Sikka Regency.

Table 4. Matrix of Stakeholders with a Non-Optimal Role STAKEHOLDERS WITH A NON-OPTIMAL ROLE STAKEHOLDERS CURRENT ROLE EXPECTED ROLE Sikka Regency Parlia- • Not playing a signifi cant role in creat- • DPRD along with the local government (DPRD) ing a clear regulatory framework ment through legislative functions related to cocoa development. can be involved in cocoa development through the creation of the required regulatory framework. University’s Research • Seeds activity has not yet been sought • The need to involve all relevant and Development stakeholders including the local government to initiate seeds activity that matches the natural conditions of Sikka (NTT), for example through scientifi c study competitions as a fi rst step to identifying suitable seeds. Church • Currently less instrumental in moti- • Provide understanding to farmers in- vating cocoa farmers. taking good care of their cocoa farms through church activities. • Develop a culture to establish groups. Financial institutions • Cooperatives and other fi nancial insti- • In cooperation with the local gov- (Banks; Cooperatives; tutions have currently not yet granted ernment as a guarantor for farmers etc.) loans or bailout loans to farmers. who have applied for loans. This can • Currently saving and lending or encourage farmers to engage in joint capital schemes are more directed to marketing eff orts. business services for consumption purposes, not to agricultural and plantation sectors. Local media both • There has been no transfer of infor- • Utilize the role of the media to en- radio and newspaper mation related to cocoa development hance farmer knowledge and technol- raised by the media. ogy transfer both in terms of cultivation and marketing. Industry • Several processing industries (still • The need for increased cooperation scarce in number) have entered into between the industry and farmers/ cooperation with the local government farmer groups directly so as to moti- to provide counseling and capacity vate farmers to further improve the building of farmers both in cultivation productivity and quality of cocoa as and in post-harvest processing demanded by companies. This cooperation may shorten the supply chain so that farmers can get a bett er price. • The need for cooperation between industrial companies and banks (fi nancial institutions) in order to overcome capital constraints oft en faced by farmers. In this case the industrial company can act as an avalyst (foster parent) for the farmers.

23 V. CLOSING farmers can be done through several programs such as: The operational steps that need to be realized through • Training of farmers to bett er farm cocoa cocoa agribusiness development policy in Sikka (GAP), among others through the provision of Regency are through planning, implementation, a budget for training and comparative study; and participatory monitoring that work together • Strengthen institutional capacity of farmers in (integrative), thorough (hollistic), and continuous terms of strength of its legality (legal entity); (sustainable) based on memorandum of understanding • Strengthen and sharpen empowerment between the various parties (stakeholders). programsfor farmers and farmer groups; and so forth. Proposed Interventions • Develop alternatives oft he economic safety net apart from cocoa trading business. To overcome the problems surrounding the cocoa business value chain in Sikka in order to improve 5. Strengthen the capacity and number of PPLs as cocoa business climate, a number of recommendations a solution to overcome low cocoa productivity of proposed interventions are as follows: problems in Sikka. Several activities or programs to be carried out to strengthen the capacity and 1. Increase commitment in cocoa business number of PPLs are as follows: development, through: • Capacity building and optimization of • Increased budget allocation from the local existing PPLs functionally at all levels of the budget (APBD) in the context of cocoa government; business development. • Institutional strengthening and restructuring • Provide regulatory framework for integrated of Distanbun; and so forth. development of the cocoa sector, according • Improving coordination between Distanbun to the needs of each aspect of the value and BKP2; chain (Input Availability Aspect; Production; • Training of Trainers (TOT)and fi eld school for BusinessAdministration/Marketing, etc.) and PPLs and addition of the number of PPLs of at the role of the local government in facilitating least 1 person per village; and determining market price, so that farmers’ • Optimization of the role of independent bargaining power becomes higher. extension workers in every village; • Planning and development of sustainable cocoa businessesand more focused on The alternative interventions above can be carried out capacity building of farmers and not just a as follows: physical program. 1. Increase government spending on legal aspects 2. Strengthening coordination across stakeholders of fi nancing, development of farmers, farmer and SKPDs (Disbuntan& BKP2, and others) as groups, extension workers (socialization, well as program coordination between NGOs counseling, training, education, and so forth), and and the local government, and more actively microfi nance business development at the farm engagewith banking institutions to provide level. capital support to cocoa farmers. In the context of 2. Budget allocation by the local government strengthening coordination across stakeholders or related agencies as well as facilitate cocoa has been conducted Revitalization of the Regional farmers to more easily obtain loans from fi nancial Economic Cooperation Council (DKED) through institutions. amending the legal basis for its formation.DKED 3. Other policies, both in the form of local regulations revitalization can be performed by issuing local (Perda)/Head of Regencys regulation (Perbup) as regulations (Perda)/Head of Regency Regulation well as in the form of programs that are structured (Perbup) to: Clarify, Reinforce, and Expand the based on two alternative measures which are Scope/Function, Structure, and Authority of the combined as follows:The government establishes DKED. a mechanism for the coaching process of cocoa farmers, farmer groups through the provision of 3. Breaking farmers’ dependence on merchant information, business development (management, collectors through capacity building of farmers marketing and technology), training and and farmer groups for joint marketing eff orts, subsidies. Additional programs to strengthen as well asthrough strengthening of the UPH to the capacity and the number of PPLs should also accommodate farmer yield. be implemented. The rules of the game are then used as the basis of the rules of the game for each 4. Capacity building of farmers and institutional stakeholder involved and included in the DKED.



24 RESEARCH REPORT

National Movement of Cocoa Production and Quality improvement (GERNAS KAKAO)

IN COOPERATION:

FORD FOUNDATION and Regional Autonomy Watch

Jakarta 2013 LIST OF CONTENTS

List of Contents ...... i List of Tables ...... ii

I. Background of GERNAS Cocoa ...... 1 II. National Implementation of GERNAS Cocoa Program...... 1 2.1 Institutional Structure...... 1 2.2. GERNAS Program Target ...... 2 2.3. National Evaluation of GERNAS Implementation...... 3 III Implementation Of GERNAS Cocoa Program in Sikka...... 4 IV. GERNAS Cocoa Program Achievement in Sikka...... 6 V. Consclusion and Policy Recommendations...... 13

Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

I. BACKGROUND

Cocoa is Indonesia’s strategic commodity that has area in its early implementation (2009) consisted of become one of the foreign exchange resources of the 40 regencys in 9 provinces, because the benefi ts are country. In 2009, Indonesian cocoa accounted for the huge, the scope has been expanding every year until third largest exports aft er oil palm and rubber (FAO, it reached 98 regencys in 25 provinces (2011), but the 2010). Cocoa productivity volume reached 844,626 scope subsequently decreased to 12 provinces in 2012 tonnes (in 2010), making Indonesia the second largest and again to 4 provinces in 2013 adapted to the Gernas cocoa producing country aft er the Ivory Coast with target area coverage which include 450 thousand ha. an export value of 1,242,290 tonnes (FAO, 2010). Cocoa plantation area continues to grow each year Of the 5 (fi ve) Gernas cocoa target regions, NTT (at an average of 7.9% per year), but this does not province has became one of Gernas program necessarily improve cocoa productivity further, implementation activities located in the regencys instead cocoa production is declining. Data from of Sikka and Ende. With total plantation area of the Directorate General of Plantation, Ministry of 46,465 ha and annual production of 12,278 tonnes, Agriculture showed that over the last 4 years cocoa NTT province ranked fi ft h aft er Sulawesi, Sumatra, production has decreased quite dramatically from Maluku and Java (BPS, 2011). In NTT province, cocoa 1,100/kg/ha/year to 660/kg/ha/year or about 40%. is a commodity that gives the highest contribution in the fi eld of plantation aft er coconut, cassava, corn, The decline in productivity is among others due to and coff ee. Cocoa cultivation system is still traditional slow rejuvenation (old age trees), lack of maintenance and the reluctance and lack of knowledge of farmers of existing cocoa trees, cocoa fruit borer pests are factors that lead to the low cocoa productivity and (PBK) and vascular streak dieback disease (VSD) quality in NTT province. Cocoa productivity in NTT thus causing a decline in the quality of cocoa beans is low (264.2 kg / ha / year), far below the national produced. Decline in cocoa productivity has resulted average (900 kg / ha / year). If managed properly, NTT in decreased welfare of the people, especially in has a potential to become the largest cocoa producer. cocoa production center regions. The cocoa sector is Total land area is huge reaching 385,711 ha (89% a refl ection of the people’s economy, because cocoa expansion). is the main source of livelihood for nearly 1.5 million households. Of the total area of land development Cocoa cultivation development in NTT is scatt ered which reached 1.6 million ha, about 96% of cocoa throughout the province with the exception of cultivation businesses are run by smallholder farms, Rote and Ndao Regencys and Kupang City with with about 0.25 ha of land ownership each. Besides the highest production in Sikka Regency (10,325.20 the decreased welfare of farmers, the decline in tonnes). Cocoa land area in Sikka reached 21,568 ha cocoa productivity also decreases cocoa productivity with a total production of 7,158 tonnes (Department at a national scale. This not only further diminish of Agriculture and Plantation, NTT Province, 2011). Indonesia’s ideals to become the world’s largest cocoa Potential land area for cocoa development in Sikka is producer, Indonesia may instead become the largest the largest in the province (followed by the regencys of cocoa importing country. Ende and East Flores), but its poor condition is one of the reasons why the Government has appointedSikka With all these problems, the Government has taken as the target region for the Gernas cocoa program. improvement steps through the Cocoa National Movement (Gernas) program implemented since In order to measure the success of a program in 2009. Gernas cocoa is a movement to increase achieving targets and improvements for the future, national cocoa production and quality to accelerate an evaluation needs to be done on the program. the increase in national crop productivity and quality The evaluation includes program performance by empowering/involving optimally all potential achievement, realization, impact and benefi ts stakeholders and available resources. resulting from Gernas activities in increasing the productivity and incomes of cocoa farmers. the Gernas program originated from the initiative of structure 4 governors of Sulawesi (South Sulawesi, North Sulawesi, West Sulawesi, and Southeast Sulawesi) II. NATIONAL IMPLEMENTATION OF as the largest cocoa commodity center regions in GERNAS COCOA PROGRAM Indonesia (accounted for 60% of cocoa nationally). In August 2008, this initiative was welcomed by Vice 2.1 Institutional Structure President Jusuf Kalla at the time who then established the Cocoa National Movement (Gernas) program in Gernas is a joint program involving various order to improve cocoa production and quality with relevant stakeholders, both from Government its implementation undertaken in 2009. Gernas target and Non-Government elements. The parties

1 involved include the Government, Provincial 2.2 Gernas Program Target Government, Regency/City Governments, the private sector, banks and also farmers. Gernas cocoa program is aimed at increasing In order to support the achievement of the the production and quality of cocoa production. program, each party is expected to contribute Through increased productivity and quality and support Gernas cocoa activities. Here is the of cocoa beans it is expected to increase the implementation structure of the Gernas cocoa incomes of cocoa farmers. Gernas target program. includes the following programs:

Figure 1. Organizational Structure of the Implementation of the National Movement For Cocoa Production and Quality Improvement Based on Minister of Agriculture Decree No. 1643/Kpts/OT.160/12/2008

Minister of Directorate Agriculture General of Plantation

R & D, University, Provincial Private,NG Governor Headof Os Plantation

DistrictHea Regent d of Plantation

UPP

Information: Farmer : Command line : Coordination line Groups

2 Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

1. Improvement of people’s cocoa plantations the implementation of Gernas cocoa in 2009- covering 450,000 ha, consisting of: 2012 conducted by an independent team (in • Rejuvenation of crop area of 70,000 ha; cooperation withthe Directorate General • Rehabilitation of crop area of 235,000 ha; of Plantation, Bappenas, and Ministry of • Intensiﬁ cation of crop area of 145,000 ha. Finance). 2. Empowerment of farmers through training and assistance to 450,000 farmers. 3. Control of pests and crop diseases covering an area of 450,000 ha. Table 2.Potential Productivity of Gernas 4. Improved quality of cocoa in accordance with SNI. Cocoa Implementation Periods 2009-2012

Table 1.Gernas program target for Potential 2009-2011 Initial Productivity Productivity No. Activity (Kg/ha) (Kg/ha) Target Realization Year Program Specifi cation Value % (ha) (ha) 1. Rejuvenation 442 1,100 249 1.Rejuvation 20,000 20,000 40 regencys, 2009 2.Rehabilitation 60,000 59,600 2. Rehabiltation 567 1,600 282 9 provinces 3.Intensifi cation 65,000 65,000 3. Intensifi cation 1,089 1,100 101 1.Rejuvation 15,150 14,850 56 regencys, 2010 2.Rehabilitation 28,613 28,394 Source: Directorate General of Plantation, Ministry of Agriculture, 13 provinces 3.Intensifi cation 15,900 15,900 2011. 1.Rejuvation 49,500 40,000 98 regencys, Although the implementation of the Gernas 2011 2.Rehabilitation 74,200 69,050 program only covered 30% of the total 25 provinces 3.Intensifi cation 62,800 43,200 area of cocoa plantations in Indonesia, Source: Directorate General of Plantation, 2012. but the program has been able to increase productivity. Based on the above data, plus the results of interviews conducted From the above table can be seen that actually with the Directorate General of Plantation, the achievement of the Gernas target which Ministry of Agriculture, it transpired that the covered 450 thousand ha is almost completed. implementation of the Gernas cocoa program The rest of approximately 128,160 ha was has been instrumental in increasing cocoa completed in 2012-2013 which covered 5 productivity by more than 200%. Though (fi ve) largest cocoa producing provinces the implementation of the Gernas program namely South Sulawesi, West Sulawesi, only covered 30% of the total plantation area Central Sulawesi, Southeast Sulawesi and in Indonesia. This means that if the Gernas NTT. Although in broad outline the Gernas program can be implemented on an ongoing cocoa target has been realized, but given the basis it is possible that Indonesia can beat vast land area of cocoa reaching 1.6 million Ivory Coast and Ghana as the world’s largest ha, the Gernas program only covers 30% of cocoa producers. Similar to the opinion of the the total land area of cocoa in Indonesia. government, cocoa entrepreneurs themselves admit that the Gernas cocoa program is able to maintain the availability of domestic raw 2.3. National Evaluation of Gernas Implementation materials. Although the Gernas program coverage area only reached 30% of the total The Gernas program is able to show an area of cocoa plantations (1.6 million ha) in increase in cocoa productivity and quality in Indonesia, the program has helped safeguard Indonesia. Data from the Directorate General cocoa production in the country so that in 2012 of Plantation of the Ministry of Agriculture productiondid not decrease signifi cantly. showed an increase in productivity of the cocoa crop particularly in the implementation However, the limited range of the Gernas of rehabilitation activities through side- target has created some concern among graft ing and graft ing shoots. The results of entrepreneurs about the availability of raw these two activities can be seen in a period materials for cocoa in the future. As it is of 1.5 years, much faster than the planting known, in addition to the Gernas program, of seedlings (rejuvenation), the results of the government through the Ministry of which can only be seen aft er 3 years. The Finance (MoF) has imposed export duty following is data on potential increase in against entrepreneurs who sell cocoa in the cocoa productivity from the evaluation of form of beans without any added value. On

3 the one hand, the implementation of this Local governments and stakeholders are policy has a positive impact on increasing expected to continue implementing the the domestic cocoa processing industry, but Gernas cocoa program in their regions. on the other hand the increase in processing Gernas is only a stimulant program to industry growth has not been matched with provide understanding to the regions an increase in productivity of cocoa beans about the importance of cocoafarming raw material so that there is some concern development for the improvement of the from the entrepreneurs about the possible people’s economy and increased economic disappearance of raw materials in the market. activities in the regions, so that with the end of this cocoa program it is expected there Gernas program sustainability is looked will be similar programs implemented by the forward by local governments and local governments. In implementing cocoa entrepreneurs. The Ministry of Agriculture development programs in their regions, the through Heri Mardianto, Gernas Secretary has local governments are expected to establish explained that the Gernas program will end partnership between them and entrepreneurs in 2013. Based on consideration of the many or between entrepreneurs and other relevant other superior commodities that also require stakeholders (banking institutions, NGOs, intensive care, the Ministry of Agriculture and and other institutions) in an eff ort to improve the President has signed an Integrity Pact that cocoa productivity and quality in Indonesia. contains a shared commitment to implement the sugar self-suffi ciency program. The plan of the government to replace the Gernas program with the sugar self-suffi ciency III. IMPLEMENTATION OF GERNAS program in 2013 has raised concerns from COCOA PROGRAM IN SIKKA local governments and businesses towards cocoa development in the future. In terms of Sikka Regency has the largest cocoa plantation area Top of Form in the province, but cocoa productivity in Sikka is below the national average. Cocoa plantation area in local governments even though the Gernas NTT province reached 46,245 ha and about 48% of it is program is only a stimulant program but in Sikka. Cocoa farm ownership of the average farmer local governments are expecting longer- is 0.25 ha and Sikka farmers accounted for about term assistance from the central government 55.1% of cocoa farmers in NTT, namely 321kg/ha/year. until they are able to independently develop When compared with the national cocoa productivity superior commodities in their regions. that reached 900kg/ha/year, cocoa productivity in Meanwhile, for businesses the existence Sikkais relatively very low. The low production and of the Gernas program in improving the quality of cocoa is caused by several things, namely productivity and quality of cocoa is able to the large number of old age cocoa trees (30-40 years), guarantee the security of raw material supply lack of knowledge of farmers to properly take care of cocoa, so that the domestic processing of their cocoa farms, the presence of pest att acks and industry can continue to thrive. poor post-harvest handling. With the variety of problems that cause a decrease in cocoa productivity, the Government has selected Although the Gernas program has ended, Sikka as the region for the implementation of the cocoa development programs remain with Gernas program. In order to optimize the achievement smaller scope of activities. The shift of state of the Gernas program, the role and involvement of all budget funds from cocoa to sugar does stakeholders is a critical factor in the implementation not mean to eliminate cocoa development process of the program. The following is the role programs altogether. In the fi rst years of its and involvement of each implementer of the Gernas implementation, the Gernas program has program. carried out rejuvenation, rehabilitation and intensifi cation activities so that in the next a) Government Institutions (Provincial and Local years, most needed are programs on capacity Governments) and institutional building of farmers. Heri Mardianto, Gernas Top of Form Responsible for the implementation of the Gernas cocoa program in Sikka is the Regency Secretary explained that cocoa development Department of Agriculture and Plantation in programs in the future will be prioritized at coordination with the Provincial Department of improving empowerment of cocoa farmers Agriculture and Plantation as well as the Central towards self suffi ciency and the reduction of Government through the Directorate General of subsidized inputs such as fertilizers and farm Plantation. The Top of Form equipment.

4 Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

duties under the authority of Sikka regency the new employees through the recruitment government has been clearly stated in the general mechanism. In fact on the ground, the selected PLP- technical guidelines on the Implementation of TKPs did not have enough experience and technical Gernas, in which Sikka regency government knowledge of the duties and responsibilities of allocated a budget from the local budget to a PLP-TKP. The obstacles when on the ground, support the implementation of Gernas including: in addition to having limitations in terms of technical ability, PLP-TKPs oft en have diffi culties 1. Provide fi nancing and determining prospective in approach farmers to undertake cultivation and farmers/potential land (CP/CL); post- harvest processing. Supposedly, in selecting 2. Provide fi nancing and conduct several PLP-TKPs, the local government uses properly activities of empowerment/training of farmers trained assistants with good technical skills so that and socialize the application of the SNI; the eff orts to empower farmers can be performed optimally. 3. Provide fi eld extension workers including fi nancing;

4. Provide funding for program operational Third, BKP2 existence has not been optimized for support facilities including procurement of technical assistance. BKP2 as food crop extension materials and equipment for rejuvenation agency in institutional and technical capacity is activities. more appropriate to deliver training and guidance 5. Provide fi nancing for development, to farmers, but its involvement in the Gernas coordination, monitoring and evaluation program has not been optimized. The extension including socialization activities. workers under the BKP2 have psychologically known the farmers and are closer to the farmers so that the approach they made are welcomed In terms of providing executing human resources, by farmers. In order to support the achievement there are several obstacles in the implementation of program objectives and the accuracy of the on the ground. targeted goals, the Sikka regency government should supposedly increase coordination with First, assistants are limited both in terms of BKP2 as the agency responsible for implementing quantity and quality. In the Gernas general empowerment programs to farmers. The lack of technical guidelines is stated that provincial and coordination among related parties and the absence regency/city governments have the authority to of regulations governing the synchronization and provide assistants. In this case NTT provincial synergy of programs among SKPDs, particularly government and Sikka regency government the Department of Agriculture and Plantation as have recruited 185 new assistants consisting of well asBKP2 in relation with the assistants, have 48 S1 graduates as contract labor and 137 high led to non-optimized implementation of farmer school graduates as support fi eld offi cers to assist empowerment programs. contract workers (PLP-TKP). The assistants are new recruits that did not come from the Agency b) Financial Institutions for Food Security & Agricultural Extension (Badan Ketahanan Pangan dan Penyuluhan, BKP2) but The 4-year Gernas program is fi nanced by the generally come from diff erent backgrounds so state budget, provincial budget, regency budget, that prior to implementation of the program, all bank loans, the private sector and farmers. PLP-TKP are trained centrally at Puslitkoka in Financing from banks is intended to fi nance crop Jember. Although all assistants have been trained, maintenance activities in the second year and so on however training time is short and assistants who through the plantation revitalization program set generally come from diverse backgrounds do not forth in Minister of Agriculture Regulation No. 33/ have the suffi cient technical ability to transfer Permentan/OT.140/7/2006 on the Development of knowledge to the farmers, for example, assistants Plantations through the Plantation Revitalization are less able to approach the farmers to persuade Program and Minister of Finance Regulation No. them to att end training, the assistants conduct 117/PMK.06/2006 on Bio Energy Development rehabilitation activities on their own without and Plantation Revitalization Loans (KPENRP). involving the farmers, in addition to the lack of Although the government has allocated a budget knowledge leading to failure in carrying out side- from the state budget/local budget and provided graft ing and graft ing shoots techniques. credit assistance to farmers, the implementation of the Gernas program is still constrained in terms Second, the assistants (PLP-TKP) are new recruits of funding, along with some constraints related to and are not experienced assistants already trained the fi nancing and utilization of the credit support before. The local government which has the scheme provided in the Gernas program. authority to hire assistants (PLP-TKP) selected

5 First is limited budget allocated to the Gernas farmers, the local government can also provide program. The government has allocated a budget convenience to them through the land certifi cation of 1 trillion per year, but implementation was program for farmers so that their land can be used not in accordance with the needs on the ground. as collateral. The budget allocated to Gernas in Sikka Regency alone reached 2 billion rupiah for the overall c) Non-Governmental Organizations (NGOs, the implementation of program activities. The funds private sector, churches, etc) are managed directly by the Directorate General of Plantation. Based on interviews, the Department The cocoa development program in Sikka is of Agriculture and Plantation stated that the local included in the Gernas program, with more active government only play a role in the allocation of involvement of the private sector, especially NGOs. 10% funds of the overall funds (approximately 80 In Sikka, there are quite a lot of NGOs (6 NGOs: million) to fund operations of fi eld work, while Swisscontact, WVI, Caritas, YPMF, Plan and all seeds and tools are brought in from outside Yayasan Karya Sosial-YKS) that provide guidance, Sikka Regency so that most (almost all) of the especially in terms of increased revenue and allocated funds go back to the central government welfare for the community in Sikka. In line with and practically the region gets no benefi t at all. the goals to be achieved, these NGOs are involved Budget constraints have led to the non-optimized in the empowerment and capacity building of achievement of the Gernas program. farmers in crop cultivation and post-harvest processing. Besides NGOs, churches in Sikkaalso Second is the non-optimal utilization of working play a role although still small butt hey have begun capital loansfor farmers. The government to play a more important role in motivating people provides working capital loans at low interest rates to improve the welfare of the community in Sikka. (6%) through the plantation revitalization grant The involvement of NGOs and other institutions scheme (KPENRP credit). With this credit scheme, has been perceived benefi cial by Sikka farmers as the government subsidized the excess interest to they are more directly involved in every activity be paid by farmers (10%) in the hope that farmers process, for example through practices performed can more easily access working capital to fi nance in the fi eld school by Swisscontact and WVI. maintenance of their farms including purchase of fertilizers, pesticides, and agricultural equipment. However, in practice only a few farmers have IV. GERNAS COCOA PROGRAM made use of the funds. Several obstacles that ACHIEVEMENT IN SIKKA exist in utilizing the credit scheme are among others lack of collateral to apply for working The coverage of the Gernas cocoa program in Sikka capital loans, lack of local government’s role as has only reached 14% of the total plantation area. a facilitator between farmers and banks and lack Cocoa plantation area in Sikka is very large, reaching of socialization of cheap credit from banks. These 21,568 ha, but by 2012 the Gernas program was conditions are recognized by the Gernas Secretary, only able to cover about 3,050 ha and 200 ha of Heri Mardianto stating that the lack of local additional rehabilitated land in 2013. Gernas program government’s role as a mediator between farmers implementation is scatt ered across 13 (thirteen) sub- and banks is because of less optimal absorption of regencys, namely the sub-regencys of Talibura, the KPENRP credit funds that have been launched Waigete, Bola, Doreng, Hewokloang, Kangae, Nelle, by the Government (Ministry of Finance). Koting, Nita, Lela, Mego, Paga, and Tanawawo. The following is the regional distribution of Gernas Based on the results of focus group discussions program implementation in Sikka Regency. with cocoa stakeholders in Sikka, these barriers in access to capital are recognized both by the local The above table shows that the largest concentration government and the banks themselves. In this of activities was carried out in the fi rst year, reaching case, the local government has been less active in 1,650 ha (2009), with scope of activities covering socializing the cheap credit program to farmers. rejuvenation, rehabilitation and intensifi cation. In addition, the lack of local government’s role During the fi rst year the scope was broader aiming is also evident from the absence of eff orts to to rejuvenate damaged and old cocoa trees, while facilitate access for farmers to get working capital in subsequent years more activities were aimed at loans. The absence of a program to bring together rehabilitation of cocoa trees. In subsequent yearsthe farmers and banks, and the absence of land titling scope of activities was more focused on rehabilitation facilities for farmers are the causes of farmers’ and intensifi cation activities so that land coverage lack of access to working capital. The government declined. The above table shows that the Gernas land should be able to act as foster father to serve, area coverage has declined, namely 400 ha in 2010, protect and guarantee farmers who generally do 600 ha in 2011, 400 ha in 2012 and only 200 ha in 2013. not have collateral when applying for credit. In Through this Gernas cocoa program the government addition, to foster the confi dence of banks towards provides an assistance program through 3 (three)

6 Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

Table 3.Distribution Data of Gernas Cocoa in Sikka Regency Fiscal Year 2009-2012

FISCAL YEAR NO. SUB-Regency 2009 2010 2011 2012 2013 PRIPIPRIRIR 1. Talibura 175.3 11 2. Waigete 44.5 10 3. Bola 117.5 25 4. Doreng 100.5 44.5 5. Hewokloang 149.5 93 50 80.5 6. Kangae 30 7. Nelle 35 8. Koting 42 15 70 9. Nita 58.8 382 25 25 200 200 10. Lela 44.5 200 30 20 25 11. Mego 92.8 150 15 130 50 12. Paga 100 124 15 60 20 125 13. Tanawawo 40 25 TOTAL 250 400 1000 150 250 200 100 300 200 200 200 GRAND TOTAL 3,250 Ha

Source: Department of Agriculture and Plantation, Sikka, 2013. Information: P= Rejuvenation R= Rehabilitation I= Intensifi cation main activities, namely rejuvenation, rehabilitation, An aid Top of Form and intensifi cation as well as a program to empower farmers through capacity building both in terms of Package contains cocoa SE seedlings, pesticides, cultivation and post-harvest processing including fertilizers, equipment (hand-sprayers and giant cocoa product standardization (SNI) eff orts.The scissors), intercrop seeds, and wages based on following describes more in-depth the eff ects and general technical guidelines for the implementation benefi ts obtainedby farmers in Sikkafrom the as set forth by the Directorate General of Plantation implementation of the Gernas cocoa program. of the Ministry of Agriculture. In addition, the criteria of farms subject to the rejuvenation 1. Rejuvenation Activities program must match the criteria established by the Directorate General of Plantation of the Ministry Rejuvenation is intended to replace old trees of Agriculture as set forth in the general technical and plant new superior seedlings (Somatic guidelines for 2009-2011. Here are the criteria of embryogenesis - SE) , or new trees obtained farms subject to rejuvenation activities: from side-graft ing or graft ing shoots. Through rejuvenation, cocoa trees aged over 25 years are cut a) Productive age cocoa trees (age>25 year); down to bereplaced with somatic embryogenesis b) Number of stands/tree population < 50% of the (SE) seedlings.SE seedlings are clones from standard number (1,000 trees/ha); superior seedlings in the region which are then c) Crop productivity is low(<500 kg/ha/year); replicated into new superior seedlings based on d) Att acked by major pests and diseases (PBK a study conducted by the Cocoa Research Center andHelopeltis spp pests, VSD and Rott en Fuit (Puslitkoka) in Jember, East Java.The advantages diseases); of SE seedlings include high productivity, long e) Qualifi ed land suitability, including: 1,500-2,500 life and resistance to pests and diseases, thus it is mm of rainfall (very appropriate) and 1,250-1,500 expected that cocoa beans produced from the SE mm or 2,500-3,000 mm rainfall (appropriate), seedlings will increase and are more resistant to 0-8% slopes (very appropriate) and 8-15% slopes pests and diseases. (appropriate).

7 Based on the above criteria, the target and The low level of knowledge of farmers has become realization of the rejuvenation program conducted obstacles in rejuvenation activities. The majority in Sikka reached 600 ha spread across 6 (six) sub- of cocoa trees in Sikka are old (> 25 years), so that regencys, namely the sub-regencys of Hewokloang, the rejuvenation program is essential to increase Doreng, Bola, Paga, Mego, and Waigete. Here are the productivity of cocoa trees. The diffi culty of the regions of rejuvenation activities in Sikka. persuading farmers to cut down their trees is one of the barriers to this rejuvenation program. Table4. Achievement of Rejuvenation Activities Cocoa farmers regarded cocoa trees as a source in Sikka of livelihood thus they are worried about losing their income if the cocoa trees are cut down. Regency Fiscal Year Farmers want to cut down their cocoa trees if the 2009 2010 2011 (1,5T) 2012 Total government is willing to provide fi nancial security Sikka 250 150 200 - 600 to compensate for their loss of income from the cocoa trees. In addition to concerns that they will Ende 250 100 300 100 750 lose income, cocoa farmers in Sikka are reluctant East Flores - 150 300 - 450 to prune their cocoa trees due to psychological factors and the belief that the trees should not be pruned, if pruned the trees will not bear fruit Source: Directorate General of Plantation, Ministry of Agriculture, 2013. again. Due to the psychological constraints, there is a need for eff orts to improve farmers’ Based on the data from Table 3 above, the actual knowledge continuously and sustainably so that achievement of rejuvenation activities in Sikka their knowledge about cultivation improved and reached 100%. In terms of productivity (see they no longer feel worried when their cocoa trees table 4), rejuvenation activities also showed an are cut down. increase in the productivity of cocoa beans, but unfortunately the number was not signifi cant. Technical factors have become another obstacle In addition to a long time to reach fruition (4-5 in the implementation of rejuvenation activities years), the existence of some constraints both in in Sikka. Rejuvenation activities have been terms of farmers, technical implementation, as performed using SE seedlings produced through well as lack of coordination by program executors research conducted at Puslitkoka in Jember. resulted in many obstacles in the implementation However the SE seedlings have not been tested in of rejuvenation activities. the fi eld before and have proven to be not suitable with the geographical conditions in Sikka, so that Based on the Gernas implementation report by the results gained were far from expectations. the Department of Agriculture and Plantation of Complaints also come from farmers claiming that Sikka, the two causes of dead trees are as follows: the quality of the SE seedlings is not bett er than the 1. High humidity because old/damaged trees previous cocoa trees. Unfortunately farms planted have not been removed with SE seedlings take a longer time to bear fruit. Therefore, the assumptions that SE seedlings 2. Cancer stems dieback due to pests and are more superior should be subject to further diseases(VSD) studies and adapted to the natural conditions and characteristics of the farm land of each farmer. Here are some of the obstacles encountered in the Besides requiring a very long time to bear fruit, implementation of rejuvenation activities in the based on interviews conducted with farmers and fi eld. several other stakeholders in Sikka, they generally argued that the majority of SE seedlings used

Table 5.Gernas Cocoa Tree Diversity Monitoring Form Rejuvenation Activities using Somatic Embriogenensis (SE) Seeds in 2009

Producitiv- Planted Dead Productivity Planting Time Life Crop ity 2011 No. Sub-regency Area Crop 2012 Average (Mth/Yr) (Ha) Average (Ha) (Ha) (kg) (kg) 1 Doreng Dec2009-Jan2010 100.50 83.49 17.01 25.00 175.00 2 Hewokloang Dec2009-Jan2010 149.50 133.40 16.10 35.00 225.00 TOTAL/AVERAGE 250.00 216.89 33.11 30.00 200.00

Source: Department of Agriculture and Plantation, Sikka 2010.

8 Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

have been infected by the severe VSD disease. c) Crop productivity is low (<500 kg/hektar/tahun) This condition has caused rejuvenation activities but still possible to be improved; in Sikka to become less optimal. d) Number of shade trees > 70% of the standard; A diff erent opinion was expressed by the Gernas e) Secretary, Heri Mardianto who said that the Att acked by major pests and diseases (PBK and constraint in the use of SE seedlings has not been Helopeltis spp pests, and Rott en Fuit disease); caused by the low quality of the seedlings, but more f) Qualifi ed land suitability, including: 1,500-2,500 due to transplanting process from the nurseries to mm of rainfall (very appropriate) and 1,250-1,500 the planting sites. Transportation process of SE mm or 2,500-3,000 mm rainfall (appropriate), seedlings that did not meet standards, delayed 0-8% slopes (very appropriate) and 8-15% slopes distribution schedule, inappropriate packaging (appropriate). process and sanitation of transportation not in accordance with set technical standards, all these have resulted in decrease in seedling quality or Based on the above criteria, the farm land area even death. The rough handling of SE seedlings for the rehabilitation program conducted in is due to ignorance on the part of assistants or Sikka reached 700 ha spread across 7 (seven) helpers who perform transport of the seedlings sub-regencys, namely the sub-regencys of Nita, from nurseries in Puslitkoka to the distribution Lela, Koting, Nelle, Talibura, Paga and Mego. area so that sometimes the seedlings are already The following is the achievementof rehabilitation damaged when they arrived at the planting site. activities in Sikka until fi scal year 2012.

2. Rehabilitation Activities Table 6.Achievement of Rehabilitation Rehabilitation is carried out on cocoa trees that Activities in Sikka are still productive but their productivity is declining. Main rehabilitation activities are done Fiscal Year Regency through a system of side-graft ing and graft ing 2009 2010 2011 (1,5T) 2012 Jumlah shoots using superior plant material, with the Sikka 400 - 100 200 700 hope that aft er 9 months the cocoa crop can already be harvested. The side-graft ing technique Ende 400 250 800 100 1,550 can make cocoa harvesting faster if compared to East Flores - - 100 - 100 traditional planting which would usually take 4-5 Source: Directorate General of Plantation, Ministry of Agriculture, years for cocoa trees to bear fruit. 2012. In the Gernas Cocoa Regional Technical Achievement of Gernas program implementation Guidelines for 2009-2011 issued by the Directorate through rehabilitation is considered bett er by General of Plantation, Ministry of Agriculture farmers if compared torejuvenating activities, is stated that the provision of aid package for in addition to shorter harvest waiting time and rehabilitation purposes include inputs, non- higher productivity. This is illustrated in Table 6 compound fertilizer subsidies in the form of below. briquett es (tablets) in light brown color as much as 200kg/ha with specifi c doses of 200 g / tree 1. Intensifi cation Activities (applied at the beginning of the rainy season), 1 (one) unit handsprayerequipement for each 5 ha, Intensifi cation activities are carried out on cocoa pesticides such as Matador brand insecticides of trees of productive age, with high production 1 (one) lt / ha, Toupan brand herbicides of 1 lt / potential, but limited application of cocoa ha and Amystartop brand fungicides of 1 (one) lt cultivation technology. The technology pursued / ha, as well as labor costs. Meanwhile, the areas in cocoa cultivation is P3S, namely pruning, for rehabilitation are farm land subject to the fertilizing, harvesting and frequent sanitation. following conditions: Pruning is intended to give room for suffi cient sunlight to the cocoa tree so that it can stimulate the a) Productive age cocoa trees (age <15 years) and growth of fl owers (if 30% sunlight is used). Pruning technically possible for side-graft ing; includes maintenance pruning, production pruning, or a combination of both. Production b) Number of stands/tree population 70%-90% of the pruning is generally done 1-2 times aft er each standard number (1,000 trees/ha);

9 Table 7.Gernas Cocoa Tree Diversity Monitoring Form Rehabilitation Activities using the Side-Graft ing Technique in 2009

Planting Dead Trees Productivity Productivity Sub- Planted Life 2011 2012 No. Time(Mth/ (Ha) regency Area(Ha) Trees(Ha) average (kg) average (kg) Yr)

1 Bola Sept-Dec 2009117.50 71,595 45,905 - 875.00 2 Doreng Sept-Dec 2009 44.25 31,405 12,845 - 550.00 3 Hewokloang Sept-Dec 2009 93.00 63,625 29,375 360.00 900.00 4 Koting Sept-Dec 2009 42.00 27,125 14,875 - 520.00 5 Nita Sept-Dec 2009 58.75 37,942 20,808 - 830.00 6 Lela Sept-Dec 2009 44.50 28,740 15,760 - 525.00

TOTAL/AVERAGE 400.00 260,432 139,568 360.00 700.00

Source: Department of Agriculture and Plantation, Sikka, 2010.

Causes of Dead Trees: 1. High humidity because the upper trunkhas not been felled. 2. Dead shoots/buds due to pest and disease att acks (helopeltis and VSD)

harvest, while maintenance pruning is generally appropriate) and 1,250-1,500 mm or done once a month or not routine depending on 2,500-3,000 mm rainfall (appropriate), the willingness of farmers. Maintenance pruning 0-8% slopes (very appropriate) and can be done through removing wild branches or 8-15% slopes (appropriate). water shoots. Fertilization is intended to provide the availability of nutrients to the trees so that Based on the above farm criteria, the locations of the soil becomes more fertile. Frequent harvest is Sikka farms for the intensifi cation program are spread intended to prevent the development of pests and across 6 (six) sub-regencys, in diff erent locations each diseases by harvesting cocoa fruits immediately year but with the majority of aid spread across the aft er havingreached maturity. Sanitation is sub-regencys of Nita, Lela, and Koting.The following intended to keep the farm environment clean, thus is the achievement of intensifi cation activities in Sikka preventing development of pests and diseases. Regency.

Based on Gernas Cocoa Regional Technical Table 8.Achievement of Intensifi cation Guidelines for 2009-2011 issued by the Directorate Activities in Sikka General of Plantation, the requirements for the Fiscal Year provision of support equipment within the Total Regency 2011 scope of intensifi cation activities are in the form 2009 2010 2012 2013 of fertilizers, pesticides, handsprayers, giant (1,5T) scissors and labor wages. While the requirements Sikka 1,000 250 300 200 200 1,950 to be met by cocoa farmersin order to participate Ende 1,000 200 650 100 - 1,950 in intensifi cation activities of the Gernas cocoa East Flores - 150 850 - - 1,000 program include: Directorate General of Plantation, Ministry of Agriculture, 2013. a) Cocoa trees are still young (< 10 years) but poorly maintained; These intensifi cation activities are very helpful in b) Number of stands/tree population >70% providing understanding of the importance of cocoa of the standard number (1,000 trees/ha); farm maintenance for farmers. Sikka cocoa farmers c) Crop productivity is low (<500 kg/hektar/ in general have the characteristics of not taking year) but still possible to be improved; intensive care of their farms and only visit their farms d) Number of shade trees > 20% of the at the time of harvest. Limitations of cost, time, and standard; energy as well as appropriate skills are the reasons e) Att acked by major pests and diseases why farmers are reluctant to perform intensive (PBK and Helopeltis spp pests, VSD and maintenance of their cocoa farms. The existence of Rott en Fuitdiseases). the Gernas program can become a driving force for f) Qualifi ed land suitability, including: farmers to start doing maintenance and fertilization 1,500-2,500 mm of rainfall (very of their cocoa farms.

10 Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

Fertilizer procurement assistance through the Gernas an integrated training to farmers on organic fertilizer program is in the form of special formula compound production using animal manure so that farmers fertilizers provided by the Provincial and Regency through the gapoktan are able to meet their own needs Departments of Plantation. These fertilizers are for fertilizers. produced exclusively from Puslitkoka analysis by taking samples of soil type and leaves to match the These intensifi cation activities are relatively soil conditions of the region concerned. Unfortunately successful, but due to the small coverage, the positive these fertilizers are not yet licensed and thus not impact has not been signifi cant. These intensifi cation publicly sold. The distribution of these compound activities experienced problems, caused by the lack of fertilizers to farmers is coordinated by the local provision of the aid package, the persistence of pest government through the Department of Agriculture att acks, and internal factors of farmers themselves and Plantation which in turn is coordinated by the who have not carried out farm maintenance on Gapoktan. The volume of fertilizers provided to an ongoing basis, so that the impact of the Gernas farmers is less balanced than the cocoa plantation program is not signifi cantly visible. Technical Top of area so that results are less optimal. In connection Form with this problem, there needs to be strong farmer institutions in the future to coordinate farmers in assistance provided through intensifi cation activities obtaining fertilizer aid and other assistance from the are only limited to the farms that have met the pre- government or other stakeholders. In addition, there defi ned eligibility criteria in the general technical is need for cooperation and involvement of other guidelines of the Directorate General of Plantation, stakeholders both from local government and non- and technical assistance was given only as a stimulus government elements (NGOs, businesses, banks) to so that farmers are expecting further aid programs provide technical assistance and training to cocoa from other stakeholders to be able to continue cocoa farmers to pursue organic fertilizers that they can intensifi cation and development activities more make themselves in farmer group institutions. independently.

The availability of specially formulated compound 4. Cocoa Farmers Empowerment Program fertilizers are only limited to the Gernas program. In addition to the 3 (three) main activities above, With the end of the Gernas program, the fertilizer in order to increase the ability of farmers both in support program which actually should be the cultivation and post-harvest processing, the Gernas local government’s responsibility as well as the program is also striving for afarmer empowerment awareness of the farmers to pursue independently program through capacity building and institutional has the potential to become unsustainable. Given strengthening of cocoa farmers. The following are the limitations of available fertilizers, the local eﬀ orts to empower farmers conducted within the government (Department of Agriculture and context of the Gernas program. Plantation) should facilitate the implementation of

Table 9.Gernas Cocoa Tree Diversity Monitoring Form Intensiﬁ cation Activities of Cocoa Trees in 2009

Productivity Productivity Productivity Implementation Planting No. Sub-regency 2010 2011 2012 year Area(Ha average (kg) average (kg) average (kg) 1 Talibura 2009 175,25 741 505 93 2 Hewokloang 2009 50,00 437 253 - 3 Nita 2009 382,00 869 569 - 4 Lela 2009 200,00 755 512 - 5 Mego 2009 92,75 654,00 462 - 6 Paga 2009 100,00 990,00 735 - TOTAL/RATA-RATA 1.000,00 741,00 506,00 93,00 Source: Department of Agriculture and Plantation, Sikka, 2010.

Information: 1. Pest and disease att acks. 2. Absence of further treatment. 3. Not all farms are participating in intensiﬁ cation activities.

11 1. The empowerment of cocoa cultivation is The minimal number of UPH is one reason why conducted through socialization, training, and farmers still prefer to sell their cocoa to merchant technical assistance to farmers. Crop cultivation collectors who are willing to come directly to training is organized through the fi eld school their homes. Besides located a far distance from where farmers are trained by a fi eld worker the residence of farmers their lack of motivation who will teach farmers how to properly conduct to perform fermentation also contributed to cocoa cultivation, including land fertilization and the less optimal role of the UPH. Farmers are sanitation (25% theory and 75% fi eld practice). generally lazy to perform fermentation due to This activity is important in order to equip the small price disparity between fermented and farmers with the correct farming method, and non-fermented cocoa. In addition, urgent needs guidance and training can be directly provided have forced farmers to sell their cocoa directly to in the fi eld to make farmers bett er understand merchant collectors, although at a lower price. In how to take proper care of their farms so that this case, there are no incentives or regulations optimal results can be obtained. Unfortunately, from the local government of the central the limitations of the quality and quantity of government that are able to motivate farmers assistants that only consist of 2 (two) people to to perform and sell fermented cocoa. Currently handle 7 (seven) sub-regencyshave become an in Indonesia, only about 10-15% of Indonesian obstacle in the fi eld so that the resulting output is cocoa is fermented. This has resulted in the low not optimal (generally 1 PPL assists 1 village with Indonesian cocoa price if compared to the Ivory 15 farmer groups). With this minimal number of Coast and Ghana. assistants, the empowerment of farmers in Sikka is mostly done by NGOs through the fi eld school. The existence of the UPH is not optimal in breaking the chain of cocoa trade system.The Farmers admitt ed that the fi eld school established trade system condition in existence so far, is more by NGOs is more useful because farmers are given dominated by the role of middlemen. This was intensive training to practice directly on their revealed by the Director General of Plantation, farms. Technical assistants in the fi eld school are Ministry of Agriculture, Heri Mardianto who called training masters and key farmers whose said that the cocoa trade system is dominated by job is to assist and conduct training to farmers. middlemen who get a larger profi t while farmers Adequate technical ability coupled with the received a low price. The local government and correct patt ern of approach to farmers has made the central government have not been able to them more motivated to participate in the fi eld do any intervention to improve the bargaining school set up by NGOs. position of cocoa farmers. Judging by the management of cocoa in Ghana and the Ivory 2. Provision of facilities and supporting Coast that protected their farmers by providing infrastructure in the form of agro-processing a good price, in fact this policy has been applied units (UPH), fermentation boxes, and other to other commodities, such as onions, in which supporting facilities include motorcycles used the local government would buy onions from by the assistants to go to technical assistance farmers, thusproviding protection to farmers locations. Post-harvest processing training is done through a bett er price. There should be a fi rm through the establishment of agro-processing commitment from the local government to units (UPH) as a means of support in order to implement a similar policy to the cocoa trade market cocoa products processed through the system, so that the systemdoes not only benefi t provision of fermentation boxes so that the farmers, but in the long run this policy can also quality of cocoa beans sold are more qualifi ed. create a sense of security to farmers and motivate At the start of its formation an UPH received them to continue managing cocoa farms. working capital of Rp.94 million from the local government to buy raw cocoa from farmers. A farmer empowerment program is more The existence of the UPH is very important as in important to be implemented in a sustainable addition to accommodating farmers’ production, manner than a physical program. Physical the UPH also seeks to empower the farmers activities such as handing out seeds, fertilizers related to quality selling standards and motivate and agricultural equipment are still needed, farmers to conduct the fermentation process however in longer term the sustainability could themselves so that they do not lose money. not be assured. Instead the sustainability of farmer empowerment activities is more guaranteed. With At this time in Sikka, there are only 3 active UPH the increased capacity of farmers, the benefi ts thus the number is very minimal considering obtained will have an impact in the long term, their important role, especially in breaking the thus the government should focus on improving chain of cocoa trade system to make farmers the knowledge and capacity of farmers both get a bett er price than the prices obtained from in terms of cocoa cultivation and post-harvest merchant collectors in the regency and villages. processing.

12 Evaluation of the National Movement for Cocoa Production and Quality Improvement (GERNAS COCOA) Program in Sikka Regency

V. CONSCLUSION AND POLICY the lack of program synergy among SKPDs. Farmer RECOMMENDATIONS empowerment eff orts aredone on their own, so that the results are not optimal. A good practice that has The implementation of the Gernas program has a been done in Sikka Regency is the establishment of positive impact on improving the productivity and a stakeholder forum called “Regional Economic cocoa quality of cocoa farmers. For farmers, this Cooperation Council” which has passed through program provides physical assistance and technical Regent Decree No.245/HK/2012 on the Establishment assistance to empower farmers in terms of cocoa of Regional Economic Cooperation Council. With cultivation and post-harvest processing. From the establishment of the agency, a good partnership these activities, farmers are gradually provided is expected between all relevant stakeholders from understanding of the importance to take good care both government and non- government elements. In of their cocoa farms. For entrepreneurs, the Gernas addition, this agency is expected to minimize the ego program is relatively able to guarantee the availability of each agency/institution so that they can play an of the supply of raw materials (cocoa beans) for the optimal role in preparing a joint program including survival of the cocoa processing industry in Indonesia the strengthening of the role of fi nancial institutions so that the volume of imports can be reduced. In in providing convenience to farmers to access capital order to pursue sustainable development of cocoa, and obtain cheap/easy credit without collateral. eff orts will be required as subsequent improvement measures. Institutional strengthening of farmers through the Gapoktan in pursuing the provision of special Strengthening local government’s commitment formula compound fertilizers and the role of related agencies (Department of Agriculture and Plantation) in an eff ort to increase In the Gernas program, the fertilizers used are not the productivity and quality of cocoa publicly sold but even so farmers can still get them from fertilizer plants but in large quantities. Therefore With the end of the Gernas program, there is a need to there need for strong farmer institutions such as strengthen Sikka regency government’s commitment Gapoktan and cooperatives. The gapoktan either by to continue implement development programs of cocoa themselves or in partnership with a cooperative or as the source of livelihood for most Sikkaresidents. coordinated by the Department of Agriculture and Sikka regency government should pay more intensive Plantation can seek the provision of fertilizers for att ention and strive for the sustainability of the cocoa member groups, so that maintenance and fertilizing development program that has been initiated through eff orts for the cocoa crop can be implemented the Gernas program. Related agencies in this regard optimally. the Department of Agriculture and Plantation should formulate integrated cocoa development programs Capacity building of farmers both in terms of to be outlined in a regulation. With the presence of cultivation and improvement of the quality of cocoa a binding regulation, this is expected to strengthen In order to continue the spirit of farmer empowerment local government’s commitment to developing the launched by the Gernas cocoa program, the cocoa sector and implementing cocoa development local government should be able to expand the programs in an integrated manner among the related partnerships that have been built with NGOs and the stakeholders. private sector in its eff orts to empower farmers. The Strengthening stakeholder forum as an eff ort to role of the private sector is important to providing synchronize and coordinate cocoa development understanding to farmers about cocoa quality like programs. As explained earlier, one of the what is demanded by the market that can bring constraints to Gernas program implementation is a good price. Thus farmers become motivated to lack of synchronization between the Department improve the quality of their cocoa with consideration of Agriculture and Plantation with the Agency for of the benefi ts that can be gained. As for the private Food Security and Agricultural Extension (BKP2) sector, such partnerships can provide a distinct as the technical institution to perform counseling advantage, because entrepreneurs will get quality to farmers. The lack of synchronization is due to cocoa in accordance with the required quality.

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