ARTICLE Asia-Pacific Management and Business Application 5 (1) 1 - 15 ©UB 2016 A Decision-Making Model for Community-Based University of Brawijaya Food Industry to Support Poverty Alleviation in Malang, Indonesia East Indonesia: Case Study of East Sumba Regency http://apmba.ub.ac.id Ratih Dyah Kusumastutia* Fanny Martdianty b Rifelly Dewi Astutic Nurmalad a,b,c,d Department of Management, Faculty of Economics and Business, Universitas Indonesia, Depok, Jakarta, Indonesia. Abstract Provinces in the eastern part of Indonesia still have the high percentage of residents living below the poverty line. However, some provinces are the producers of food commodities. The One Village One Product (OVOP) movement has been proven to be able to reduce the poverty level and can be implemented in East Indonesia, especially by developing the community-based food industry. The objective of the research is to develop a decision- making model to determine the best suitable community-based food industry to be developed optimally in East Indonesia using Analytic Hierarchy Process (AHP). We identify five criteria for the model from the literature and interviews with experts, namely resources, demand, supporting industries, strategy, and competitiveness, and supports from government and other parties. We apply the model to the case of East Sumba regency of the East Nusa Tenggara (NTT) province, to select from alternatives, namely cassava, banana, corn and peanut-based food industries. The results show that banana-based industry is chosen as the best-suitable community-based food industry, mainly due to the uniqueness of the banana- based product and high production of banana in the area. Keywords community-based, food industry, poverty alleviation, analytic hierarchy process, Indonesia. Received: 9 May 2016; Accepted: 22 June 2016; Published Online: 30 August 2016 DOI: 10.21776/ub.apmba.2016.005.01.1 Introduction Indonesia is considered as one of the the economy has grown significantly, countries with steady and fast economic the country is still facing the problem growth. Based on the data from the of poverty alleviation. The number of Indonesian Statistics Body (BPS), the residents living below the poverty line Indonesian economy has grown with an has reached 11.18 percent or 28.5 million average of 5.42 percent in the period of people (BPS, 2016b). According to the data 2001 to 2014 (BPS, 2016a). Even though from BPS (2016c), the poverty severity *Corresponding author Email: [email protected] Asia-Pacific Management and Business Application, 5, 1 (2016): 1 - 15 ISSN: 2252-8997 2 Ratih Dyah Kusumastuti, et. al index was slightly increased from 0.48 implies that the gap between the rich and in 2013 to 0.51 in 2015, indicating that the poor has grown as indicated by the the average expense per capita deviated increasing trend of the GINI ratio (see even farther from the poverty line. It also Figure 1). Figure 1. Gini Ratio of Indonesia (BPS, 2016d) In order to accelerate the Indonesian MP3EI strategy is to divide Indonesia into economic development, the government 6 corridors, based on the resource-based has established the Masterplan for approach which considers the resource Acceleration and Expansion of Indonesia’s potential of each corridor (see Table 1). Economic Development (MP3EI). The Table 1. Economic Corridors in MP3EI Regions Corridors Center for production and processing of natural resources and Sumatra the nation’s energy reserves Java Driver for national industry and service provision Center for production and processing of national mining and Kalimantan energy reserves Center for production and processing of national agricultural, Sulawesi plantation, fishery, oil and gas, and mining Bali-Nusa Tenggara Gateway for tourism and national food support Center for development of food, fisheries, energy, and national Papua-Moluccas mining Source: Indonesia-Investments (2013) As can be seen in Table 1, the provinces those with a large number of residents in the eastern part of Indonesia, such as living below the poverty line. According Nusa Tenggara Timur (NTT), Papua and to BPS data, in the NTT province, for Moluccas are considered to be the national instance, the number has reached 22.58% food support corridor since those provinces in 2015 (BPS NTT, 2016), and in one of are the regions with a high production its regency, East Sumba, 28.5% of the rate of the food commodity. However, residents (in 2013) are living below the the provinces are also considered to be poverty line (BPS Sumba Timur, 2016a, Asia-Pacific Management and Business Application, 5, 1 (2016): 1-15 A Decision-making Model for Community-Based Food Industry 3 2016b). A policy that can be implemented industry to be developed optimally in East to reduce the poverty level in the area is Indonesia to support poverty alleviation. the community-based enterprise based The decision-making model is developed on the one village one product (OVOP) using Analytic Hierarchy Process (AHP) concept. from Saaty (1980), and the model is applied to the case of East Sumba regency The OVOP is a movement that was of the NTT province. originated in Oita prefecture, Japan in the 1970s with the aim of encouraging rural The remainder of the paper is as follows. development through community-oriented Relevant studies are discussed is presented, activities by employing local resources followed by the explanation of research and knowledge (Natsuda et al. 2012). One methodology is presented, discussions of of the principles of OVOP movement is decision-making model and the model thought globally, act locally, which means application in East Sumba is presented, creating globally acceptable products and conclusions and recommendations are and/or services based on local resources presented. (Shakya, 2011). The movement was later adopted in several Asian countries, such Relevant Studıes as Thailand, Philippines, and China. In The OVOP movement is based on three the implementation, the movement which basic principles (Shakya, 2011), namely: was originally meant to prevent rural depopulation has somewhat evolved into 1. Think globally, act locally. The local a direct state-involved policy, which has residents are expected to create been proven to be able to reduce poverty globally marketable products and/ in the area (Natsuda et al., 2012). or services which represent local people’s pride in material and cultural Provinces in the eastern part of Indonesia richness of their home villages/towns. can adopt the OVOP movement as well to alleviate poverty in the region by engaging 2. Self-reliance and creativity. The the people in the creation of unique realization of local potential resources products that represent their areas, and into valuable product/service at certain that are made using local resources. As village/town depends on the initiative previously mentioned, several provinces, and effort of the local people. in this region (such as NTT and Papua) 3. Human resource development. The are considered to be the producers of the movement emphasizes on visionary food commodity. Therefore, the poverty local leadership with challenging and alleviation program in the region will be creative spirit, because the success of optimal if it also engages the community any OVOP product/service mainly to create unique food products using the depends on its quality, and the product/ local resources, that can be sold nationwide service is developed and improved by or even globally. the local people themselves. The determination of the kind of food The OVOP movement was originally industry that is suitable to be produced meant to revitalize the economy in rural by the local community requires a Japan, and it was community-based decision-making model. Therefore, the with government playing a supporting objective of this research is to develop role (Shakya, 2011). However, in other a decision-making model to determine countries, the movement is adopted the most suitable community-based food as government-involved policy for Asia-Pacific Management and Business Application, 5, 1 (2016): 1-15 4 Ratih Dyah Kusumastuti, et. al poverty alleviation, and it is seen as Pasuruan, Indonesia, while Natsuda et al. a way to improve local communities’ (2012) study about the OVOP program in entrepreneurial skill by utilizing local Thailand as a rural development strategy. resources and knowledge; creating value- Both studies also emphasize the significant adding activities through branding of local role of government in implementing the products; and building human resources in movement. the local economy (Natsuda et al., 2012). Research on CBE in Central Europe is The OVOP movement has been adopted conducted by Fink et al. (2013). The study in several Asian countries besides Japan, is about how to create favorable conditions such as Thailand, Malaysia, Philippines, for small business in Central Europe, and People’s Republic of China (PRC), and it suggests that the municipality and the Indonesia (Igusa, 2006). The movement business should work with and for each has been adopted in Thailand and other instead next to and against each European countries as a community-based other, it also suggests the need to create enterprise (CBE) (Natsuda et al., 2012; the region’s image through focused Fink et al., 2013). CBE is an alternative communication of regional characteristics model that is potential for the development and the municipality’s strength. More of the impoverished community (Paredo importantly, the study states the need to and Chrisman, 2006). CBE is based on create regional products, i.e. high a quality the understanding that collective and product with the regional identity. individual interests are fundamentally complementary, and by regarding com- The government, as indicated in previous munal values and the notion of the studies, plays an important role in common good as important elements in creating policy that is conducive to the venture creation. development of the industry, especially for small-scale industry. Igusa (2006), Research concerning the impact of OVOP also states that a clear guidance from the movement in various countries has been local government through knowledge done in the past decade.