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Roles of Commodities in Poverty Alleviation
and Strengthening Landscape Management
Prof. Dr. Bustanul Arifin
barifin@uwalu...
Outline
1. Update of the Global and Indonesian Economy
2. Comparative advantage: Necessary, not sufficient
3. Competitive ...
The global economy has slowed down
The economy 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
The World 5,5 5,7 3,1 -0,...
Economic Growth based on major sectors
Source: BPS, February 5 of 2016
Kinerja Pertumbuhan Sektoral Tahun 2015
Sumber: BPS, 5 Februari 2016
Growth Distribution and Regional Economy
Source: BPS, February 5 of 2016
Poverty Alleviation: More difficult in recent years
Poverty as of September 2015 was 28.51 million (11.1%). Not surprising...
Poverty and Unemployment Rate: Increasing
Indicator
2014 2015
Million (%) Million (%)
Poverty Level 27.73 10.9 28.51 11.1
...
Inequality: Worsening since Regional Autonomy
Source : BPS, 2015
Comparative Advantage: Necessary, but not Sufficient
• Indonesian has adopted the strategy in the last half century. As a ...
Competitive Advantage of the Nations
Also known as: Porter’s Diamond
Rank Country Score Rank 2014
1 Switzerland 68.30 1
2 United Kingdom 62.42 2
3 Sweden 62.40 3
4 Netherlands 61.58 5
5 Unite...
Rapid Forest Loss in South East Asia
http://maps.grida.no/region/geoasiap
Asia is experiencing significant transformation ...
Access to Land Utilization: Farmers vs Firms
FORESTRYPLANTATION
26.000.000 ha
10.300.000 ha
Community-
Based Forest
Manage...
Sustainable Development Strategy: Evolution
• Bruntland Comission: Sustainable development is development
that meets the n...
Agroforestry Landscape: Towards Sustainability
Forest
Agriculture
Forest
Intensive
agriculture
Tree
plan-
tations
Agrofore...
Sustainability: Beyond Competitiveness
Sustainability Certification: Growing Trends
• Different terms: Global environmental goverance, global
certifying partners...
The Benchmark of Smallholder Coffee
• Indonesia is the 4th largest coffee producer, after Brazil, Vietnam,
and Columbia, b...
Coffee: Improving Rural-Based Intervention
• Start at the very basic level of better farming practices
• Provide technical...
• Indonesia is the 3rd largest cocoa producer
(0.43) after Cote d’Ivoire (1.3) and Ghana
(0.74), and remains important coc...
Cocoa: Promote SE Seedling to Other Regions
• Formulate concrete actions to effectively strengthen the extension services
...
• The declining price since 2014 to only US$ 1.4
per kg has brought difficult time for rubber
production, where 85% involv...
Rubber: Empowerment and Policy Reform
• Support the smallholders to improve farm management, based on
innovation and new t...
The Largest Producer of Palm Oil: What Next?
• Indonesia is the largest CPO producer, reaching
about 30 million ton in 201...
Palm Oil: Action Strategies for the Future
• Strengthen and finalize the participatory spatial planning at local,
provinci...
Three Plausible Scenarios (Glasbergen, 2015)
• Leaving it to the market: Institutionalization of private
governance arrang...
Closing: Macro and Micro-based Initiatives
• Business initiatives on PISAgro (Partnership for Indonesia
Sustainable Agricu...
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Roles of Commodities in Poverty Alleviation and Strengthening Landscape Management

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Prof. Dr. Bustanul Arifin

Professor of Agricultural Economics and UNILA
Board of Founders and Senior Economist with INDEF
Chairman, Indonesian Society of Agricultural Economics

Published in: Environment
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Roles of Commodities in Poverty Alleviation and Strengthening Landscape Management

  1. 1. Roles of Commodities in Poverty Alleviation and Strengthening Landscape Management Prof. Dr. Bustanul Arifin barifin@uwalumni.com Professor of Agricultural Economics and UNILA Board of Founders and Senior Economist with INDEF Chairman, Indonesian Society of Agricultural Economics Workshop “Perencanaan Tataguna Lahan dan Pengelolaan Sumberdaya Alam”, Kementerian Koordinator bidang Perekonomian dan CIFOR, 26 April 2016 di Jakarta
  2. 2. Outline 1. Update of the Global and Indonesian Economy 2. Comparative advantage: Necessary, not sufficient 3. Competitive advantage of the nations: Innovation? 4. Sustainability, sustainable development: Evolution 5. Current issue: Sustainability certification 6. Closing: Macro and micro-based initiatives
  3. 3. The global economy has slowed down The economy 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 The World 5,5 5,7 3,1 -0,0 5,4 4,2 3,4 3,4 3,4 3,1 Developed countries 3,1 2,8 0,2 -3,4 3,1 1,7 1,2 1,4 1,8 1,9 Developing countries 8,2 8,7 5,8 3,1 7,4 6,2 5,2 5,0 4,6 4,0 Chinese Economy 12,7 14,2 9,6 9,2 10,4 9,3 7,8 7,7 7,3 6,9 Commodity Prices (non-energi) 23,1 13,9 7,9 -15,8 26,5 17,9 -10,0 -1,2 -4,0 -17.4 Indonesian economy 5,5 6,3 6,0 4,6 6,4 6,2 6,0 5,6 5,0 4,8 GDP per capita (US$) 1.655 1.919 2.225 2.322 2.979 3.692 3.741 3.667 3.531 3.377 Sumber: Bank Dunia dan BPS, berbagai tahun In percent
  4. 4. Economic Growth based on major sectors Source: BPS, February 5 of 2016
  5. 5. Kinerja Pertumbuhan Sektoral Tahun 2015 Sumber: BPS, 5 Februari 2016
  6. 6. Growth Distribution and Regional Economy Source: BPS, February 5 of 2016
  7. 7. Poverty Alleviation: More difficult in recent years Poverty as of September 2015 was 28.51 million (11.1%). Not surprising •) Rata-rata Maret dan September Sumber : BPS, 2015
  8. 8. Poverty and Unemployment Rate: Increasing Indicator 2014 2015 Million (%) Million (%) Poverty Level 27.73 10.9 28.51 11.1 Rural Poverty 17.73 62.6 17.89 62.7 Unemployment 7.24 5.9 7.56 6.2 Total Work Force 114.6 94.1 114.8 93.8 Worker in Agriculture 38.97 34.0 37.75 32.9 Worker in Industry 15.26 13.31 15.25 13.28 Workers in Services 60.40 52.7 61.80 53.8 Source: BPS. Poverty Data as of September, Workforce Data as of August
  9. 9. Inequality: Worsening since Regional Autonomy Source : BPS, 2015
  10. 10. Comparative Advantage: Necessary, but not Sufficient • Indonesian has adopted the strategy in the last half century. As a result, – Coffee, number 3: production 710 thousand tons, export 500 thousand tons – Cocoa, number 3: production 800 thousand tons, export 450 thousand tons – Rubber, number 2: production 3.2 million tons, almost all for export markets – Palm Oil, number 1: production 30 million tons, export 26 million tons • The strategy is necessary, but not sufficient to contribute to farmer’s welfare • Low yield, poor access to good agricultural practices (GAP) and technology. • Supply chains and marketing systems of the crops are generally not efficient • Small portion of economic benefit of trade is received by smallholder farmers • Indonesia then adopted the development strategy that focus on improving the competitiveness of the Indonesian economy, competitive advantage
  11. 11. Competitive Advantage of the Nations Also known as: Porter’s Diamond
  12. 12. Rank Country Score Rank 2014 1 Switzerland 68.30 1 2 United Kingdom 62.42 2 3 Sweden 62.40 3 4 Netherlands 61.58 5 5 United States 60.10 6 6 Finland 59.97 4 7 Singapore 59.36 7 8 Ireland 59.13 11 9 Luxemburg 59.02 9 10 Denmark 57.70 8 14 South Korea 56.26 16 19 Japan 53.97 21 29 China 47.47 29 32 Malaysia 45.98 33 55 Thailand 38.10 48 81 India 31.74 76 83 Philippines 31.05 100 97 Indonesia 29.79 87 140 Togo 18.43 142 141 Sudan 14.95 143 Source: INSEAD--The Business School for the World, 2015-2016 Global Innovation Index, 2015 Global Competitiveness Index, 2015 Source: WEF, Global Competitiveness Report, 2015-2016 Rank Country Score Rank 2014 1 Switzerland 5.76 1 2 Singapore 6.68 2 3 United States 5.61 3 4 Germany 5.53 5 5 Netherlands 5.50 8 6 Japan 5.47 6 7 Hongkong SAR 5.46 7 8 Finland 5.45 4 9 Sweden 5.43 10 10 United Kindom 5.43 9 18 Malaysia 5.23 20 26 South Korea 4.99 26 28 China 4.89 28 32 Thailand 4.64 31 37 Indonesia 4.52 34 47 Philippines 4.39 52 55 India 4.31 71 90 Cambodia 3.94 95 124 Nigeria 3.46 127 140 Guinea 2.84 144
  13. 13. Rapid Forest Loss in South East Asia http://maps.grida.no/region/geoasiap Asia is experiencing significant transformation of terrestrial and aquatic ecosystems. Most extensively, forest disruption, forest fires and haze, and land conversion tropical regions in Southeast Asia, especially in the late 20th century.
  14. 14. Access to Land Utilization: Farmers vs Firms FORESTRYPLANTATION 26.000.000 ha 10.300.000 ha Community- Based Forest Management 11.499 hh 240.000 ha Farmers (having no access to land) Farmers Plantation Companies: 13.572.000 hh 23.728.000 hh 0 ha 21.500.000 ha 16.000.000 ha hold hold hold hold hold hold Forest Concession Right: 304 Industrial Timber Plantation: 227 2.178 Source: Jamal (2014), from Sirait et al (2014)
  15. 15. Sustainable Development Strategy: Evolution • Bruntland Comission: Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” • Earth Summit, Rio de Janeiro, 1992: Sustainable development is maintaining a delicate balance between the human need to improve lifestyles and feeling of well-being and preserving natural resources and ecosystem. • Rio+10, Johannesburg, 2002: Sustainable development is the balance of three dimensions: economics, social and environment • Rio+20, Rio de Janeiro, 2012: Sustainable development is associated with green economy, which is the harmony between economics, social, environment and governance
  16. 16. Agroforestry Landscape: Towards Sustainability Forest Agriculture Forest Intensive agriculture Tree plan- tations Agroforestry/ eco-agriculture Tree cropsAgriculture Forest Source: Van Noordwijk, 2008
  17. 17. Sustainability: Beyond Competitiveness
  18. 18. Sustainability Certification: Growing Trends • Different terms: Global environmental goverance, global certifying partnership, corporate governance iniatives, sustainability regulation, certification of commodity origin, non-state regulation, etc. • Growing interests in research on dynamics of global eco- certification to ground-based farm economy in producing countries, including the social-economic impacts • Some speculations: Global eco-certification in agricultural commodities (coffee, cocoa, tea, oil palm, pepper etc) have restructured the supply chain in producing countries, but resistance from state-affiliated agencies further complicate adaptation of global eco-certification.
  19. 19. The Benchmark of Smallholder Coffee • Indonesia is the 4th largest coffee producer, after Brazil, Vietnam, and Columbia, but the 2nd largest Robusta producer after Vietnam • Coffee production in 2015 was 700,000 tons, a large decrease from about 798,000 tons of production in 2013. – 85% of coffee is Robusta (mostly from Lampung and South Sumatra) – 15% of coffee is Arabica (from some highlands, but virtually all exported) • The majority (95%) is small-holder, where productivity is 600 kg/ha far below that in Vietnam and Brazil of about 2.5 - 3 ton/ha.
  20. 20. Coffee: Improving Rural-Based Intervention • Start at the very basic level of better farming practices • Provide technical assistance, extension services and empowerment actions at the field level. • Apply selected red cherry and strip picking for ripen fruits. • Provide access for road pavement and concrete floors to ensure a better drying process for coffee bean. • Encourage coffee producers to organize as a group, to ensure the monitoring system and traceability principles • Environmental services vs. global buyer-driven initiatives • Economic valuation is a necessary step to synchronize
  21. 21. • Indonesia is the 3rd largest cocoa producer (0.43) after Cote d’Ivoire (1.3) and Ghana (0.74), and remains important cocoa actor. • Cocoa production 2014 was 800 thousand tons, just reviving the trend. Production is targeted over 1 million ton of cocoa in 2015. • Cocoa production center is 60 % in Sulawesi and Sumatra, mostly for EU & US • The majority (95%) is smallholders, average land-holding size 1,5 ha on local varieties. • Cocoa productivity remains low, 500 kg/ha, far below its potentials to achieve 1.5 ton/ha Revitalizing the Cocoa Economy
  22. 22. Cocoa: Promote SE Seedling to Other Regions • Formulate concrete actions to effectively strengthen the extension services and farmers’ empowerment and capacity building programs. • Expand somatic embryogenesis (SE) technology to other regions across the country and to newly regions interested in cocoa development. • Review the value-added tax and export tax of processed cocoa products , especially the efficiency level does not change • Encourage investment in cocoa processing plants, in production centers • Prepare the adoption of third party certification systems • Anticipate the evolution of certification systems for new non-trade barrier • Facilitate a bridging process to link the bottom-up initiatives of institutional changes at farm-level with current global environmental governance. • Involve intermediaries such as academic institutions, government agencies, and NGOs to achieve sustainable-based certification system.
  23. 23. • The declining price since 2014 to only US$ 1.4 per kg has brought difficult time for rubber production, where 85% involving smallholders; • Most rubber trees all over the country are not tapped. Labor cost is higher than farm-gate price; • Meanwhile, the yield of smallholder remains low, good agricultural practices are not adopted properly, majority of rubber trees is over 30 years • Consequently, the quality of slab and sheet is low • Replanting program has not been successful, the support from financial institution is quite weak; • At downstream, industrial deepening is hindered by low yield and low quality products, and incentive systems are not working very well. The Difficult Time of Rubber
  24. 24. Rubber: Empowerment and Policy Reform • Support the smallholders to improve farm management, based on innovation and new technology to improve productivity, adaptive to local wisdom, such as “jungle rubber” and agroforestry system; • Implement replanting scheme, by simplifying financial procedures and credit system, including empowerment programs for small- farmers, supporting cost of living before the trees ready for tapping • Improve harvesting practices and post-harvest handling to improve efficiency, grading and sorting to improve the rubber quality; • Improve business practices, partnership between rubber industry and smallholder farmers living in rural areas; • Implement the capacity building program of micro business, such as information and communication technology, market intelligent, and macro policy of exchange rates, interest rates, and diplomacy.
  25. 25. The Largest Producer of Palm Oil: What Next? • Indonesia is the largest CPO producer, reaching about 30 million ton in 2015 and growing at 5,1%. • Composition Land Area Production – Smallholder 41% 36% – Large Scale 48% 52% – State Owned 11% 12% • However, productivity gap between smallholders and large scale is widening (2.9 vs. 4.2 ton/ha). • Palm oil industry supports regional development and poverty alleviation, especially in rural areas; • Rapid expansion of large-scale plantation often triggers land-conflicts and declining natural forests • Indonesia Estate Crop Fund was just established.
  26. 26. Palm Oil: Action Strategies for the Future • Strengthen and finalize the participatory spatial planning at local, provincial and central government (as stated in Law 25/2007) in order to reduce land conflict in rural areas; • Remove unnecessary levies and synchronizing central and local government regulations to improve the competitiveness; • Improve infrastructures and support the connectivity (hardware and software) and the business climate, especially for SMEs; • Support the moratorium policy for natural forest and peat lands; • Prioritize the replanting (from the revenue from the Indonesia Estate Crop Fund-IECF) to improve the productivity of smallholder farmers; • Increase R&D funding at least 1% of GDP and strengthen the innovation policy, and improve the ABGC partnership; • Reform the pricing policy for biofuels industry and reallocate the fossil fuel subsidy for the needy and alternative energy.
  27. 27. Three Plausible Scenarios (Glasbergen, 2015) • Leaving it to the market: Institutionalization of private governance arrangements, more inclusiveness, increasing relationships between schemes. Weakness: Producers not sure of a premium fee, inefficient duplication of efforts • Bringing the state back in: Transparency and accountability requirements, creating complementarities between private and state regulations, information dissemination and training. Weakness: Doubts about the capacity of developing countries for system changes, many governments are not interested in. • Institutionalizing meta-governance: Collaborative public-private efforts to enhance coherence in the world of sustainability standards. Weakness: Focus only on technical aspects, doubts about power and mandate of meta-governance attempts
  28. 28. Closing: Macro and Micro-based Initiatives • Business initiatives on PISAgro (Partnership for Indonesia Sustainable Agriculture): PPP (Government, KADIN & WEF) to implement the New Vision for Agriculture (NVA): food security, economic opportunity and environmental sustainability • Initiatives on PISAgro to implement the NVA are subject to scale-up and scale-out strategies to be replicated across different agro-ecosystems, so that the government supports to provide incentive systems are really needed. • Sustainability shall become new norms and business practices in the future by broadening into ABGC (academic, business, government and civil society) collaborations and networks. • Future research on the subject is really needed, so that best practices of sustainability advantage could be formulated in different lines of business and macro-economic environment.

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