Why small-scale tuna fishers in Indonesia enter into contracts
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Why small-scale tuna fishers in Indonesia enter into contracts Presentation at Golive Indonesia and Indonesian synergi workshop at ANU, Canberra.
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Why small-scale tuna fishers in Indonesia enter into contracts
- 1. Life Impact | The University of Adelaide Why small-scale tuna fishers in Indonesia enter into contracts: the influence of transaction costs, risk and trust (study case in East Java, Indonesia) Dias Satria
- 2. Life Impact | The University of AdelaideSlide 2 Introduction • The development of the small-scale fishing economies requires an improvement of the market institution to ensure the reduction of the transaction costs. • The development of the market institution in artisan Tuna’s fishing economies is one of the important parts in connecting smallholders from the remotes area to the global markets. • These improvements at the end will support local economic development that can improve artisan fisher’s welfare.
- 3. Life Impact | The University of AdelaideSlide 3 Transaction Costs Economics (TCE) model posits that a governance structure is chosen in order to economize on transaction costs. (Williamson, 1995) The increased use of contract arrangements in small-scale Tuna Fishing Economies between fishers and middlemen. 1. Reduce price risk (Boehlje and Ray, 1999). 2. Risk management (Hayenga et al. 2000) 3. Access to capital, so they can invest in productive assets (Key and McBride, 2003). 4. Get a wider market access (Muth, 2007).
- 4. Life Impact | The University of AdelaideSlide 4 Transaction cost economics framework Governance structure choice Asset and human specificity Uncertainty Frequency
- 5. Life Impact | The University of AdelaideSlide 5 (Chilles and McMackin, 1996; Khoi Son 2011) Risks and trust in Transaction cost economics framework
- 6. Life Impact | The University of AdelaideSlide 6 Fish marketing arrangements and organization Transaction characteristics in SFE (Small-scale fishing economies) Transaction costs in SFE Role and services provided by intermediaries (Middlemen) in SFE (Platteau & Nugent 1992); (Lem et al. 2004); (Khoi & Son 2011); (Carnaje 2007) and (Merlijn 1989). The importance of social ties and relation norms (trust) in contractual arrangements (B. 1975; Batt 2003; Batt & Rexha 1999; Doney & Cannon 1997; Hö ffler 2006; Moorman, Deshpandé & Zaltman 1993). Small-scale tuna fishing economies
- 7. Life Impact | The University of AdelaideSlide 7 Research Gap Transaction Cost Economics Risks behavior Trusts small- scale Tuna fishing economies
- 8. Life Impact | The University of AdelaideSlide 8 Transaction Characteristics • Asset and human specificity • Uncertainty • Frequency • Others Marketing arrangements • Spot markets (auction markets) • Hybrid (contract) • Vertical integration Risks behavior Trust Transaction costs Model development
- 9. Life Impact | The University of AdelaideSlide 9 Objectives To examine the importance of risks behavior, trust and the transaction characteristics (asset and human specificity, frequency and uncertainty) in triggering small-scale tuna fishers to engage in a contract with intermediaries. 1. To investigate the transaction characteristics factors (asset & human specificity, frequency and uncertainty) influencing small-scale fishers to engage a contract with the intermediary. 2. To examine the importance of risk behavior in the contract relationship between small- scale fishers and the intermediary. 3. To analyze the role of trust in the contract fishing in small-scale tuna fishing economies.
- 10. Life Impact | The University of AdelaideSlide 10 Methods 1. Introduction 2. Questionnaire development 3. Operationalization and measurement variables 4. Selection of the samples 5. Data analysis
- 11. Life Impact | The University of AdelaideSlide 11 Result and discussion
- 12. Life Impact | The University of AdelaideSlide 12 Demographic of tuna fishers in East Java
- 13. Life Impact | The University of AdelaideSlide 13 Ethnicity 23.57 0.38 68.44 0.38 0.76 0.76 3.04 1.13 0 20 40 60 80 Jawa Madura Bugis Bajo Flores Ambon Lombok Others
- 14. Life Impact | The University of AdelaideSlide 14 Variable Mean Std. Dev. Andon Local Auctions market No Auctions market Human specificity 4.08 0.56 4.10 4.06 4.03 4.11 Uncertainty 2.90 0.93 2.74 3.15 3.01 2.85 Frequency 3.25 0.66 3.35 3.11 3.20 3.28 Searching costs 2.685 0.918 2.45 3.02 2.78 2.63 Negotiation costs 2.79 1.01 2.63 3.04 2.89 2.75 Monitoring costs 2.47 1.10 2.68 2.16 2.78 2.33 Trust 3.69 0.44 3.72 3.65 3.59 3.74 Risk perception 3.27 0.65 3.50 2.92 3.68 3.07 Risk behavior 2.25 0.589 2.39 2.03 2.34 2.21 Market participation 19.82% 36.52 21.46% 17.40% 44.57% 8.03% Transaction costs, risks and trust in artisan Tuna fishing economies
- 15. Life Impact | The University of AdelaideSlide 15 Variables Coefficient Std. Err. P>|z| mfx Household characteristics Age 0 0 0.97 0 d_Notschool 0.05 0.23 0.81 0.01 d_Jawa -0.32 0.32 0.32 -0.09 d_Bugis* -0.57 0.32 0.07 -0.16 Andon -0.14 0.22 0.51 -0.04 logincome* 0.25 0.09 0 0.07 Transaction characteristics var_tc_spec* 0.22 0.13 0.08 0.06 var_uncer* -0.24 0.09 0 -0.06 own_boat 0 0.16 0.97 0 var_freq 0.13 0.1 0.16 0.03 var_risks 0.2 0.15 0.19 0.05 Transaction cost var_tcost_search* 0.31 0.11 0 0.09 var_tcost_nego* 0.41 0.09 0 0.11 var_tcost_monitor* -0.47 0.1 0 -0.13 Others var_auction* -0.3 0.16 0.06 -0.09 var_risks_behav* -0.28 0.14 0.05 0.08 long_relation* 0.3 0.16 0.06 0.08 var_trust* -0.28 0.15 0.05 -0.08 _cons -3.02 2.06 0.14 Demographic profile • Age • Ethnic • Education • Andon Transaction Characteristics • Asset specificity • Human specificity • Uncertainty • Frequency Transaction costs • Searching costs • Negotiation • Monitoring Risks behavior Trusts Probit model
- 16. Life Impact | The University of AdelaideSlide 16 Policy options • Development of market institutions especially in functioning the auctions market system (Market access to regional and international traders) • The importance of legal frameworks and enforcement in market arrangements to reduce risks. • Investment policy in regards to the attraction of the foreign processors close to the port. (cut the transaction costs)
- 17. Life Impact | The University of AdelaideSlide 17 Acknowledgment Ministry of Education, Indonesia School of agriculture, food and wine, The University of Adelaide Brawijaya university, Malang, Indonesia Dr Elton Li (Principal supervisor) Dr Amos Gyau (External supervisor) A/Prof. Johan Bruwer (Prev. co. supervisor) Mark K. Brindal (Independent supervisor)
- 18. Life Impact | The University of AdelaideSlide 18 Thank you
Editor's Notes
- In this research, basically, I want to investigate the problems facing by the small holders in accessing a high value market based on the TCE framework. And askio ng, why they are engaging in a contract with intermediary (middlemen) and why they don’t go directly into the auctions market which is offering better price than the intermediary.
- I would like to start my presentation with the importance of improvement of the market institution Because the one of the root problems why small holders cannot access a high value market is due to poor market institution (no regulation, no enforcement etc.)
- In the tuna’s value chain in Indonesia, especially in east. There is a unique chain in which intermediary or local traders or middlemen took an important role in value chain.
- Higher level of asset specificity are associated with increased vertical coordination. Uncertainty generally encourages tighter coordination of marketing channels. The sophistication of governance forms increase with frequency. This logic suggest that as asset specificity increases, contracts of longer duration will be adopted to limit the potential for moral hazard.
- Trust is believed to: Lower cost of transactions and allow for greater flexibility to respond to changing market conditions; Lead to important information sharing which increase coordination and joint efforts to diminish inefficiencies; and Facilitate investments in relation-specific assets’ which improve productivity (B. 1975; Batt 2003; Batt & Rexha 1999; Doney & Cannon 1997; Höffler 2006; Moorman, Deshpandé & Zaltman 1993)
- Most of the Transaction cost economics frameworks have been applied broadly in some agricultural research (Fafchamps & Gabre-Madhin 2001; Kherallah & Kirsten 2002; Kirsten et al. 2009; Rørstad, Vatn & Kvakkestad 2007; Vavra 2009). The challenge is to understand the above concept and applying the theory into the STFE context. How is the nature of transaction characteristics (asset and human specificity, uncertainty and frequency), risks behavior, social capital and trust in small-scale tuna fishing economies? How about the marketing arrangements in STFE?
- Higher level of asset specificity are associated with increased vertical coordination. Uncertainty generally encourages tighter coordination of marketing channels. The sophistication of governance forms increase with frequency. This logic suggest that as asset specificity increases, contracts of longer duration will be adopted to limit the potential for moral hazard.
- Banyuwangi – pancer ilegal gold miner Pacitan SBY come from
- Andon fishers Human specificity is very high Transaction costs is low
- bugis Log income Human specificity Uncertainty Transaction costs Auctions market