Improving resource use efficiency in the coconut industry of North Sulawesi and its national implications

• Sam Ratulangi University, Indonesia
• Bogor Agricultural University, Indonesia
• Indonesian Coconut and Palmae Research Institute, Indonesia
• Research and Development Board of North Sulawesi, Indonesia

In north Sulawesi the major agricultural activity is coconut production, contributing more than 85 per cent of total agricultural output. Coconuts are also an important export market for the island. The majority of producers are small to very small landholders, facing pressures to maximise returns while investigating alternative farm income generators. The former is dependent on industry restructuring, the latter on additional resources.

To complicate this process average farm sizes are shrinking. Traditional inheritance practices and limited employment opportunities in other sectors have seen farms broken up, resulting in smaller landholdings. The average farm size per household fell to 0.86 hectares per family by 1993. Smaller farm sizes limit options to adopt improved production techniques, most being based on larger-scale farms on which coconut production is usually undertaken. Markets are restricted, due in part to the large numbers of small sellers and lack of size economies in coconut warehousing. Consequently prices are low and tend to fluctuate.

Small farm sizes and production levels will not see farm income increase, a situation that is a major problem. Alleviating this situation is a policy priority. Policy options include industry reform, particularly of marketing, as well as broader economic reforms to increase off-farm employment and income earning opportunities. A framework and set of tools for regional planners in north Sulawesi to identify policy options for improved resource use in these contexts is needed.

Sub-project A: Review and evaluate opportunities and constraints within the coconut industry
Document the existing state of resource use in the North Sulawesi coconut industry, including farm size and efficiency.
Document the opportunities for alternative farm enterprises for existing coconut producers in North Sulawesi.
Analyse existing farm size and resource use efficiency within the North Sulawesi coconut industry and evaluate the consequences of improved resource use efficiency in coconut production or the adoption of alternative enterprises.
Evaluate the efficiency of the marketing sector of the North Sulawesi coconut industry.

Sub-project B: Quantify relationships between the coconut industry and the broader economy of North Sulawesi, and the national economy
Evaluate the interactions among agricultural industries in North Sulawesi resulting from changes in resource use efficiency in the coconut industry.
Evaluate the national level effects of major changes in the North Sulawesi coconut industry as a pilot study of creating regional linkages in an existing computable general equilibrium model of the Indonesian economy.

Existing literature will be reviewed and evaluated wherever possible.
Limited surveys will be undertaken to acquire critical information and data that is not otherwise available (Research objectives 1-4).
Initial comparisons of coconut and alternative enterprises will be undertaken via partial and capital budgeting (Research objectives 1-3).
The North Sulawesi coconut industry will be modelled within a simple regional model of the North Sulawesi economy; this model will be designed to interact with an existing model of the Indonesian national economy (Research objective 5).
An existing computable general equilibrium model of the Indonesia economy will be modified to link with the model of the North Sulawesi economy (Research objective 6).