Sahara

Impact of a Lower Oil Subsidy on Indonesian Macroeconomic Performance, Agricultural Sector and Poverty Incidences: A Recursive Dynamic Computable General Equilibrium Analysis

Budget deficit, exchange rate fluctuation and high fuel world price provides a pressure on budget capacity to stimulate the Indonesian economy. The government has designed several fiscal policies, including reducing the fuel subsidy. The study objective is to analyse the impact of reducing fuel subsidy on macroeconomic variables, agricultural sector, and income distribution. The modification on the basic model, which is a recursive-dynamic CGE model, is made in this study. The data used in the model is of the Indonesian I-O Table 2000, The Indonesian Social Accounting Matrix 2000, National Household Survey data and parameter from some other sources. The results show that the reduction in fuel price subsidy tends to increase prices of industrial outputs that highly depend on fuel, such as transportation and fishery sectors. In contrast, the change in fuel price does not influence the price of paddy. Wage of skilled labor, land rent, and capital rent decline steadily in response to the change in fuel price. Households will lose their income following the reduction in fuel subsidy, which then decreases the welfare of households. Incomes are not evenly distributed within the society (household groups). An increased fuel price at consumer level declines the Indonesian real GDP. The government should give the compensation of reducing the fuel subsidy directly to the poor people. The compensation can also be given directly to the poor people through the development of infrastructure, which may solve some supply side bottlenecks in the economy.

Determinants and Effects of Small Chilli Farmers' Participation in Supermarket Channels in Indonesia

The number of supermarkets in Indonesia is increasing, but small-scale farmers may be at risk of being excluded from these emerging marketing channels. Drawing on data from our survey of 600 small-scale chilli farmers in West Java, we examine the factors that influence farmers’ decisions to participate in supermarket channels. We use a treatment-effect model to examine the effect of supermarket participation on income, while controlling for the possibility of selectivity bias. Our results indicate that participation in the supermarket channel significantly increases farm income, even after we controlled for differences in education, chilli-farming experience, storage-house ownership, and the distance from the farmers house to a bitumen road.

Strategic formulation to increase white tea competitiveness (Case study: Research Institute for Tea and Cinchona)

White tea is a new product in Indonesia’s tea industry. It is a product developed by Research Institute for Tea and Cinchona in order to revive Indonesia’s tea industry. White tea has uniqueness in its relatively high price and high market demand that not affected by its high price. The increasing number from Indonesia’s middle class income could also become white tea’s new potential consumer because they put quality and health first than the price. White tea’s high price and demand attract new players in this industry. The appearence of new competitors make this in-dustry more competitive. That’s why it’s necce-sary to find a way to win the compettion and to keep the domination in the white tea industry through strategic formulation. There were two steps in strategic formulation used to produce the strategies. The first is analyzing the com-pany environment using internal factor evalua-tion (IFE) and external factor evaluation (EFE). The second is using internal and exter-nal (IE) matrix and strength weakness oppor-tunity and threat (SWOT) analysis. IE matrix showed the position of company using infor-mation from IFE and EFE. SWOT analysis resulted strategies using information from the company’s strength, weakness, opportunity, and threat. IFE and EFE showed that the company has strong internal power and good respond to external factors. IE matrix showed that com-pany is in grow and build stage. IE matrix and SWOT analysis showed that the alternative strategies for the company are market pene-tration, market development, product develop-ment, forward integration, backward integ-ration, and side integration.

Global Agrifood Value Chains and Local Poverty Reduction: What Happens to Those Who Don’t Plug In?

Structural changes in the global agrifood value chain have transformed food production in developing countries including Indonesia. One element of this is the spread of supermarket retailing. By increasing the demand for and returns to higher quality produce, this development has the potential to improve living standards in a sector where poverty has been persistent. Many studies have shown the magnitude of price premiums available to farmers who sell to supermarkets. However, little attention has been paid to how the introduction of a supermarket retailer affects those farmers who continue to sell to traditional market channels. Our data suggests that in regions where there are both modern and traditional buyers, competition effects result in the immiserization of farmers who continue to sell to traditional markets. This result underlines the fact that while sectorial transformation has desirable poverty reduction potential, actual impacts are lumpy. The distribution of farmer participation in a region may result in a case where the upgrading of agrifood supply chains can increase poverty in the absence of policy interventions.