EQSI Works

One of our greatest challenges is meeting society’s food needa while simultaneously reducing agriculture’s environmental harm. This will require the “sustainable intensification” of agriculture: producing more food on less land in a more sustainable ways. Growth in emerging markets and rising demand for higher quality food product mean huge opportunities for industry along the whole value chain. More production of food with increasingly scare land and water resources will require ingenuity, innovation and considerable investment for decade to come. The future of agriculture depends in large part on innovative sollutions emerging from the private sector. But it means new and innovative partnership between different stakeholders in the food system. Agribusinesses need to establish and expand new ways of working with consumer groups, goverments, research institutes, civil society organizations, and the millions of smallholder farmers—who are critical to the future supply of many agricultural products including livestock, coffee, cocoa, vegetables and oil palm.

Cocoa is an important cash crop in Indonesia, cultivated by an estimated one million smallholder farmers. It is an important economic driver in rural Sulawesi Island. Indonesia is the world's third largest Cocoa bean producer behind Cote d'Ivore and Ghana, in a market where supply is tight. Changes in Indonesian policy and export taxes have led to significant increases in Indonesia's Cocoa processing capacity, supporting many jobs. But Cocoa smallholders suffer from declines in production, negatively impacting household income. The two most significant reasons for low production are aging trees and pest infestations. It is estimated pests reduce yield by 40%.

Globally, in the last century Cocoa farming has been responsible for substantial deforestation, land degradation and adverse impacts on atmospheric CO2. Indonesia’s modern Cocoa boom started in the early 1990s, now many trees have reached an age of 20 to 25 years, becoming no longer viably productive. Cocoa uses more land than other crops in the project’s target districts, Kolaka Utara, Kolaka Timur and Kolaka (Sulawesi Tenggara).

The broad social context in which Indonesia’s rural households seek to lift themselves from poverty creates formidable development challenges. Low literacy and numeracy levels and weak participation in local development planning and decision-making are strongly linked to a social structure and frequently pro-male societal norms and values. Land ownership is badly skewed and uncertain tenure can be an issue. In Indonesia’s hilly sub-districts of Sulawesi Tenggara, differences in the size and productivity of landholdings relate directly to food security and income distribution. In an average year, some 85% of hill and surrounding sub-district households do not produce enough food to feed themselves adequately. The Government of Indonesia (GoI) has responded to this situation with the goal of sustainable poverty reduction through creation of economic opportunities for the poor and marginalized households, and by encouraging their participation in development activities in agro-forestry and agribusiness sectors. The reach of many programs and successfully increasing the participation of woen and mainstreaming gender for sustainable Cocoa Smallholder Agribusiness outcomes is quite limited.

Encouraging sustainable management of natural resources by giving community user groups usufruct rights to national forest can be Indonesia’s creative response to the forest degradation that has occurred through encroachment, mining and overuse. The GoI agrees that an effective way of supporting sustainable resource management practices is to help Community Groups become sustainable institutions. Project EQSI design and implementation supports this.

The Gol initiatives for Local Self-Governance supports decentralization and devolution of powers and responsibilities to local bodies. With that, Project EQSI has confirmed support from the districts (kabupaten) Kolaka Timur, Kolaka and Kolaka Utara as well as the Project's target sub-districts (kecamatan). We have obtained individual signed letters of support confirming the mutual commitment between the Project EQSI consortium and each village head (kepala desa), pledging willingness to support the bid preparation and project implementation within each sub-district. The letters of support confirm the village heads' understanding of Project EQSI scope and Green Prosperity co-operation requirements. At national level, there is an enabling environment for local-level community forestry, sustainable agriculture and watershed management strategies.

In structured interviews and informal discussions with stakeholders and three participatory workshops held at national, sub-district and village level, the EQSI consortium team captured the following interrelated sets of problems:

  • there is scope to improve coordination and functional linkages between local, sub-district and national levels that impede the use of lessons drawn from previous community forestry, agribusiness and watershed management projects.
  • poor penetration and inconsistent activity from NGOs and Cocoa traders and processors for holistic solutions to the Cocoa farming sustainability problem.
  • limited capacity in local organisations to plan, promote and implement sustainable land use practices in Cocoa farming, silviculture, national  forest areas and watersheds.
  • increasing environmental degradation coupled with low income potential, especially in upper slope communities.

The consequences are:

  • Issues for governance and equity within Community Groups, leading to risks that community management will not continue to receive sufficient local-level commitment.
  • Insufficient and uneven availability of support for planting material (nurseries or bibit, scions, seeds and clones) for Cocoa and other agro-forestry species, fertilizers, training, and appropriate farm chemicals.
  • Rural poverty; livelihoods are not enhanced and vulnerability to food insecurity remains high.
  • Pressure on natural resources continues; reducing forest cover, habitat, biodiversity and other intrinsic values.
  • Damage to the environment, reduced Carbon Cycle for sequestering of carbon, and increased GHG.
  • Ageing cocoa farm trees and elderly bias in rural population demographics.

PT. Kalla Kakao Industri (KKI) wants to work together with smallholder cocoa farmers to improve productivity, improve quality, promote certified cocoa sustainability and give smallholders better returns through more direct sourcing, however it is recognized sourcing from smallholders presents numerous challenges:

  • Productivity and crop quality are often low.
  • Smallholder supplier may lack knowledge on how mitigate social and environmental impacts.
  • Poor farm management skills and lack of aggregation reduce smallholder’s ability to achieve scale.
  • Transparency and traceability measures are needed along the supply chain to address food safety and sustainability.
  • Certification programs have difficulty evaluating the sustainability of farming practices through layers of collectors and middlemen.

To help overcome the challenges and meet the enormity of capacity building that needs to be achieved, KKI has joined in consortium with Yayasan Kalla and LEM Sejahtera for this project with MCA-Indonesia. ​​​

Our Sustainable Agriculture Project, set in selected Cocoa-growing landscapes of Sulawesi Island, aligns to and supports MCA-I’s Compact between USA and Indonesia. Green Prosperity (GP) the largest project of the Compact, seeks to address critical economic growth constraints while supporting the government of Indonesia’s commitment to a more sustainable, less carbon-intensive future.  Assistance given will be enduring cooperation focused on sustainable economic, agro-forestry and agribusiness and social development, especially for communal efficiency and technical strengthening of post harvest practices -  particularly for Cocoa fermentation methods. Indonesia is the third largest producer of Cocoa in the world after Ghana and the Ivory Coast, and the most significant Cocoa bean supplier in East Asia. Traditionally Indonesia’s biggest competitive advantages include its low cost, high production capacity (availability of supply), efficient infrastructure and open trading/marketing system (business environment). Since introducing a 10% tax on bean exports in 2010, local processing capacity has more than trebled to around 650,000 tonnes/annum while Cocoa bean production has declined from 500,000 tonnes/annum down to 400,000 tonnes/annum. Minimal rewards farmers historically received have not provided incentive for the time-consuming work of replanting as their Cocoa trees die off – a task that usually means moving to a new area of canopied forest and waiting three to five years for a new crop to mature. Cocoa is competing for agricultural space with other commodities like palm oil – which is increasingly in demand for numerous products including bio-fuels. A volatile Cocoa price makes investment in new Cocoa plantations too much of a risk. Many young people in Indonesia have left farming for other employment prospects or are moving away from Cocoa into pepper, rubber, timber, rubber or palm oil, whose prices are more stable. The following chart highlights Indonesia’s urbanization over the last 50 years, and the enormity of the situation is alarming given that the population has roughly quadrupled in that time.

Most smallholder households rely on unpaid family labour for Cocoa production. Labour shortages are a major constraint to increasing Cocoa production and fermenting Cocoa. Labour shortages may be associated with one or more of the following factors:

  • lack of cooperation among household members in Cocoa production
  • reduced access to labour from the extended family
  • rising cost of hired labour (there is limited and sporadic use of hired labour, usually for specific tasks including harvesting, establishment and rehabilitation of Cocoa)
  • high mobility (out-migration) of family members, especially males. Thus there is a high dependence on family labour and reluctance to use hired labour.

Various non-production demands on labour time also exist resulting in labour shortages for Cocoa production. Gender division of labour for particular activities may also constrain labour supply. Both men and women labor on Cocoa lands, with men typically responsible for planting and pruning while women weed; both harvest. Women tend to be responsible for finances in Cocoa households. The consequence of this is that crop management inputs are limited and productivity is low relative to potential yields.

Cocoa smallholders are suffering from declines in production that negatively impacts household income. The most significant reasons for low production are aging trees, ageing farmers, skimping on inputs and pest infestations. The Cocoa industry estimates that pest infestations reduce yield by 40%.

With labour shortages and declining production, combined with the slender premium paid for fermented beans, the result is that the majority of Indonesia’s Cocoa harvest is not fermented and not meet requirements for good quality. There is NO chocolate flavour in Cocoa beans without fermentation.

An adequate supply of labour is critical to high levels of production and for good fermentation practices. Families that are unable to mobilise adequate levels of labour from within the family, through reciprocal exchanges or by hiring are more likely to adopt a wet-bean production strategy than a dry-bean production strategy. While the wet strategy is less labour intensive than the dry bean strategy, returns are linked to the spot market and that has to be considered.

In reviewing the previous agro-forestry, natural resource management and Cocoa farming strengthening projects it is obvious that consideration of the socio-cultural aspects are critical to success, yet its complexity has meant that it is often overlooked with bio-physical aspects taking precedence.

To ensure greater hope for success and to understand community stakeholder aspirations and expectations in relations to integrated agro-forestry we shall manage:

  • for strong partnerships and collaborations.
  • a focus toward needs oriented participatory training and socialization
  • broad project planning, inclusive and flexible
  • to carry out frequent regular reviews with stakeholders
  • to proceed in accordance with the IFC Performance Standard documents (which underpin the GP Environment and Social Management System Framework)

The major barriers constraining the adoption of programs can be broadly defined into the interrelated areas of physical, social, institutional and economic. One significant physical factor is the availability of water. Socially, the lack of understanding of farmer’s decision-making processes, labour shortages and low household capital are barriers. In addition, farmers are being underpaid for their produce because they lack the understanding of the market chain. Land tenure security and the reluctance of farmers to make long-term investment can also be a significant issue and difficult to overcome.