Full Terms & Conditions of access and use can be found at
http://www.tandfonline.com/action/journalInformation?journalCode=cbie20
Download by: [Universitas Maritim Raja Ali Haji] Date: 17 January 2016, At: 23:49
Bulletin of Indonesian Economic Studies
ISSN: 0007-4918 (Print) 1472-7234 (Online) Journal homepage: http://www.tandfonline.com/loi/cbie20
Contract Farming and Risks for Smallholders in the
Oil-Palm Industry in Indonesia
Eko Ruddy Cahyadi
To cite this article: Eko Ruddy Cahyadi (2013) Contract Farming and Risks for Smallholders in the Oil-Palm Industry in Indonesia, Bulletin of Indonesian Economic Studies, 49:3, 381-382, DOI: 10.1080/00074918.2013.850634
To link to this article: http://dx.doi.org/10.1080/00074918.2013.850634
Published online: 05 Dec 2013.
Submit your article to this journal
Article views: 529
View related articles
Bulletin of Indonesian Economic Studies, Vol. 49, No. 3, 2013: 381–7
ISSN 0007-4918 print/ISSN 1472-7234 online/13/030381-7
ABSTRACTS OF DOCTORAL THESES
ON THE INDONESIAN ECONOMY
Contract Farming and Risks for Smallholders in the
Oil-Palm Industry in Indonesia
Eko Ruddy Cahyadi (cahyadi@ifgb.uni-hannover.de)
Accepted 2013, Leibniz University of Hannover
Indonesia’s contract-farming policy has led to the rapid expansion of oil-palm smallholdings. Oil palm offers attractive returns for smallholders, but contract
farming can suffer from asymmetric information and can therefore be ineficient
and unfair. This questions the effectiveness of such schemes in reducing poverty. Furthermore, the nature of the oil-palm industry exposes smallholders to certain risks, such as price volatility and crop disease. While some studies suggest that contract farming can be an effective way for smallholders to manage risk, the role of shocks in pushing oil-palm smallholders into poverty demands further inves-tigation.
This thesis aims to improve the understanding of the effects of contract farm-ing in Indonesia’s oil-palm industry on smallholders’ wellbefarm-ing. It has three
spe-ciic research objectives: (a) to assess whether and to what extent the poor beneit
from contract farming; (b) to assess the degree of vulnerability to poverty among oil-palm smallholders, and to determine whether contract farming is an effec-tive measure of reducing vulnerability to poverty; and (c) to investigate the rela-tionship between subjective risk expectation, risk attitude and decision-making behaviour among oil-palm smallholders. It uses as its empirical base a household survey of 300 oil-palm smallholders in the province of Jambi, Sumatra.
Descriptive analysis shows that contract smallholders have substantially more land and income than non-contract smallholders. Moreover, they apply higher inputs and therefore generate greater yields. After controlling for a hidden bias, I
conirm that contract participation has a positive effect on income. My investiga -tion of the equity effect, however, shows that poor smallholders are unlikely to
beneit from such participation.
This thesis also inds that contract smallholders experience oil-palm shocks
more extensively than non-contract smallholders, because the former are more dependent on oil palm. On average, oil palm contributes more than 60% of the household income of contract smallholders and only 30% of that of non-contract smallholders. My analysis shows that contract participation can reduce price shocks but not production shocks. After assessing the vulnerability of smallhold-ers, I identify four poverty typologies: structurally chronic, structurally transient, stochastically transient and non-poor. About 40% of oil-palm smallholders are
classiied as stochastically transient – that is, as the poor who at present are
382 Abstracts of doctoral theses on the Indonesian economy
poor but could fall into poverty should they experience shocks. These results signal to policymakers that it is not enough to consider the effects of oil-palm development on income growth, and that there is a need to take future risks into account in order to develop proactive poverty-reduction policies.
While a simple means comparison shows that contract smallholders are signii -cantly less vulnerable than non-contract smallholders, propensity-score matching (after having controlled for selection bias) shows that contract participation does
not signiicantly reduce their vulnerability to poverty – in large part because con -tract farming is dominated by households with greater asset endowments. The results of my risk-behaviour analysis show that subjective expectation towards all risks is driven by the level of exposure to past shocks. Asset endowments are another important determinant. This thesis reveals that a plan for oil-palm invest-ment tends to be encouraged by a high risk expectation in non-oil-palm enter-prises and by a low level of risk aversion, and that it seems to be independent of risk expectations in the oil-palm industry itself.
Overall, this thesis suggests that Indonesia’s contract-farming schemes need to be more pro-poor, and that policymakers must take risk into account in their attempts to reduce poverty.
© 2013 Eko Ruddy Cahyadi
http://dx.doi.org/10.1080/00074918.2013.850634
Public-Sector Accounting Reforms in the Post-Soeharto Era Harun Harun (harun.harun@canberra.edu.au)
Accepted 2012, University of Waikato
This study aims to understand the institutionalisation of accrual accounting systems in the Indonesian public sector. It relies on data from three sources: (a)
oficial documents (that is, laws and government regulations) on the adoption
and implementation of such accounting systems in the sector; (b) publicly avail-able information about the social, economic and political developments leading up to the adoption; and (c) interviews with 36 participants with either involve-ment in or an understanding of the internalisation of accrual accounting in the sector. Drawn from an integrated model of institutionalisation inspired by new
institutional sociology, this study identiies and discusses the features of the insti -tutionalisation process in Indonesia, both at the national level and within one municipality (used as a case study).
This study inds that the new ideals requiring the adoption of accrual account
-ing in the Indonesian public sector were irst mobilised in the 1980s by the tech -nocrats (that is, by economists and accountants) in the Ministry of Finance since
the 1980s. This mobilisation occurred when the country encountered a iscal crisis. The study also identiies that the desire to adopt accrual accounting may have
been driven by the wish to follow a similar practice to that adopted in other coun-tries. Nonetheless, Indonesia’s accrual accounting system was formally adopted
only after the collapse, in 1998, of Soeharto’s regime, through the issuance of Law
17 (2003) and the introduction, in 2005, of new government accounting standards.
