Report No. 7697-IND Indonesia: Strategies for Sustained Development of Tree Crops (In Two Volumes) Volunme 11: Statistical Annex and Techni(al Appendices December 7, 1989 Agrikulturt( Operations Division Countrv Department V Asia Regional Office FOR OFFICIAL USE ONLY Document of the World Bank 7thiS djwum entlerit h&- i rcstri w(d distribUtion11 arid nra. bCX L),(Sd b) re( yIcnlts only in the perfornian(e of their otli( ial duties. It, ( onentos mav not otherwise hie (di( In V, vthlouL 'A'Orlid ank luthWrizat ion. FOR OMCIAL USE ONLY INDONESIA STRATEGIES FOR SUSTAINED DEVELOPMENT OF TREE CROPS VOLUME II: STATISTICAL ANNEY AND TECHNICAL APPENDICES Table of Contents STATISTICAL ANNEX SECTIDN I - AREA, PRODUCTION AND lt'COME Table 1.1 Shares in Gross Domestic Product Table 1.2 Smallholder Households - Land Ownership and Income Table 1.3 Number of Project-Assisted Smallholders Table 1.4 Area Under Crops - By Province Table 1.5 Area Under Oil Palm - Smallholders and Estates rable 1.S Production and Yield of Palm Oil - Smallholders and Estates Table 1.7 Area Under Coconuts - Smallholders and Estates Table 1.8 Productior and Yield of Copra - Srnallholders and Estates Table 1.9 Area Under Ruober - Smallholders and Estates Table 1.10 Production and Yield of Dry Rubber - Smallholders and Estates Table 1.11 Annual Crowth Rates in Area and Yield SECT!ON 11 - MARKETS AND PRICES Tabip 2.1 Impact of Increase .n Palm Oil and Coconut Oil Production Table 2.2 Production of Fats an4 ;..s by Region Table 2.3 Palm Oil - Pro-ected Table 2.4 CoLonut Cil Pre A( and Frojected Table 2.5 Per Capita Consumo:o Majcr Fats and Oils Table B.6 Area and Potential of Rubber in Unassisted and Project- Supported Smailhoidir.gs Table 2.7 Area and Potential Output of Rubber in Estates Table 2.8 Potential Cutput of Rubber Under Various Scenarios Table 2.9 Shoe Manufacturing Capacity and Correspondir.g Rubber Input Requirements Table 2.10 Latex-Based Rubber Goods Production and Latex Consumption Table 2.11 Rubber Consumption in the Tire Industry Table 2.12 Actual Rubber Output Versus Processing Capacity Table 2.13 Nonactive Capacity as Proportion of Actual Output and of Total Available Capacitv of Rubber Table 2.14 Rubber Prices - Actual and Pro;ected Table 2.15 Impact of Charges inr Cutput Prices and Input Costs on Rates of Return SECTION III - RUBBER SMALLHOLZER' - LAN' O:STR:P:TiON AND PROZECT EVALUATION Table 3.1 Land D.tr t:n A:-'-.. Smatlh.ol'r R_bter-Produc.ing Households - By Provln-ce Table 3.2 Ex-Post Frc'e. Evauart:not SMallhol'der Rubber with D-Class Expected' Y.e.s This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - SECTION IV - PTPs AND THE ESTATE SECTOR Tabse 4.1 Location and Crops of PTP Estate Companies rable 4.2 Projected Processing Facilities - PTFs Table 4.3 Planting Program - Estate Sector Table 4.4 Total Planting Program Table 4.5 Investment Program - PTPs Table 4.6 Investment Program - PIR-TRANS Table 4.7 E,timated Investments - PBSN Projects Table 4.8 Summary of Investment Program - Estate Sector Table 4.9 Financial Ratios of 17 Tree Crop PTPs Table 4.10 Cost Overruns of PTPs SECTION V - PRIVATE SECTOR Table 5.1 Foreign Private Estate Area Planted by Tree Crops Table 5.2 Indicative Costs of an 8,000 ha Oil Palm Estate/Factory - With and Without Regulatory Delay SECTION VI - TRENDS IN PRICES, WAGES AND TARIFFS Table 6.1 Trends in Nominal and Real World Market Prices Table 6.2 Price Indices and Exchange Rates Table 6.3 Trends in Nominal and Real Wages and Interest Rates Table 6.4 Consumption of Coccnuts and Edible Oils by Expenditure Classes Tabl_ 6.5 Comparison of Indoiesian and Rotterdam Cooking Oil Prices Table 6.6 Border Price Parity Comparison for CPO and Copra at Primary Producer Level Table 6.7 Trends ir. Implicit Tariffs for CPO and Copra Table 6.8 Estimated Profits on Administered Trade of CPC SECrION VII - COST RECOVERY AND EXPORT TAXES Table 7.1 Area Eligible for Conversion by Project Table 7.2 Cost Recovery in Tree Crop Programs Table 7.3 Exzport/Import Tax Rates for Tree Crop Commodities Table 7.4 Edible Oils Export Tax Simulation Results TECHNICAL APPENDICES Appendix 1 Environmental Impact Assessment and Management Appendix 2 An Alternat ve to .he Present NES/PIR Approach Appendix 3 Procedures for 0 r.aining Access to Land Appendix 4 Research 'nsti tues Appendix 5 Simulation .-ode! for AssessinJ the Impact of a 5Z Tax on Rubber Exports Append..x 6 Dispersed Nrseries for Smallholder Plantings Appendix 7 Funding Smallholder Tree Crops After the Financial Sector Reforms CHARTS I Chart 1 Smallholder Tree Crop Development Authority Chart 2 Cooking Oil Processing Channels Table 1.1: SHARES IN GROSS DOMESTIC PRODUCT (GDP) (Rp billion, 1983 terms) Avg. annual growth (Z) 1978 1983 1985 1986 1987 (1978-87) Products derived from: Rubber 194 207 229 246 247 2.4 Oil palm 91 155 205 234 235 10.0 Coconut 397 379 454 465 472 1.7 Subtotal 682 741 888 945 954 3.4 Other estate crops 1,236 1,929 2,199 2,207 2,282 6.3 Total Estate Crops 1,918 2,670 3,087 3,152 3,236 5.4 Total agriculture /a 12,516 16,702 18,358 18,845 19,380 4.5 Total non-oil/LNG 41,337 58,352 63,056 64,660 68,719 5.2 P-ubber, Oil Palm, Coconut Z of total estate crops 36 28 29 30 29 As 2 of agriculture /a 5.4 4.4 4.8 5.0 4.9 As Z of non-oil/LNG 1.6 1.3 1.4 1.5 1.4 /a Excluding timber. Source: BPS. - 2 - Table 1.2: SMALLHOLDER RUBBER HOUSEHOLDS: LAND OWNERSHIP AND INCOME (October 1983 - September 1984) Average income Total Total income per household Land area (ha) households (Rp'000) (Rp) 0.10 - 0.14 24 7,C40 7,3,333 0.1i - 0.19 117 79,83Z0 682,307 0.20 - 0.24 346 273,131 789,395 0.25 - 0.49 3,281 2,169,264 661,159 0.50 - 0.74 16,261 10,555,802 649,148 0.75 - 0.99 18,067 12,320,981 681,960 1.00 - 1.99 151,513 121,463,235 801,684 2.00 - 2.99 144,331 136,989,762 949,142 3.00 - 3.99 97,227 92,319,423 949,524 4.00 - 4.99 68,575 71,319,423 1,040,000 5.00 - 7.49 93,671 100,527,673 1,073,000 7.50 - 9.99 26,511 29,903,509 l,128,000 10.00 - 14.99 29,600 34,045,489 1,150,000 15.00 plus 24,634 37,078,335 1,505,1b9 Total 674,153 649,037,897 962,749 Source: 1985 Agricultural Statistics, BPS. - 3 - Table 1.3: NUMBER OF PROJECT-ASSISTED SMALLHOLDERS Rubber Other Type of project Sumatera Kalimantan Islands Total NES/PIR lokal, transmigration 40,338 16,490 2,717 59,545 UPP/PRPTE 19,505 8,520 94 28,119 Other 5,880 3,061 - 8,941 Total Project Farmers 65,273 28,071 2,811 96,605 Total nonproject farmers 367,433 233,458 19,638 620,529 Oil Palm Other Type of project Sumatera Kalimantan Islands Total NES/PIR lokal, transmigration 29,703 6,733 5,877 42,313 Nonproject farmers Negligible Coconuts Othe i Type of project Sumatera Kalimantan Java Islands Total NES/PIR lokal 2,458 2,458 Other (UPP/PRPTE, etc.) 77,207 Total Project Farmers 79,665 Total non-project farmers 475,311 97,140 583,751 672,583 1,828,785 Source: DGE; 1985 Agricultural Statistics. - , - rable 1.4: AREA UNDER CROPS BY PROVINCE, 1986 ('000 ha) Province Rubber Oil palm Coconut Total Aceh 71 45 98 214 North Sumatera 540 369 143 1,052 West Sumatera 68 11 75 154 Riau 320 63 293 676 Jambi 430 6 109 545 South Sumatera 520 26 55 601 Bengkulu 44 1 20 65 Lampung 46 11 138 195 West Java 111 13 279 403 Central Java 76 - 287 363 Yogyakarta - - 52 52 East Java 28 - 252 280 Bali - - 73 73 West Nusa Tenggara - 57 57 East Nusa Tenggara - - 139 139 West Kalimantan 340 41 69 450 Central Kalimantan 135 - 37 172 South Kalimantan 118 - 30 168 East Kalimantan 18 9 37 64 North Sulawesi - - 260 260 Central Sulawesi - - 163 163 South Sulawesi 6 6 141 153 Scutheast Sulawesi - - 42 42 Maluku 1 - 172 173 Irian Jaya 2 6 24 32 East Timor - - 48 48 Total 2,874 609 3,113 6,594 Z of which Otuter 93 98 70 81 Total for all estate crops in Indonesia 9,267 1 of which rubber, palm oil and coconut 71 Source: DGE. Table 1.5: AREA UOER OIL PALM - SMALLHOLDERS AND ESTATES (' 000 ha) Mature area Immature area Total area Small- Govt. Private Total Small- Govt.. Private Tlt& Small- Govt. Private Crand holders est.tes estatee mature holders estateg astates imature holders estates totates total r-ua X a X Area X UTT - I AUr- : XX .T C.TT o11T 1970 0 - 43 49 36 77 79 69 0 - 44 61 11 23 66 41 0 0 67 a6 47 36 134 1971 0 - 44 49 37 77 81 69 0 - 46 61 11 23 67 41 0 0 90 66 48 36 1N 1972 0 - 72 49 42 76 114 67 0 - 74 61 13 24 d7 43 0 0 146 73 56 27 201 1973 0 - 74 46 77 119 76 0 - 26 26 14 23 39 25 0 0 98 62 60 86 166 1974 0 88 76 49 77 137 ,s 0 - 30 21 16 *3 46 26 0 0 118 65 64 35 162 1976 0 88 73 49 72 137 72 0 - 33 27 19 28 62 28 0 0 121 64 as 36 169 1976 0 - 109 77 60 71 169 76 0 - 32 23 20 29 62 26 0 0 141 67 70 38 211 1977 0 - 107 72 51 72 158 72 0 - 42 28 20 28 62 28 0 0 149 66 71 32 220 1978 0 - 122 75 69 68 181 72 0 - 41 26 28 32 69 28 0 0 163 66 87 36 260 1979 1 33 134 76 69 73 194 74 2 67 43 24 22 27 67 26 J 1 177 66 61 31 261 1980 1 17 141 71 62 66 194 68 6 83 59 30 27 34 C1 32 6 2 200 70 79 26 286 1981 2 33 164 72 74 74 230 72 4 67 69 28 26 26 89 28 6 2 213 67 100 31 119 1982 2 22 169 75 59 69 230 72 7 78 6e 26 27 31 . 28 9 3 226 70 s6 27 320 1983 2 u 18169 T3 68 266 63 36 96 81 31 36 32 161 37 87 9 262 64 106 27 407 1984 2 6 214 63 80 61 296 68 38 96 126 37 61 39 215 42 40 8 340 67 131 26 611 1986 20 24 232 69 88 61 348 68 90 76 103 31 65 39 249 42 1l1 20 316 66 144 24 697 9sse 46 36 241 73 88 61 374 62 e5 a6 91 27 67 39 233 38 130 21 882 6S 146 24 607 Source: DGE. Table 1.6: PRODUCTION AND YIELD OF PALM OIL - SMALLHOLDERS AND ESTATES ('000 ha and '000 tens of palt oil) Mature area ('000) ha) Production ('000 tons) h'ai-d (tonoho Sal l- Covt. FPrivate Total Sal l- Govt Private STF Got. Private Ov-ro holde * estates estates matur- holder, *etates estates Total holders estates *state meaon Are I r-o X r--U Wr ---- WrIT Wr-iT W1Tr. XT VrTTE l IT Vr? 1 WI. 1970 0 0 43 64 36 46 79 100 0 0.0 147 '38 70 32 217 100 0.00 0 8.42 124 1.94 71 2.76 1971 0 0 44 64 37 46 81 1oo 0 0.0 170 e8 80 32 260 100 0.00 0 3.88 126 2.16 70 3.09 1972 0 0 72 63 42 37 114 100 0 0.0 189 70 80 30 269 100 0.00 0 2.83 111 1.90 $1 2.88 1973 0 0 73 61 46 39 119 100 0 0.0 207 12 82 38 289 100 0.00 0 2.84 117 1.78 73 2.43 1974 0 0 88 64 49 36 137 100 0 0.0 24' 70 104 :l6 348 100 0.00 0 2.77 109 2.12 U4 2.54 1976 0 0 88 64 49 36 137 100 0 0.0 211 68 126 37 397 100 0.00 0 3.08 106 2.67 e9 2.90 1976 0 0 109 69 so 31 159 100 0 0.0 286 66 145 2d 431 100 0.00 0 2.62 97 2.90 107 2.71 1977 0 0 107 e8 61 32 168 100 0 0.0 338 74 121 36 467 100 0.0o 0 3.14 109 2.37 82 2.89 1978 0 0 122 67 69 33 181 100 0 0.0 33e 67 166 40 S01 100 0.00 0 2.76 99 2.80 101 2.'? 1979 1 1 134 69 69 30 194 100 1 0.2 439 68 201 34 641 100 1.00 30 3.28 99 7.41 108 .so 1980 1 1 141 73 62 27 194 100 1 0.1 499 69 221 37 721 100 1.00 27 3.64 96 4.25 114 8.72 1981 2 1 154 67 74 32 230 100 1 0.1 633 67 268 38 800 100 0.60 14 3.46 100 3.69 103 3.48 1982 2 1 169 73 69 26 230 100 3 0.3 599 88 286 30 887 100 1.50 39 3.64 92 4.63 126 3.38 1983 2 1 181 71 73 29 266 100 3 0.3 710 72 269 34 982 100 1.60 39 3.92 102 3.60 96 3.84 19i'l 2 1 214 72 80 27 296 100 4 0.3 814 71 329 30 1,i47 100 2.00 62 ^..80 98 4.11 106 3.88 1965 28 8 232 e; 88 25 348 100 38 2.9 867 70 339 31 1,242 100 1.29 36 3.74 106 3.86 106 3.67 1986 46 12 241 64 88 24 374 100 63 3 9 912 68 386 29 1,360 100 1.18 33 3.76 106 4.36 121 3.61 Source: DGE. Table 1.7: AREA UNDER COCOF;JTS - SMALLYOLDERS AND ESTATES ('000 ha) Mature area Immature area Total area S - Covt. Private Total Small- Covt. Privote Total Srall- Covt. Private Crand holders estates estates mature holders *statas estates imature holders ostetee etate total Aroa X Ar-o X Ar-r XAreaa X C T Ar- X X Aro 11 AroI X Ci W ~T. iA.ros GCT Area C. T r X CT e 1970 1,256 70 4 67 4 36 1,264 70 S33 30 2 33 7 64 642 30 1,789 99 6 0.8 11 0.6 1.006 1971 1,313 70 4 67 4 36 1,321 70 667 30 2 33 7 64 66a ao 1,870 99 a 0.8 11 0.6 1,887 1972 1,326 70 5 71 4 38 1,336 70 683 30 2 29 7 64 672 30 1,889 99 7 0.4 11 0.6 1,907 1973 1,397 70 S 71 6 38 1,407 70 b93 30 2 29 8 62 603 30 1,90 99 7 0.8 18 0.6 2,010 1974 1,480 70 6 71 6 40 1,491 70 628 30 2 29 9 60 639 30 2,108 99 7 0.8 15 0.7 2,130 1976 1,521 69 b 63 8 60 1,634 69 672 31 3 38 8 6O 683 31 2,193 99 a 0.4 16 0.7 2,217 1976 1,610 70 6 56 8 63 1,623 70 696 30 4 44 7 47 706 30 2,306 99 9 0.4 15 0.6 2,32 1977 1,628 68 6 65 2- 68 1,660 68 765 32 6 46 12 32 782 32 2,393 98 11 0.6 86 1.6 2,442 1978 1,669 68 6 66 27 63 1,(01 6s 785 32 4 44 16 37 806 32 2,464 9g 9 0.4 48 1.7 2,606 1979 1,718 68 6 60 26 53 1,749 68 803 32 6 60 23 47 831 32 2,621 96 10 0.4 49 1.9 2,580 1980 1,788 67 6 83 29 69 1,802 67 864 33 1 17 13 31 use 33 2,622 96 6 0.2 42 1.6 2,670 1981 1,868 67 6 40 50 88 1,914 68 896 33 9 60 7 12 911 32 2,763 97 1i 0.6 57 2.0 2,826 1982 1,863 68 5 38 13 43 1,88: 66 946 34 8 62 17 67 971 34 2,809 96 13 0.6 80 1.1 2,852 1983 1,906 66 6 29 17 44 1,928 66 986 34 12 71 22 66 1,019 35 2,891 9e 17 0.6 89 1.3 2,947 1984 1,927 66 3 21 17 44 1,947 a6 1,032 36 11 79 22 60 1,066 36 2,969 98 14 0.6 J9 1.3 8,012 1966 1,962 66 6 33 18 44 1,986 66 1,033 34 10 67 23 68 1,068 36 2,996 98 16 0.6 41 1.3 8,061 1986 2,033 67 8 63 18 44 2,06D ee 1,024 33 7 47 23 56 1,064 34 3,067 98 15 0.6 41 1.3 8,113 Source: DOGE. Table 1.8- PRODUCTION AND YIELD OF COPRA - SLALLHOLDERS AND ESMATES ('000 he and '000 tons of copra equivalent) Matur- &rea ('000 ha Production ('000 tons) Yield (tonalhu Smal- G:ovt. PSmah- Tot1 Sll- Covt. Private Sll_- aot. Privat Ovrall holders estatee %.-tat*a mtur- holders estate. e*tates Total holders e*tate. eatateo mean A Kr aw WT.XST wTT-T 1r-.T7 XT - U. X TT- wI.r- n wr wT.7. 1970 1,256 99 4 0.3 4 0.3 1,264 100 1,199 100 2 0.2 2 0.2 1,203 100 0.96 100 0.60 63 0.60 63 0.96 1971 1,313 99 4 0.3 4 0.3 1,321 100 1,274 100 2 0.2 4 0.3 1,280 100 0.97 100 0.C0 52 1.00 103 0.97 1972 1,326 99 6 0.4 4 0.3 1,336 100 1,249 99 3 0.2 4 0.3 1,266 100 0.94 100 0.60 64 1.00 106 0.94 1973 1,397 99 6 0.4 6 0.4 1,407 100 1,274 99 2 0.2 4 0.S 1,282 100 0.91 100 0.40 44 0.30 88 0.91 1974 1,480 99 6 0.3 6 0.4 1,491 100 1,335 99 1 0.1 6 0.4 1,342 100 0.90 100 0.20 22 1.00 11 0.90 1976 1,621 99 6 0.3 8 0.6 1,634 100 1,S81 99 3 0.2 6 0.4 1,389 100 0.91 100 0.60 66 0.76 83 0.91 1976 1,610 99 5 0.3 8 0.6 1,623 100 1,627 98 3 0.2 5 1.4 1,661 100 0.96 99 0.60 63 0.63 66 0.96 1977 1,628 98 6 0.4 26 1.6 1,860 100 1,642 99 3 0.2 21 1.3 1,685 100 0.96 100 0.60 U3 0.31 86 0.94 1978 1,69 98 6 0.3 27 1.6 1,701 100 1,653 98 4 0.3 20 1.4 1,679 100 0.93 100 0.80 86 0.74 80 0.93 1979 1,718 98 6 0.3 26 1.6 1,749 100 1,596 98 3 O.- 22 2.0 1,632 100 0.93 100 0.60 64 0.36 91 0.9) 1980 1,768 98 5 0.3 29 1.6 1,802 100 1,630 98 4 0.2 33 1.4 1,668 100 0.92 100 0.80 S7 1.14 124 0.92 1981 1,868 97 6 0.3 60 2.6 1,914 100 1,766 99 4 0.2 24 0.6 1,780 100 0.96 102 0.8' 72 0.48 52 0.93 1982 1,8e63 99 6 0.3 13 0.7 1,881 100 ;,587 99 4 0.2 11 0.9 1,606 100 0.86 100 0.80 94 0.36 99 0.86 1983 1,906 99 6 0.3 17 0.9 1,928 100 1,690 99 3 0.2 14 0.7 1,604 100 0.83 100 0.60 72 0.82 99 0.83 1984 1,927 99 3 0.2 17 0.9 1,947 100 1,737 99 2 0.1 11 0.6 1,760 100 0.90 100 0.67 74 0.65 72 0.90 1985 1,962 99 5 0.3 18 0.9 1,986 100 1,905 99 4 0.2 11 0.9 1,928 100 0.97 100 0.30 82 0.61 63 0.97 1986 2,033 99 8 0.4 19 0.9 2,059 100 1,960 99 8 0.4 17 0.9 1.976 100 0.96 100 1.00 104 0.94 98 0.96 Source: DCE. Table 1.9: AREA Ub{!VER RU8BER - SYALLHOL0ERS ANlF ESTATES ('000 ha) Mature area Immatur area Total area Small- Covt. Private Total Smll- Govt. Privato Total Sall- Govt. Private Crand holders estates estates maturo holders estates estates jimmature holders estates estates total -Ar-a --- Ar-o- - A-re--- X r CT r-e-a X Ar-- -X Area X -Foi llE-47 rT Area X C.T-. Aro- X C.Td.r Ar4 -XT r-e 1970 1,091 60 169 71 143 51 1,393 o0 722 40 65 29 137 49 924 40 1,813 78 224 10 280 12 2,317 1971 1,090 80 167 71 157 61 1,404 60 721 40 64 29 150 49 9j5 40 1,811 77 221 9 307 13 2,339 1972 1,108 60 140 71 156 51 1,404 8o 733 40 67 29 160 49 940 40 1,841 79 197 8 306 13 2,344 1973 1,227 e6 152 70 167 57 1,536 a6 830 34 64 30 118 43 812 36 1,867 79 216 9 276 12 2,348 1974 1,250 87 161 77 149 68 1,560 67 622 33 46 !3 110 42 778 33 1,872 80 197 a 269 11 2,328 1975 1,269 88 150 74 151 59 1,560 67 806 32 62 26 104 41 762 33 1,866 80 202 9 265 11 2,322 o 1978 1,262 8a 154 78 147 68 1,563 67 604 33 43 22 105 42 752 33 1,656 e1 197 9 262 11 2,306 1977 1,258 68 161 79 42 80 1,561 68 606 32 39 21 95 40 740 32 1,874 81 190 8 237 10 2,801 1978 1,269 88 163 81 149 59 1,571 88 602 32 36 19 104 41 742 32 1,871 81 189 8 263 11 2,313 1979 1,29e 67 163 82 163 60 1,612 e8 630 33 33 18 107 40 770 32 1,926 81 186 8 270 11 2,382 1980 1,318 68 153 81 141 67 1,612 68 629 32 37 19 106 43 772 32 1,947 82 190 8 247 10 2,384 1981 1,277 64 156 77 131 54 1,604 64 717 36 46 23 112 46 875 38 1,994 82 202 8 243 10 2,439 1982 1,278 61 165 76 137 6e 1,570 63 768 37 C0 24 106 44 914 37 2,086 82 206 8 243 10 2,464 1983 1,329 63 166 70 133 6a 1,617 03 789 37 68 30 103 44 960 37 2,118 82 228 9 236 9 2,677 1984 1,412 63 167 65 137 68 1,706 63 824 37 84 36 98 42 1,006 37 2,236 82 241 9 236 9 2,712 19865 1,396 61 166 64 130 56 1,692 61 897 39 96 30 101 44 1,083 39 2,268 82 261 9 281 8 2,776 1966 1,463 61 163 60 132 6a 1,748 el 914 39 110 40 102 44 1,126 39 2,367 92 273 9 234 a 2,874 Source: DCE. Table 1.10: PRODUCTION AND YIELD OF DRY RUBBER - SMALLHOLDERS AND ESTATES ('000 ha and '000 tons of dry rubber) Mature area 1'000 ha) Production ('000 tons) Yi;ld (kg/he) Small- Covt. Privt Total Small- Govt Private S"a 1- Govt. Private Ovrale holders estates estates mature holders estat"a estates Total holders estates 4*tat4 mean W!z XTArT ~UT A T Ar-a X TTX W XT r WT. UT wTT X 77W V WT wT 1970 1,091 78 169 11 143 10 1,393 100 671 71 118 16 113 14 802 100 623 91 742 129 790 137 676 1971 1,090 78 167 11 167 11 1,404 100 647 70 118 15 l1 15 781 100 602 90 762 136 739 133 666 1972 1,108 79 140 10 168 11 1,404 100 567 71 121 16 112 14 800 100 512 90 864 162 718 126 670 1973 1,227 80 162 10 157 10 1,536 100 698 71 137 16 109 13 844 100 487 89 901 164 694 126 649 1974 1,260 81 161 10 149 10 1,650 100 671 70 138 17 108 13 817 100 467 87 914 173 726 138 627 1976 1,269 81 150 10 161 1;- 1,660 100 643 69 137 17 110 14 790 100 431 86 913 180 728 144 606 1973 1,262 81 164 10 147 9 1,663 100 810 71 142 17 104 12 866 100 487 88 922 167 707 120 661 1977 1,268 81 161 10 142 9 1,661 100 690 69 147 17 117 14 864 100 465 86 974 178 824 161 647 3 1978 1,269 81 153 10 149 9 1,671 100 612 69 162 18 110 12 884 100 482 86 1,069 188 738 1s1 6a3 1979 1,296 80 163 9 163 10 1,612 100 673 70 170 18 121 13 964 100 619 87 1,111 186 742 124 698 1980 1,318 82 163 9 141 9 1,612 100 714 70 186 18 120 12 1,020 100 642 86 1,216 192 861 136 633 1281 1,277 82 156 10 131 8 1,684 100 642 67 193 20 128 13 963 100 603 82 1,237 201 977 169 6le 1982 1,278 81 165 10 137 9 1,670 100 686 65 189 21 126 14 900 100 469 80 1,219 213 912 169 673 1983 1,329 82 166 10 133 8 1,617 100 674 67 201 20 133 13 1,008 100 607 81 1,297 208 1,000 160 623 1984 1,412 83 157 9 137 8 1,706 100 704 68 208 20 121 12 1,033 100 499 82 1,326 219 883 146 606 1986 1,396 83 166 10 130 8 1,692 100 720 68 211 20 124 12 1,066 100 616 83 1,271 204 964 163 624 1966 1,463 83 163 9 132 8 1,748 100 763 69 200 18 160 13 1,-13 100 626 82 1,227 193 1,136 178 637 Source: DGE. Table 1.11: ANNUAL GROwTH RATES IN AREA AND YIELD (In percent) S-aliholdara Government estate* Private estate, Total Area Production Area Production Area Production Are-a Production Im- Ton- Yiold/ ImaiTn-on Yi -Id/ I. .- Ton- Yi*ld/ TI- Ton- Yi-ld/ ture Mature Total nage he ture Mature Total nage ha turo Mature Total nage ha tur- Mature Total nags he Oil Palo 1970-86 - - - - - 6.4 10.2 8.6 11.8 1.6 10.1 6.3 6.8 11.2 6.9 9.7 3.9 9.1 11.7 2.S 1970-79 - - - - - -1.8 12.6 7.1 11.2 -1.2 9.8 6.4 6.6 11.2 6.6 1.6 9.6 7.0 11.3 1.4 1979-86 68.4 61.6 68.6 69.4 6.4 12.7 9.1 10.2 11.1 2.0 16.0 7.0 9.7 8.6 1.7 20.1 10.0 13.4 10.8 0.9 Rubber 1970-88 1.6 1.6 1.6 1.8 0.3 2.2 0.4 1.0 4.0 3.6 -2.0 -1.0 -1.6 1.4 2.4 1.2 1.3 1.2 2.1 o.6 1970-79 -2.2 2.0 0.5 1.6 -0.6 -7.9 -0.1 -1.9 4.0 4.1 -4.6 0.1 -2.0 0.2 0.1 -2.6 1.8 0.1 1.7 0.1. 1979-86 6.7 1.7 3.1 1.6 -0.1 18.2 1.0 6.8 2.4 1.4 -1.2 -2.1 -1.8 1.9 4.0 6.7 1.3 2.9 1.6 0.6 Coconut 1970-86 4.6 3.0 3.6 2.8 -0.2 11.4 1.1 6.3 6.6 4.4 8.3 11.9 10.2 11.6 -0.4 4.7 8.0 3.6 2.6 -0.2 1970-79 6.0 3.6 4.0 3.4 -0.2 12.2 2.7 6.4 6.6 3.8 11.3 26.0 18.0 26.4 0.1 6.1 8.6 4.2 3.6 -0.2 1979-86 3.7 2.2 2.7 2.6 0.4 17.8 1.4 8.9 6.4 3.9 7.8 -9.4 -2.7 -11.9 -1.6 3.6 2.0 2.6 2.4 0.4 Source: DGE. - 12 - Table 2.1: IMPACT OF INCREASE /a IN PALM OIL AND COCONUT OIL PRODUCTION (Percent change) Real price Year Palm oil Coconut oil Soybean 1990 -n.C2 0.00 -0.01 1995 -0.98 -0.01 0.00 2000 -3.10 -0.88 -0.40 Production Year Malaysian palm oil World coconut oil World soybean 1990 0.00 0.000 0.00 1995 -0.02 +0.002 0.00 2000 -1.40 +0.340 -0.59 /a Thirty-three percent increase in production in Indonesia is assumed. Source: Mission estimates. -13- Table 2.2: PRODUCTION OF FATS AND OILS BY REGION IN 1982 (Million metric tons) Regi, .i Production North America 12.4 EEC 11.2 Eastern Europe 9.2 China 7.3 Malaysia 5.2 India 4.0 Brazil 3.5 Argentina 2.4 Africa 2.2 Indonesia 2.2 Japan 2.2 Philippines 1.6 Mexico 0.9 Other Europe 0.9 Turkey 0.8 Pakistan 0.6 Australia 0.6 Rest of the world 5.3 Source: FAO Production Yearbook Tapes. - 14 - Table 2.3: PALM OIL PRICES,/a 1950-87 (ACTUAL) AND 1988-2000 (PROJECTED) ($/ton) 1985 Constant $ Current $ MUV iD Ub GNP /c Current S /d Actual 1950 277 1,169 1951 298 1,092 1952 294 1,028 1953 227 814 890 1954 225 827 872 1955 240 866 938 1956 246 857 904 1957 259 884 922 1958 232 779 811 1959 248 844 846 1960 228 757 765 1961 232 758 773 212 1962 216 695 706 192 1963 222 725 716 187 1964 240 769 787 200 1965 273 869 848 235 1966 236 724 709 205 1967 224 681 655 194 1968 169 517 473 146 1969 181 528 481 141 1970 260 712 657 219 1971 261 678 627 220 1972 217 518 501 183 1973 378 778 825 246 1974 669 1,130 1,343 519 1975 434 660 796 452 1976 407 610 710 355 1977 530 723 873 506 1978 600 712 922 543 1979 654 685 924 609 1980 584 558 755 552 1981 571 543 674 519 1982 445 429 496 435 1983 501 496 538 435 1984 729 734 753 657 1985 501 501 501 447 1986 257 217 253 1987 342 261 313 Proj ected 1988 438 312 401 1989 441 295 386 1990 446 307 389 1995 598 327 384 2000 671 296 344 /a Malaysian 5Z, CIF Northwest Europe. Th Deflated by Manufacturing Unit Value (MUV) Index. T7 Deflated by US GNP deflator. 7T DevelopinLg countries' Export Unit Value. Sources: IMF and FAO Trade Yearbook (actual); World Bank, International Economics Department (pro'ected). - 1 5 - Table 2.4: COCONUT OIL PRICES,/a 1950-87 (ACTUAL) AND 1988-2000 (PROJECTED) _________ - ~~~~($/ton) 1985 Constant $ Current $ MUV /b US GNF /c Current S /d Actual 1950 292 1,232 1951 338 1,238 1952 263 920 1953 339 1,215 1,329 1954 306 1,125 1,186 1955 259 935 1,012 1956 265 923 974 1957 275 939 979 1958 312 1,047 1,091 1959 378 1,286 1,290 1960 312 1,037 1,047 1961 254 830 847 227 1962 251 807 820 219 1963 286 935 923 255 1964 297 952 943 277 1965 348 1,108 1,081 305 1966 324 994 973 258 1967 328 997 959 260 '968 399 1,220 1,118 306 1969 361 1,053 960 269 1970 397 1,088 1,003 301 1971 371 964 892 280 1972 234 55S 540 194 1973 513 1,056 1,120 350 1974 998 1,686 2,004 909 1975 394 599 723 400 1976 418 627 729 352 1977 578 789 952 547 1978 683 810 1,049 618 1979 984 1,030 1,390 927 1980 674 64', 872 636 1981 570 542 673 526 1982 464 +47 517 450 1983 730 123 783 547 1984 1,155 1,163 1,'93 1,019 1985 590 590 590 517 1986 297 251 292 1987 442 338 405 Projected 1988 566 402 518 1989 598 400 524 1990 628 414 524 1995 777 425 499 2000 847 314 434 /a Phil.ippines/Indonesia, bulk, CIF Rotterdam; before 1973, Sri Lanka 1Z, CIF Europe. /b Deflated by Manufacturing Unit. Value (MTUV) Index. 7t Deflated by US GNP deflator. 7t Developing countries' Export Unit Value. Sources: Oil World (actual); World Bank, International Economics Department lprojected). - 16 - Table 2.5: PER CAPITA CONSUMPTION OF MAJOR FATS AND OILS (kg) 1960 1970 1980 1987 EEC 26.7.5 31.57 35.22 38.50 USSR 13.64 17.71 20.52 22.80 United States 28.55 32.60 34.79 39.40 Brazil 5.45 8.04 16.95 18.70 China 2.46 2.65 4.65 7.50 India 5.75 5.48 6.54 7.20 Indonesia 2.58 3.08 6.02 8.70 Japan 6.95 13.13 15.81 19.30 World 9.53 10.70 12.73 13.10 Source: Oil World. - 1 7 - Tablo 2.6: AREA AND POTENTIAL OUTPUT OF RUBBER IN UNASSISTED AND PROJECT-SUPPORTED SMALLHOLDINGS (BASE CASE) Area Imature Total Potential outcut from: planted Imsiotur u Mature D aur e.tu r,%, rea Mature S Ieping Total Yoar (plannod) re area PIlonno ReIzd (DGE) Sloeping area area area area ………----------------------- ('000 ha) ----(--------------------___ ------ ('000 tons) -…-__ 1978 60.7 437.1 1,268.5 1,706.7 1,705.7 1,870.6 164.9 (8.8) 691.6 89.8 781.4 1979 86.4 463.2 1,290.7 1,763.9 :,763.9 1,926.2 172.3 (8.9) 696.4 44.7 741.1 1980 64.6 478.4 1,249.0 1,727.4 1,727.4 1,947.1 219.7 (11.3) 680.2 67.4 737.6 1981 65.6 490.1 1,260.0 1,740.0 1,740.0 1,993.7 263.7 (12.7) 678.8 63.8 742.6 1982 60.8 603.6 1,297.3 1,800.9 1,800.9 2,035.8 234.9 (11.5) 694.4 53.8 748.2 1983 67.8 472.7 1,380.4 1,853.1 1,853.1 2,117.9 264.8 (12.6) 727.6 67.1 794.8 1984 71.4 489.0 1,368.3 1,867.3 1,867.3 2,236.7 378.4 (16.9) 733.4 94.4 827.8 1986 7e.6 606.1 1,427.7 1,933.8 1,933.8 2,283.9 360.1 (15.7) 764.4 90.1 864.5 1986 77.1 620.8 1,478.2 1,999.0 1,999.0 2,366.2 367.2 (16.6) 791.1 96.4 887.5 1987 86.9 623.3 1,620.1 2,043.6 2,043.4 2,482.1 4A8.6 (17.7) 812.6 117.3 929.9 1988 102.4 541.6 1,683.1 2,104.5 2,104.4 838.9 1989 92.2 671.9 1,683.4 2,166.3 2,166.2 860.9 1990 78.6 685.7 1,606.8 2,192.6 2,192.4 882.0 1991 41.4 66e.9 1,826.6 2,192.6 2,192.4 900.2 1992 41.4 546.4 1,647.1 2,192.6 2,191.3 921.6 1993 41.4 479.4 1,713.2 2,192.6 2,1.00.3 962.3 1994 41.4 413.1 1,779.4 2,192.6 2,181.3 1,016.6 1996 41.4 388.2 1,824.3 2,192.6 2,189 3 1,065.0 199e 41.4 331.0 1,861.8 2,192.6 2,189.3 1,116.3 1997 41.4 331.0 1,861.6 2,192.6 2,189.3 1,146.0 1998 41.4 331.0 1,861.6 2,192.6 2,189.3 1,172.2 1999 41.4 331.0 1,861.6 2,192.6 2,189.3 1,188.8 2000 41.4 331.0 1,881.6 2,192.6 2,189.3 1,202.4 2001 41.4 331.0 1,881.6 2,192.6 2,189.3 1,207.8 2002 46.1 334.7 1,867.8 2,192.6 2,189.3 1,207.7 2003 45.1 338.4 1,864.1 2,192.6 2,189.3 1,202.4 2004 91.6 388.7 1,803.9 2,192.6 2,189.3 1,184.4 2006 39.4 386.7 1,806.9 2,192 6 2,189.3 1,174.8 2006 38.9 384.2 1,808.4 2,192.6 2,189.3 1,161.6 2007 37.9 380.7 1,811.9 2,192.6 2,189.3 1,138.8 2008 37.8 377.1 1,815.6 2,192.6 2,189.3 1,114.0 2009 37.9 373.6 1,818.9 2,192.6 2,189.3 1,082.6 2010 37.6 366.1 1,826.4 2,192.6 2,189.3 1,049.8 Not: Figures within parentheses refer to 'slooping area' rubboor as a percentage of total rubber area in the snmliholder sector. Soureos: DGE and mission estimates. - 18 - Tablo 2.7: AREA AND POTENTIAL OUTPUT OF RUBBER IN ESTATES (sASE CASE) Area Immature Total Potntil output from: planted Immature Maturo plua matu ; rea Sl ping Totl Yea t(planned) are area Pin- -R a,2cd (DGE) Sleeping re are are ar _____________________________ ('000 he) ------_____----------- ----- ('000 tons) ---…- 1978 22.9 84.6 301.8 386.3 386.3 441.9 73.6 Cl1.6) 399.4 27.2 426.6 1979 20.2 74.9 316.9 391.8 391.8 467.8 97.8 (21.4) 401.1 88.4 437.6 1960 28.9 93.2 312.8 406.0 406.0 436.7 71.1 (16.3) 400.8 80.8 431.1 1981 41.9 128.2 306.0 433.2 433.2 446.9 e8.2 (16.3) 396.7 33.1 429.8 1982 68.8 180.3 297.0 477.3 477.3 448.2 67.1 (16.0) 388.8 80.6 419.5 1983 28.0 200.7 289.9 490.6 490.5 460.1 81.1 (13.3) 381.6 30.4 412.0 1984 20.8 198.6 298.0 496.6 496.6 476.6 68.9 (12.4) 381.6 28.0 407.6 1986 17.7 196.0 303.8 499.6 497.2 491.2 66.2 (11.2) 383.2 26.3 409.5 1986 27.6 194.8 317.8 512.6 506.0 607.4 58.6 (11.5) 388.6 38.1 419.6 1987 21.1 174.0 346.0 618.9 601.8 523.7 81.4 (11.7) 391.7 30.8 422.6 1988 21..d 136.6 386.2 621.7 491.1 406.1 1989 24.4 133.0 394.6 627.5 494.8 420.5 1990 26.8 138.0 398.8 634.7 502.0 437.8 1991 9.3 129.8 406.2 534.7 602.0 449.6 1992 9.3 111.2 423.6 534.7 500.3 488.5 1993 9.3 99.4 435.3 634.7 499.7 484.0 1994 9.3 87.3 447.4 634.7 499.6 506.7 1996 9.3 72.2 462.6 634.7 498.6 622.4 1996 9.3 56.7 479.0 634.7 497.4 639.2 1997 9.3 56.7 479.0 634.7 497.4 647.3 1998 9.3 56.7 479.0 634.7 497.4 567.2 1999 9.3 66.7 479.0 634.7 497.4 668.3 2000 6.2 52.6 482.1 634.7 497.4 665.0 2001 23.9 67.3 467.4 634.7 497.4 639.7 2002 29.8 87.8 447.0 634.7 497.4 629.8 2003 10.6 89.1 445.7 634.7 497.4 523.6 2004 6.9 86.7 448.1 534.7 497.4 520.3 2006 8.7 84.1 460.6 634.7 497.4 OS8.6 2006 7.6 86.6 449.2 534.7 497.4 495.6 2007 18.9 80.6 464.3 534.7 497.4 480.8 2008 6.6 67.3 477.4 534.7 497.4 474.9 2009 13.6 60.3 474.4 634.7 497.4 461.1 2010 12.3 86.7 469.1 534.7 497.4 443.7 Note: Figures within parontnmsoe refer to wsleoping areoa rubber as a percentage of total rubber area. Sources: DGE and mission estimates. - 19 - Table 2.8: POTENTIAL OUTPUT OF RUBBER UNDER VARIOUS SC.FNARIOS, 1987-2010 ('000 tons) Smallholders Total Scenario Scenario Scenario Scenario Scenario Scenario 'rear Estates PAR "B' NC" "Am 'B" "Co 1987 391.7 812.6 812.6 812.6 1,204.3 1,204.3 1,204.3 1988 405.1 838.9 838.9 838.9 1,244.0 1,244.0 1,244.0 1989 420.5 860.9 860.9 860.9 1,281.4 1,281.4 1,281.4 1990 437.8 882.0 882.0 882.0 1,319.9 1,319.9 1,319.9 1991 449.6 900.2 900.2 900.2 1,349.8 1,349.8 1,349.8 1992 468.5 921.5 921.5 921.5 1,390.0 1,390.0 1,390.0 1993 484.0 978.9 966.8 966.8 1,462.9 1,450.8 1,450.8 1994 505.7 1,069.4 1,030.2 1,030.2 1,575.1 1,535.9 1,535.9 1995 522.4 1,164.3 1,098.7 1,095.8 1,686.7 1,621.1 1,618.1 1996 539.2 1,246.9 1,160.5 1,150.9 1,786.1 1,699.8 1,690.2 1997 547.3 1,308.1 1,201.4 1,183.7 1,855.4 1,748.7 1,731.0 1998 557.2 1,363.3 1,234.9 1.208.3 1,920.5 1,792.1 1,765.5 1999 558.3 1,408.1 1,258.2 1,Z2Z.0 1,966.3 1,816.4 1,780.3 2000 555.0 1,449.8 1,280.1 1,233.6 2,004.8 1,835.1 1,788.6 2001 539.7 1,48?.3 1,294.7 1,237.5 2,023.1 1,834.5 1,777.2 2002 529.8 1,511.3 1,303.9 1,235.9 2,041.1 1,833.6 1,765.7 2003 523.5 1,533.1 1,308.2 1,229.5 2,056.6 1,831.7 1,753.1 2004 520.3 1,541.0 1,300.2 1,210.8 2,061.3 1,820.5 1,731.1 2005 508.6 1,556.3 1,300.2 1,200.5 2,064.8 1,808.8 1,709.1 2006 495.5 1,566.2 1,295.6 1,186.0 2,061.8 1,791.2 1,681.5 2007 480.6 1,566.9 1,280.8 1,161.6 2,047.5 1,761.4 1,642.1 2008 474.9 1,565.9 1,263.2 1,134.7 2,040.8 1,738.2 1,609.6 2009 461.1 1,576.0 1,239.0 1,100.6 2,037.1 1,700.1 1,561.7 2010 443.7 1,584.4 1,212.2 1,063.2 2,028.1 1,655.9 1,506.8 source: Mission estimates (see Main Report, Section III for discussion of the scenarios). - 20 - Table 2.9: SHOE MANUFACTURING CAPACITY AND CORRESPONDING RUBBER INPUT REQUIREMENTS 1988 1990 2000 Variables Low High Installed manufacturing capacity (million pairs) 51.7 126.3 250.0 327.6 Rubber inputs (tons) 25,850 63,150 125,000 163,795 Of which: Pale crepe 10,340 25,260 50,000 65,518 SIR5 7,755 18,945 37,500 49,139 RSS1 7,755 18,945 37,500 49,139 Sources: "Present and Future Development of Rubber and Rubber Products in Indonesia,' Department of Industry, October 1988; and private commu- nications with Mr. Wattimena, Directorate of Chemical Industries, Department of Industry. - 21 - Table 2.10: LATEX-BASED RUBBER GOODS PRODUCTION AND LATEX CONSUMPTION Items 1987 1988 1989 1990 Glove-s production ('000 pairs) 960.0 328.8 1,901.6 3,517.3 Condoms ('000 pieces) 10.0 213.0 233.0 - Foam rubber (tons) 2.8 3.8 3.8 3.8 Total latex consumption (tons) 3.8 16.0 69.0 122.9 Source: "Present and Future Development of Rubber and Rubber Products in Indonesia.' Department of Industry, October 1988. - 22 - Table 2.11: RUBBER CONSUMPTION IN THE TIRE INDUSTRY ('000 tons) 4-wheeled 2-wheeled Year vehicles motor vehic'.es Bicycles Total 1981 20.82 2.27 (4.62) 27.71 1982 21.14 2.76 (4.78) 28.68 1983 19.98 2.71 (4.54) 27.23 1984 21.45 2.48 (4.79) 28.72 1985 22.23 2.57 5.38 30.18 1986 26.85 3.43 9.48 39.76 1987 27.67 4.41 7.00 39.08 1988 31.16e 5.64e (7.36) 44.16 1989 32.60e 6.11e 7.74 46.45 1990 35.40e 6,66e 8.41 50.47 e = estimate. Note: Data on bicycle tire production and rubber demand are for 1985-87. Estimated rubber demand by the bicycle tire sector within parentheses are estimated at 20Z of total rubber demand in the otnier two tire industries. - 23 - Table 2.12: ACTUAL RUBBER OUTPUT VERSUS PROCESSING CAPACITY ('000 tons) Total Total no. of No. of Actual Processing capacity available processing active pro- *;ear output Licensed Active Nonactive capacity units cess units 1982 899.2 730.12 0.00 730.12 101 101 1983 1,007.0 845.90 110.70 956.55 124 110 1984 1,032.6 1,004.90 88.00 1,092.85 124 11 1985 1,055.0 (1,053.27) 1986 1,113.1 868.53 145.15 1,013.68 123 102 1987 1,131.7 (926.71) (1,032.88) 1988 (1,140.0) 984.88 67.20 1,052.08 101 93 Note: Figures within parentheses denote estimates by extrapolation. Source: DGE. - 24 - Table 2.13: NONACTIVE CAPACITY AS A PROPORTION OF ACTUAL OUTPUT AND OF TOTAL AVAILABLE CAPACITY OF RUBBER (In percent) Active capacity Nonactive capacity Total available capacity Year Actual output Total available capacity Actual output 1982 81.2 0.0 81.2 1983 84.0 11.6 95.0 1984 97.3 8.1 105.8 1985 (99.8)e 1986 78.0 14.3 91.1 1987 81.9e (91.3)e 1988 86.4e 6.4 Notes: Figures for total available capacity and capacity utilization rates for 1985 and 1987 are estimated by linear intraDolation. "e" denotes estimated values. Source: DGE. - 25 - Table 2.14: NATURAL RUBBER PRICES,/a 1950-87 (ACTUAL) AND 1988-2000 (PROJECED) 1985 Constant Current $ MUV /D US GNP /c Current S /d -(c------------- - -/kgJ- _ ($/ton) - Actual 1950 90.6 382.8 423.2 1951 130.2 477.1 580.2 1952 85.0 297.2 373.1 1953 53.4 192.1 230.8 1954 52.1 191.6 221.6 1955 86.4 311.9 355.9 1956 75.4 262.7 300.5 1957 68.8 234.8 264.7 1958 61.9 207.' 233.3 1959 80.7 274.5 296.6 1960 84.2 280.7 304.3 1961 65.0 213.0 232.7 543.3 1962 63.1 202.8 222.0 492.1 1963 57.8 189.3 199.6 489.0 1964 55.6 179.0 188.9 452.5 1965 56.7 181.2 187.8 438.2 1966 52.0 160.5 166.4 431.3 1967 43.9 134.0 136.6 362.0 1968 43.7 134.7 129.6 330.9 1969 57.8 169.0 162.5 423.3 1970 46.3 127.4 123.2 391.5 1971 39.9 104.2 100.6 330.3 1972 40.1 96.1 96.5 310.4 1973 78.5 162.3 177.2 570.0 1974 86.9 1L7.5 180.1 717.3 1975 65.9 100.6 124.3 541.7 1976 87.3 131.4 154.8 721.1 1977 91.7 125.7 152.5 791.5 1978 110.7 131.8 171.5 915.3 1979 142.4 149.7 202.7 1,180.6 1980 162.4 155.7 211.9 1,310.3 1981 125.2 119.4 149.1 1,067.7 1982 100.2 96.9 112.1 799.2 1983 123.8 122.9 133.3 963.7 1984 109.6 111.2 114.0 975.4 1985 92.4 92.4 92.4 756.0 1986 94.5 79.9 92.7 752.7 1987 111.7 85.9 106.0 916.4 Projected 1988 144.4 102.6 132.2 1,189.5 1989 127.2 85.1 111.4 1,031.0 1990 117.5 77.4 98.0 916.0 1995 207.7 114.8 133.3 1,423.0 2000 239.1 105.5 122.4 1,873.0 /a RSS No. 1, in bales, spot, New York. Th Deflated by Manufacturing Unit Value (MuJV) Index. TE Deflated by US GNP deflator. TE Developing countries' Export Unit Value. Sources: International Rubber Study Group, Rubber Statistical Bulletin (actual); World Bank, International Economics uepartment (projected). - 2 6 Table 2.15: IMPACT OF CHANGES IN OUTPUT PRICES AND INPUT COSTS ON RATES OF RETURN Rubber 102 decline 252 decline No change in Ex-ante in rubber (from 1995) in fertilizer project price /a rubber price /b subsidy evaluations FRR (Z) ERR (Z) FRR (!) ERR (Z) FRR (2) Full PMU 22 22 19 19 24 Full PMJ & corn 31 24 29 21 33 Partially assisted 19 21 17 18 22 Private estate 19 23 16 21 20 Nuc:s'rv-assisted 20 22 17 19 21 ____________ Coconut 102 decline 252 decline No change in in copra (from 1995) in fertilizer No ')rice /a copra price /b subsidy trade reform /c FRR (Z) ERR (Z) FRR (Z) ERR (Z) FRR (2) FRR (2) ERR (2) Full PMU (hybrid) 17 17 15 14 1n i8 17 Full PMU & corn 22 20 19 18 24 Full PMU (cocoa with existing talls) 21 23 19 21 23 Oil Palm 10Z decline 25: decline No change in in oil palm (from 1995) in fertilizer With price /a oil palm price /b subsidy trade referm /' FRR (Z) ERR (2) FRR (2) ERR (2) FRR (2) FRR (2) ERR (Z2 Full PMU 22 24 20 22 25 27 29 Private estate 18 26 17 25 21 22 32 /a A 102 decline is based on the historical trends in real world prices (Ar.nex Table 6.1!. /b A 25Z decline is based on the likely deviation of the actual world prices from the Bank projected prices (beyond a five-year period). /c Assumes no change in farmgate copra price, whereas Table 7.1 (main report) reflects a 52 increase in copra price, due to trade liberalization. /d Assumes a 15Z increase in oil palm (ffb) price, due to trade liberalization. Note: The main report ,Table 7.1) presents the base case analysis. SR 056 Tabla 3 l/INS 5R S/5A 415/02 10-89/.jd T.b l. 3. 1 LA)D DISTR1BUTION AMONC SNALLHOLDER RV88ER-PROODUC ING 1t0LDS: BY PROVINCE L..nd a*r _Ac.h N. Su.at.a Ir_ Sat., RJ S. Su-at.ra . 0n.I._ 1. Kalim ntan C. Kalim_ntan S. Kelimanton W. Jan. (h.) h/h S h/h I h/h S h/h S h/h I h/h S h/h S h/h 1 h/h S h/h S h/h 1 0.10- O.14 - - - 0 15- 0.19 - 77 1 - 0.20- 0.24 51 146} I 0 - - - - - ) } }1} 3.6 0.25- 0.49 24 1 882 } 362 2 1 155 } 160 1 184 1 24 1 249 } _ _ 967 1 239 1.4 14 0 } } } } }2.1 0 .50- 0.74 431 5,273 4 7 385 2.3 593 116 0 519 1 1.6 2,694 1 4 9 125 } 3.8 2.110 } 204 } 2,661 9.5 1,200 7.3 } } } } } } }11.8 0 75- 0 99 151 } 5,153 4 6 752 4 5 435 , 384 } 2,406 } 276 i 1,561 } 456 } 4,439 15.0 1.956 12.0 1.00- 1 99 4,188 26 0 42.853 39 0 8,225 19 0 13,550 18 0 13,060 19 0 21,326 20 0 3,361 30.0 20,461 11 0 3,209 9.0 12,295 44.0 6.176 38.0 2 00- 2.99 4.185 26.0 26,218 24 0 3,642 21 0 16,689 22 0 13,891 21.0 28.730 27.0 3,283 29 0 28.812 16.0 ,,124 19.4 3,866 14.0 3,831 23.5 3 00- 3 99 2,653 16.0 11,642 10 5 1,170 7.0 15.847 21 0 10,376 15.0 18,080 17.0 1,264 11.0 24,000 13 n S56.'9 15.4 1,930 7.0 1.513 9.3 4 00- 4.99 2.443 15 0 7,897 7.0 487 3 0 8.564 11.0 7,418 11.0 10,900 10.0 860 7.7 22,666 12.3 4,14? 11.3 941 S3, 635 3.7 5 00- 7 49 1,236 7.6 6,514 6.0 333 } 9,912 13.0 13,336 20 0 11,092 11.0 1,16S 10.0 39,835 21.0. 7,319 20.0 579 } 649 3.9 } 2.7 7.50- 9.99 401 1,480 1 3 126 1 2,898 4.0 2,214 3.3 2,079 2.0 175 1.5 14,229 7.7 2.365 6.4 64 1 2.7 49 0.3 10 00-14.99 171 5 4 1.350 } 75 0.4 2,989 4 0 2,567 4.0 2,788 3.0 227 2.0 16,666 9.2 2,120 5.0 133 - - } } 1.6 15.00. 316 1 514 } - - 2,233 3 2,187 3.3 2,406 2.3 404 3 6 12,44b 6.7 3,947 10.7 - - - - To!l 120 19.96 16.567 ML0 66.112 102. 11.16.1A4 183Me 2L lo, So-.re: 1987 Analy.is of S- lIhold-, Rhbba, and C--o.nut P,od.cara, BPS. - 28 - Table 3.2: EX-POST PROJECT EVALUATION OF SMALLHOLDER RUBBER WITH D-CLASS EXPECTED YIELDS (NES-TYPE PROJECT) Total Total financial economic Total Year costs costs Yield revenue (Rp/ha) (Rp/ha) (kg/ha) (Rp'000/ha) 1.983 2,553 1,424 0 0 1984 369 385 0 0 1985 415 420 0 0 1986 297 344 0 0 1987 297 371 0 0 1988 362 433 0 0 1989 147 367 0 0 1990 151 517 150 187 1991 154 517 320 437 1992 157 517 380 567 1993 161 517 420 687 1994 166 517 430 770 1995 170 517 500 980 1996 174 517 530 1,019 1997 179 517 570 1,075 1998 184 517 560 1,036 1999 184 517 560 1,016 2000 184 517 540 961 2001 184 517 510 908 2002 184 517 480 855 2003 184 517 460 819 2004 184 517 440 783 2005 184 517 420 748 2006 184 517 390 694 2007 184 517 370 659 2008 184 517 330 587 Net present value (financial at 10t interest): -3,122 Net present value (economic at 102 interest): -1,920 Note: Financial and economic cost streams are based on the farm models. All costs are in constant 1988 terms. Economic costs include labor valued at 802 of market wages and fertilizer at progressively higher prices. Post-1988 prices are deflated by 62 p.a. to obtain constant 1988 values. Gross returns are based on estimates provided in the Bank report entitled, Upgrading of Substandard Smallholder Plantings on Indonesian Treecrop Projects, 1987. Gross value is estimated at farm- gate parity using the Bank commodity market forecasts and eccnomic incidental costs to derive parity values. Source: Mission estimates. - 9- Table 4.1: LOCATION AND CROPS OF PTP ESTATE COMPANIES, 1988 Province of head office/estate Crops grown (ha) companies Rubber Oil palm Coconut Sugarcane Others Total Aceh FTF I 9,376 13,928 - - - 23,304 North Sumatera =P`Y-- 18,802 60,326 - - 3,240 82,368 PTP III 19.689 21.091 - - - 40,780 PTP IV 36.108 44,89C - - 1,703 82,706 PTP V 23,272 35.785 - - - 59,057 PTP VI 6,539 58,458 4,301 - 6,046 75,344 PTP VII 945 89 373 - - 285 90,603 PTP VIII 400 6,019 - - 13,630 20,049 PTP IX - 9,131 - 16,294 46,477 71,902 Lampung FF'F X 23,639 19,851 1,057 - 2,352 46,899 West Java PTF xi 19,418 4,070 5,198 - 5,553 34,239 PTP XII 8,579 - 1,913 - 17,021 27,513 PTP XIII 9,822 - 1,508 - 18,822 30,152 PTP XIV - - 31,823 - 31,823 Central Java FIT XV-XV _ - - 45,300 45,300 PTP XVII - - - - NA PTP XVIII 30,85" _ 2,492 - 10,089 43,436 PTP XIX - - - 2,300 2,300 East Java P'rFxx- - - 29,888 - 29,888 PTP XXI-XXII - - 78,431 - 78,431 PTP XXIII 5,942 - 836 - 22,188 28,966 PTP XXIV-XXV - - 59,603 - 59,603 PTP XXVI 6,699 - 438 - 17,195 24,332 PTP XXVII - - - 9,548 9,548 PTP XXIX 2,236 - - - 12,661 14,897 South Sulawesi FTF XXVlll - 4,000 - - - 4,000 Totals 222,321 366,927 17,743 261,339 189,110 1,057,440 Summary N-umer of PTPs 26 Rubber dominant : 3 Oil palm dominant: 9 Sugar dominant : 5 Mixed crops 9 Source: DGE, PTPs. - 30 - Table 4.2: PROJECTED PROCESSING FACILITIES /a /b Total increases 1988 1989 1990 1991 1992 1988-92 Rubber: Sheet Units : Total 108 113 116 119 121 New 2 4 3 3 2 14 Capacity : Total 622 656 683 723 740 (t/day) New 18 34 27 39 17 133 Extension - - - 4 - 4 Rubber: Crumb unites - : Total 26 31 35 38 42 New 3 8 2 3 4 17 Capacity Total 499 578 733 784 909 't/day) New 20 79 130 5" 120 400 Extension 21 - 25 - 5 51 Rubb'er: Latex tJffTt~ : Total 6 7 9 9 9 New - 1 2 - - 3 Capacity Total 123 133 148 148 148 (t/day) New - 10 15 - - 25 Extension 5 - - - - 5 Rubber: Crepe units :rTotal i9 19 19 20 20 New - - - 1 - 1 Capacity : Total 35 35 35 38 38 (t/day) New 2 - - 3 - 5 Extension - - - - - - Oil Palm: CPO Mills Units T Total 52 67 75 80 83 New 12 15 8 5 3 43 Capacity : Total 2,061 2,541 3,081 3,501 3,851 (t/FFB/hr) New 321 455 300 240 80 1,396 Extension 30 25 240 180 270 715 Oil Palm: Fractionation units : Total 2 3 3 3 3 New - 1 - - - 1 Capacity : Total 400 500 500 500 500 (t/CPO /day) New - 100 - - - 100 Extension - - - - - - Oil Palm: PKO Mills units : Total 2 3 3 3 3 New - 1 - - - 1 Capacity : Total 100 150 150 150 150 (t/PK/day) New 50 50 - - - 100 Extension - - - - - - Cocoa (15 PTPs - incomplete data PTP XXIX) units : Total 43 44 47 50 57 New 1 1 3 3 7 15 Capacity : Total 491 535 583 649 770 (Wet t/day) New 18 30 40 35 78 200 Extension 6 14 9 31 43 103 Tea units Total 47 48 5C 52 53 New 1 1 2 2 1 7 Capacity : Total 400 414 450 462 482 (Wet t/day) New 5 9 20 10 20 64 Extension 2 5 16 2 - 25 Coffee units : Total 35 35 35 35 35 New - - - - - - Capacity : Total 1,000 1,005 1,079 1,160 1,180 (Wet t/day) New - - - - - - Extension _ 5 74 81 20 180 /a Sources: PTPs' Corporate Plans/Financial Evaluations (Agricultural Development Services (Singapore) Pte. Ltd.) or PTPs' own Long-Term Plans. /b No data available for PTP XXVIII. - 31 - Table 4.3: PLANTING PROGRAM - ESTATE SECTOR 1989 1990 1991 1992 1993 Total PTPs (1) Rubber 22.5 19.7 12.1 17.7 23.3 95.3 Oil palm 33.9 34.0 34.7 33.8 14.1 150.5 Coconut 2.7 1.0 1.8 - - 5.f Cocoa 6.5 5.7 4.5 4.0 3.1 23.8 Subtotal 65.6 60.4 5:3.1 74.3 17.2 2'5.1 PIR-TRANS !2) Private estates Approved ;4.G 20.0 18.) 9.0 8.o 69.0 Unapproved - 5.0 11.0 15.0 16.0 47.0 Subtotal 14.0 25.0 29.0 24.0 24.0 116.0 PTPs Approved 1.5 4.0 1.0 1.0 - 7.5 Unapproved - 0.5 1.0 1.0 1.0 3.5 Subtotal 1.5 4.5 2.0 2.0 1.0 11.0 Total PIR-TRANS 15.5 29.5 31.0 26.0 25.0 127.0 PSBN (3) Oil palm 55.0 67.0 63.0 41.0 - 226.0 Rubber 60.0 62.0 57.0 53.0 - 232.0 Subtotal 115.0 129.0 120.0 94.0 - 458.0 Other Private (4) Coconut 15.0 13.0 10.0 6.0 9.0 53.0 Cocoa 18.0 20.0 20.0 10.0 4.0 72.0 Coffee 0.6 2.6 4.6 6.3 7.6 21.7 Tea 2.2 1.6 0.6 0.2 0.2 4.8 Subtotal 35.8 37.2 35.2 22.5 20.8 151.5 Total Estate Dev. 186.9 236.3 230.2 161.3 77.8 892.5 Of which: PTP 22.1 45.1 46.0 20.8 33.0 177.0 Private 164.8 191.2 184.5 140.5 44.8 725.5 Sources: (1) From Biro Tata Usaha (BTU), March 1988. (2) Rencana Tahunan Pengambangan Proyek PRI-TRANS. (3) Program Investasi PBSN, Rencana PESN Repelita V, DGE, November 1988. (4) DGE estimates. December 1988, as provided to the mission. Table 4.4: TOTAL PLANTING PROGRAM - REPELITA V (ha) Commodity 1989 1990 1991 1992 1993 Total Rubber Smallholders 54,000 39,000 39,000 40,000 40,000 212,000 Government estate - - - - - 0 Private estate ].1,000 13,000 l,0CO 8,000 4,000 46,000 Subtotal 65,000 52,000 49,000 48,000 44,00 258,000 OiL Palm Smallholders 49.049 66,050 72,550 66,550 52,446 306,645 Government estate 17,130 23,766 34,291 11,341 30,684 117,212 Private estate 19,421 18,884 9,459 22,159 20 69,943 Subtotal 85,600 108,700 116,300 100,050 83,150 493,800 Coconut Smallholders 68,000 73,000 74,000 76,000 73,000 364,000 Government estate 3,000 14,000 7,000 5,300 1,300 30,600 Private estate 15,000 13,000 10,000 5,700 8,700 52,400 Subtotal 86,000 100,000 91,000 87,000 83,000 447,000 Cocoa Smallholders 13,666 10,300 10,300 10,300 10,300 54,866 Government estate 600 2.617 3,000 2,800 - 9,017 Private estate 18,373 19,937 19,637 10,173 4,199 72,319 Subtotal 32,639 32,854 32,937 23,273 14,499 136,202 Coffee Smallholders 28,400 36,380 43,440 50,700 58,160 217,080 Government estate - - - - - 0 Private estate 600 2,620 4,560 6,279 7,645 21,704 Subtotal 29,000 39,000 48,000 56,979 65,805 238,784 Tea Smallholders 1,750 1,850 2,000 2,050 2,250 9,900 Government estate 55 55 55 55 55 275 Private estate 2,200 1,822 606 160 200 4,853 Subtotal 4,085 3,434 2,741 2,263 2,505 15,028 Source: DGE. - 33 - Table 4.5: INVESTMENT PROGRAM - 17 PTPs (REPELITA V: 1988-92) (Rp billion, current) 1959 l990 1991 1992 1993 T tal Field development 184.9 171.5 165.9 152.0 124.8 799.1 Processing facilities Oil palm 422.0 466.0 412.0 361.0 269.0 1,930.0 Rubber 18.8 24.5 19.5 18.3 12.7 93.8 Other processing 8.0 7.5 7.0 7.0 6.5 36.0 Civil works and others 462.3 480.2 447.9 410.4 374.4 2,175.2 Total 1,096.0 1,149.7 1,052.3 948.7 787.4 5,034.1 Source: BTU and PTP Plans; mission's estimates. - 34 - Table 4.6: INVESTMENT PROGRAM - PIR-TRANS (1988-92) (P.p billion, current) 1939 1990 1991 1992 1993 Total Field development Approved Private estates 8.1 17.0 26.0 31.1 26.3 108.5 PTPs 3.1 2.0 4.7 3.3 3.3 16.4 Under study Private estates - - 3.6 11.4 20.6 35.6 PTPs - - 0.4 1.1 1.6 3.1 Subtotal 11.2 19.0 34.7 46.9 51.8 163.6 Processing facilities - 23.0 103.0 199.0 256.0 581.0 Civil works/others 40.0 16.0 43.3 181.1 316.3 596.7 Total 51.2 58.0 181.0 427.0 624.1 1,341.3 Source: Mission estimates. - 35 - Table 4.7: ESTIMATED INVESTMENTS - PBSN PROJECTS (1988-92) (Rp billion, current) 1989 1990 1991 1992 1993 Total Field development Oil palm 20.7 68.9 83.3 54.0 96.4 335.0 Rubber 38.6 93.4 109.4 120.5 127.8 489.7 Subtotal 59.3 162.3 193.2 174.5 224.2 824.7 Processing facilities Palm oil 87.0 128.0 161.0 273.0 241.0 890.0 Rubber 3.0 13.7 24.9 45.1 74.7 161.4 Subtotal 90.0 141.7 185.9 318.1 315.7 1,051.4 Civil works and others 44.5 137.9 194.0 218.1 336.3 930.8 Total 193.8 441.9 573.1 710.7 876.2 2,795.7 Source: Mission estimates. - 36 - Table 4.8: SUMMARY OF INVESTMENT PROGRAM - ESTATE SECTOR (REPELITA V) (Rp billion, current) 1988 i989 1990 1991 1992 Total PTP tr,.ditional estates and nucleus 1,096.0 1,149.7 1,052.3 948.7 787.4 5,034.1 PIR-TRANS program 15.2 58.0 181.1 316.3 398.5 969.1 PBSN private estates 193.8 441.9 573.1 710.7 876.2 2,795.7 Total Investments 1,305.0 1,649.6 1,806.5 1,975.7 2,062.1 8,798.9 Source: Mission estimates. Tabl- 4.9: FINANCIAL RATIOS OF 17 TREE CROP PTPn I Il III IV V VI VII VIII X XI XII XIII XVIII XXIII XXVI XXVIII XXIX Net Profit Margin (X) 1983 4.6 18.8 11.2 14.3 19.8 16.0 19.4 12.5 li.1 0.9 22.9 26.9 18.7 19.9 13.6 - 26.6 1984 20.0 24.5 20.3 14.9 23.1 26.0 34.0 28.4 16.6 6.7 32.3 36.3 20.1 36.6 19.9 - 26.6 1985 7.1 16.1 16.4 6.9 22.6 17.0 22.8 16.4 4.0 (36.0) 20.3 14.1 8.4 30.4 16.2 - 19.6 198s (4.3) 10.6 18.5 7.1 21.6 13.0 14.7 10.4 7.7 (45.4) 17.6 21.1 14.4 39.6 22.4 - 26.3 1937 18.1 12.4 20.9 12.2 18.7 20.0 20.8 7.6 12.5 0.6 23.1 18.2 21.6 36.4 17.2 - 26.8 R-turn on Equity (X) 1983 2.8 13.6 8.6 11.9 13.9 12.0 11.3 22.1 10.4 0.6 26.7 26.9 18.0 13.6 10.6 - 7.6 1984 17.6 20.6 20.0 12.4 19.0 23.0 24.1 26.8 17.3 3.4 46.6 A2.0 18.8 20.6 16.0 - 20.9 1986 5.4 12.4 13.8 6.3 16.8 14.0 14.8 16.2 4.9 (15.2) 19.4 12.1 4.2 20.1 18.4 - 16.1 1986 (3.1) 6.8 16.1 6.7 16.1 8.0 8.0 D.6 10.9 (20.1) 13.6 14.9 10.3 23.0 19.9 - 24.3 1987 9.9 6.7 14.4 10.2 12.4 11.0 10.0 8.6 13.8 1.8 14.7 10.9 12.0 18.8 18.2 - 19.2 Current Ratio 1983 0.8 1.2 0.6 1.2 1.6 1.0 1.9 0.7 0.5 2.5 1.3 1.4 0.6 3.2 1.2 1.4 2.1 1984 1.9 0.9 0.8 0.9 1.1 1.1 1.9 1.7 1.2 1.6 2.0 1.8 0.8 2.6 1.8 1.3 2.4 1986 1.3 0.6 0.9 0.7 1.3 0.9 1.4 1.6 1.2 1.1 1.6 1.1 0.6 2.1 1.2 6.3 2.5 1986 1.2 0.6 0.9 0.6 1.3 0.7 1.4 1.3 1.6 2.3 1.4 1.0 l. 2.9 1.8 10.1 1.8 1987 2.2 1.0 1.0 0.8 1.6 1.0 1.3 1.2 1.1 1.4 1.4 1.1 L.1 2.3 1.4 - 1.9 Debt/Equity Ratio 1983 64/36 37/63 48/52 66/44 39/61 33/67 25/75 68/42 61/39 60/60 41/59 42/68 46/66 29/71 31/69 76/24 26/76 1984 64/36 38/62 41/69 60/40 44/66 33/67 31/69 36/66 60/40 67/43 41/69 40/60 43/67 87/63 86/65 74/26 10/90 1985 68/32 44/66 44/65 69/31 49/51 44/66 34/66 38/62 66/34 62/38 46/65 41/69 46/54 44/66 40/6C 68/44 29/-1 1986 73/27 46/54 45/55 71/29 68/44 44/568 36/64 41/59 66/34 66/34 46/54 41/59 41/59 37/68 87/68 57/43 28/72 1987 63/37 46/64 36/64 6E/36 49/61 38/62 34/68 36/65 66/46 60/40 43/67 34/68 36/65 34/66 81/69 69/81 17/68 Lon-T-r- D-bt to 1983 S5 30 28 69 42 11 23 32 48 68 36 40 21 29 11 90 19 1984 67 24 25 64 33 11 27 22 55 64 41 36 27 39 17 81 17 1986 67 29 28 63 44 24 28 31 64 63 36 28 23 42 21 103 26 198 73 33 87 81 68 29 36 30 68 80 38 28 81 40 16 110 18 1987 68 26 26 67 49 30 30 20 47 67 35 24 23 80 17 - 4 Sourc-: PTPa. - 38 - Table 4.10: COST OVERRUNS (FIELD DEVELOPMENT) OF PTPs (Constant 1987 Rp) Planted Actual Standard Cost PTP/Project name Crop Area years cost /a fisik overrun (ha) (Rp mln) (Rp mln) PTP Iv PIR TRANS Bunut Oil palm 2,000 1986 2,739 2,362 +15.9 NES II Air Molek Rubber 3,714 1980-84 16,383 13,909 +17.8 PIR Khusus Pinang Tinggi Oil palm 2,000 1983-86 4,441 3,007 +47.7 PIR Khusus Tanah Putih Oil palm 2,000 1985-87 2,893 2,635 +9.8 PTP VI NES Ophir Oil palm 3,267 1981-87 10,024 8,322 +20.5 PIR Akselerasi-Kampar Oil palm 4,310 1985/86 8,571 7,149 +19.9 NES III Rumbo Bujang Rubber 2,198 1979-86 15,130 6,885 +119.8 PIR Khusus Durian Luncuk Rubber 2,089 1982-87 7,467 3,756 +98.8 NES VII-Pasir Oil palm 3,634 1982-87 13,706 8,358 +64.0 NES VII-Pasir Rubber 1;866 1982-87 12.?78 5i;76 +98.8 PTP XII NES VII-Sambas Rubber 3,000 1981-87 7,001 5,948 +17.7 NES V-West Java Coconuts 700 1981-86 2,961 2,957 0.0 PIR Khusus-Sintang Rubber 1,596 1981-83 10,436 4,544 +129.7 PTP XVIII NES III-Danau Salak Rubber 3,997 1980-83 16,537 13,375 +23.6 PIR Khusus-Batulucin Rubber 1,937 1981-86 5,812 5,001 +16.2 PIR Khusus-Buntok Rubber 515 1982-84 1,708 1,422 +20.1 PTP XXIII PIR Khusus ;:I-Poso Rubber 220 1985/86 793 410 +93.4 PIR Khusus-Bengkulu Rubber 842 1984-86 1,864 1,034 +80.2 NES V-Bengkulu Rubber 3,533 1981-86 10,060 6,989/b +43.9 /a Actual current costs adjusted to values in 1987 Rupiah. /b Adjusted for losses in area to maturity. Source: PTPs. - 39 - Table 5.1: FOREIGN PRIVATE ESTATE AREA PLANTED BY TREE CROPS (ha) Total area Rubber Coconut Oil palm Others under HGU PT Socfindo (13) 8,660 - 33,785 42,445 45,200 PT London Sumatera (t7) 25,516 973 13,174 39,663 56,044 PT Goodyear SP (5) 14,980 - - 14,980 18,923 PT Uni Royal (1) 17,137 - - 17,137 21,590 PT Tatar Anyar Indo. ~5) 258 - - 258 4,776 PT Tolar Tiga (1;.) 7,127 - 12,893 20,020 25,086 PT J.A. Wattie (8) 3,790 - - 3,790 7,998 PT Simpang Ampat (1) 733 - - 733 813 PT United Kingdom Indo. (1) 546 - - - 959 PI PP Husdu uLji ig '1) 921 - - 921 1.925 PT PP Tasik (l) - - 2,720 2,720 6,000 PT Toarco Java (1) - - - - 518 NV Cult. Mij. Tobea (1) - 800 - 800 1,359 NV H.C. Mij. Tonpen (1) - 528 - 528 1,000 PT BAT (1) - - - - 540 Total 79,668 2,301 62,572 9,594 192,731 Note: Figures in iarentheses represent number of plantation units. Source: DGE. CjbI, .~ INDICATIVE COSTS OF AN9 6.000 KA OIL P6AL9 ESTATE/FA0TORY WIhMC A 6ITrICJT A RE3.LTORY MJEAY OF PO.JR YEARS (1966O -o..At p *, -H- 83/84 64/a6565/66 86/67 67/6 66/69 69/90 90/91 91/92 92/93 93/94 94/95 95/95 66/97 97/96 90/99 99/00 00/01 01/02 02/03 06/04 Vo60 No I-o.et..n Doi- S .n. ',~ 0 0 0 0 6.000 0.000 6.000 6.000 6.000 6.000 6.000 6.000 JOoo 6.000 6.000 6.000 6.000 6.000 6.000) 0.000 8.00 6.000 FFB (t..) - t.. ... 0 0 0 0 0 0 0 50.400 1OO.600 151.200 175.000 192.000 192,000 192.000 192.000 192.000 192.000 192.000 192,000 176.000 176.000 170.000 CPO -...t-t- ..t. 0 0 0 0 0 0 0 2- 16 0 19 0 20 0 20 0 21 0 21 0 21 0 21 0.21 0 21 0.21 0 21 0 23 0 21 0.2i CP0 (too.) 0 0 0 0 0 0 0 9.072 19.152 30.240 35.200 40,320 40.320 40.320 4" 320 40.320 40.320 40.320 40.320 36.940 36.960 36.960 4.rr.I *.6 tr.,t 0 0 0 C' 0 0 0 0.037 0 040 0 042 0 044 0 045 0 045 0 045 0 045 0 045 0 045 0 045 0 046 0 045 0 045 0045 P... _.n.I (t.o.) 0 0 0 0 0 0 0 1.865 4.032 6.350 7.744 a.64 6.64640 40. a.64 a.64 6.640 6.640 a.64 7.92 7 92 7.92 CPOFOS p.c. (p.r,o.) 0 0 0 0 0 0 0 265 0 65 0 66 06 0 70 0 69 069q 0 67 066a 0 65 0 65 0 65 0 65 0 65 0065 P.,. h.r.IFOB pr (P., n.)0 0 0 0 0 0 0 337 0 37 0 37 0 37 0 36 0 36 0 36 035 0.34 0 32 0 32 0 32 0 32 0 32 0 32 Pcm 7.. 0 0 0 0 0 0 5.697 12.449 19.956 23.936 26.224 27.821 27.621 27.01.4 26.611 26.208 26.206 26,206 24.024 24 024 24.024 6.-nI 0 0 0 0 0 0 0 690 1.492 2 350 2.6865 3.263 3.251 3.148 3.046 2.943 2.765 2.765 2.765 2.6J4 2.634 2.634 12to5j- 8.49 Q 9 9 9 Q 9 ,W 13I34 22.M 269 M-N-7 2L9!72 KaG9 3o 9 2Lh -9 2Z2 97 2z 26- as.1~ 2.ni L.- Ct c-,,.; II -t 0 0 0 450 40 40 40 30 s0 30 30 30 30 30 30 30 30 s0 s0 s0 30 30 F,.Idd..o8. 0 0 0 0 14.000 2.30m 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.-f.;. c.ot 0 0 0 0 0 2 800 2 80 2 800 2.600 2.800 2680 2 800 2.800 2.000 2,800 2.800 2.600 2.800 2.600 2.000 2.800 2.600 1.f66f.d-f.-try' 0 0 0 0 0 0 0 202 403 605 704 768 768 768 768 766 768 76 768 704 704 704 0 0 0 0 0 0 0 202 403 605 704 768 6 768 766 768 68 7160 76876 704 704 704 7'.-s..Pot a u0) ro.t. 0 0 0 0 0 0 c 350 742 1 171 1.374 1.567 1.56 1.567 1.567 1.547 1.567 1.5 67 1.547 1..7 1.434 1.436 1.436 Id.A.n '.1,. W-k-.. -,0.1. 0 0 0 0 0 0 738 0 0 0 0 0 0 0 0 0 0 0 0 0 0 c F.c ~ ~~~0 0 0 0 0 0 .9W22 7.214 0 0 0 0 0 C 0 0 5.411 3.607 0 0 0 0 0 V.6...0 0 0 0 0 0 1500 0 0) 0 0 0 I 1500 0 0 0 0 0 1500 0 0 0 lo%..1 0 0 1. 0 0 0 1.082 871 0 0 0 0 0 150 0 0 5401 361 0 1SO 0 0 0 541109 ~~ ~~ ~ ~~~0 0 0 In I.19 959 0 0 0 0 i6 5 0 0 595 397 0 165 00 0 Con...16 A...o... 0 0 0 0 C 180~~~~~~~~~~~~I 1I 122 81 0 0 0, 0 0 0 0 0 0 0 0 0 0 11--9 ~~~0 0 0 0 1 ~ 0 1326 0) .328 0 0 0 C 0 0 0 0 0 0 0 0 0 1if! OI*I . stCo.t. 0 0 0 0 C 13,27411.45~2 809 L-409 0 0 0 .1,0'. 9 0 LAi 8A&2 Q L120 9 9 Q 1944i C!.t. 0 0 9 4 O L4.040 18_jj4 L4_.8.3 4413 ?1. 7Q 5.1 .1 533.1 7,7!48 .. ~ ~ ),~' 027~~5 .450 14_04 18,114 j._4.32 2 1A.4 Q_j [?._09 21,45 44 ~.3 ~AI Z.Z;1 7 L24 Ž64 2A9~ 0 -o.ta ,f,t. 0 0 0 -450 14.040 18.114 14.4. 32 827 5.365 12.636 15.8275 19.2?3 17 110 1s8643 18.115 11.163 12.681 17.246 15.631 15.573 15.573 15.573 FM9 201i26 t ~ ~~~~0 0 0 363 11,934 14.365 11.793 3 776 4.919 4.426 4.110 5.043 6 445 5.04.3 5.043 10.102 6.416 5.043 6.445. 4.823 4.823 4,623 8l.n. ft 0 0 0 0 0 0 0 6 587 13.941 22.308 2.6,01 31.507 31.072 30.969 30.060 29.5SU 28.973 26.973 26.973 26.550 26,558 26.5SW -f ~ ~ 9 9 9 306 i 4l1.934 A4...I6 11-M3 2, &9 9.~92 !TA7 89 a-9-3 ZoS454 2±j24_6 Z.._M2 252-01 1 V. 20-5 0.2 22.$7 aU_a_g 21U7 21Z7 NEV (.6 106) 77 168 E89R 306 Om ! r iS F ~~1S C r -C C gC 6 " nI C * 1- G OM OO, g. 5... OrOO' = eO isO 1 a; r.-I;:~ I' 6e~ F b oi bob -'4,-e ;F 4 42 - Table 6.1: TRENDS IN NOMINAL At4O REAL WORLD MRKET PRICES Rubber R"el price Copra Real price CP0 Reel price CCO Real price price conetent ptice constant price constant price constant MUV tndex (S/ton) 1965 torm (8/ton) 196 terms (6/ton) 1935 term (8/ton) 1966 terse (19965100) 1970 468 1,215 226 6le 200 712 397 1,o6 so 1971 899 1,042 lo8 491 261 073 871 964 se 1012 401 942 141 as7 217 it6 284 56S 42 197l 706 1,822 858 ?28 878 7 518 1,06 48 1974 969 1,475 662 1,116 609 1,18o 99 1,66 59 1975 659 1,006 256 889 434 6O 194 599 66 Growth rate (1) 7.8 -4.6 2.6 -.68 10.6 -1.S -0.2 -11.8 12.6 1976 678 I,815 275 412 407 610 413 627 6e 1977 917 1,264 402 b48 680 728 678 769 73 1273 1,107 1,819 470 66c boo 712 6a6 310 64 1979 1,424 1,497 673 706 854 e63 964 1,030 95 1930 1,624 1,667 464 484 664 666 674 644 104 Growth rate (S) 16.3 4.8 13.4 1.8 9.4 -2.2 12.7 0.7 12.0 1961 1,262 1,196 379 860 671 648 570 642 105 1962 1,002 970 814 808 44E 429 464 447 108 196 1,23s 1,229 496 491 601 496 780 728 101 1064 ,0o0 1,107 710 716 729 784 1;166 1,188 99 1965 924 924 s8e 386 601 501 690 590 100 Growth rate (S) -7.8 -6.2 0.5 1.6 -3.2 -2.0 0.9 2.1 -1.2 1968 920 776 193 167 267 217 297 251 113 1967 1,120 642 309 23S 342 261 442 83s 18O 1966 1,444 1,026 397 282 464 880 650 412 141 Growth rate O 26 5 14 9 1. % 29.9 34.4 23 !9.7 2e.1 9.1 Growth rate (5) 1970-U6 6.52 -1.20 3.20 -4.25 3.27 -4.13 2.18 -5.26 7.62 S deviation off-trend 26 is 40 39 31 25 40 37 9 Fereteet l - m1,Zt2 351 427 286 441 295 696 400 150 1990 1,176 776 449 296 448 807 826 414 152 1995 2,101 1,143 659 306 593 827 777 425 lea 2000 2,391 1,055 608 266 671 296 647 874 227 Notes: (1) Price. are RSS1, New York for rubber, CAF NW Europo for oop- and CPO. (2) CCO pricee ere CIF Rotterda.. (3) IJV rofers to the index of unit vealuoe of marwfoctured goods, (4) Reel priceo ore nominal values deflated by tho WUV inoox. Source: The Sank Commodity Price Project;ono. - 43 - Table 6.2: PRICE INDICES AND EXCHANGE RATES (FOR INTERNATIONAL COMPARISON) Off-Java 17 cities rural rice Exchange CPI price index rate (1985=100) (1985=100) (Rp/US$) 1970 13 13 378 1971 13 14 415 1972 14 15 415 1973 19 27 415 1974 26 30 415 1975 31 30 415 Growth rate (2) 19.5 19.0 1.9 1976 37 36 415 1977 41 38 415 1978 45 42 415 1979 53 52 623 1980 63 61 627 Growth rate (2) 14.1 14.2 10.9 1981 71 70 632 2982 77 80 661 1983 87 96 909 1984 96 103 1,026 1985 100 100 1,111 Growth rate (2) 9.1 9.4 15.1 1986 106 110 1,283 1987 116 123 1,644 1988 123 130 1,700 Growth rate (1) 7.6 9.1 15.1 Growth rate (2) 1970-88 13.41 13.90 8.1 Forecast 1989 130 138 1,700 1990 138 147 1,700 1995 - - 1,700 2000 1,700 Note: 1988, 1989 and 1990 price indices are defined assuming a uniform 62 growth rate. The exchange rate for years post-1988 is assumed to be Rp 1,700/S. Source: BPS. - 44 - Table 6.3: TRENDS IN NOMINAL AND REAL WAGES AND MONEY MARKET INTEREST RATES Wage rate Wage rate Interest Nominal Real (I) Real (II) rates (Rp!day) ---- (1985 Rp/day) ----- (Z) 1970 150 1,179 1,197 NA 1971 202 1,527 1,465 NA 1972 226 1,600 1,466 NA 1973 270 1,454 984 NA 1974 408 1,564 1,351 NA 1975 413 1,330 1,379 NA Growth rate (Z) 22.5 2.4 2.9 1976 482 1,297 1,345 NA 1977 708 1,718 1,852 NA 1978 666 1,491 1,582 NA 1979 784 1,471 1,515 NA 1980 733 1,164 1,201 NA Growth rate (2) 11.0 -2.7 -2.8 - 19al 866 1,226 1,241 16.3 1982 934 1,207 1,174 17.2 1983 97C 1,121 1,008 13.2 1984 1,049 1,098 1,022 18.6 1985 1,101 1,101 1,101 10.3 Growth rate (Z) 6.2 -2.7 -2.9 -10.8 1986 1,143 1,080 1,042 13.0 1987 1,230 1,064 1,000 14.5 Growth rate (Z) 7.6 -1.5 -4.1 11.5 Growth rate (2) 1970-87 13.0 -1.0 -1.0 -3.0 Note: Wage rates are adopted from the BPS 'Statistik Upah Karyawan Perkebu- nan' pre-1980, for permanent Estate Crop wages. Post-1980 values are agricultural wage rates for Padang, North Sumatera reported in G. Papanek, "Changes in Real Wages, Employment, Poverty, Competitive- ness," DSP Paper No. 24, April 1988. Interest rates are middle-range money market averages reported in the 'International Financial Statis- tics" of the IMF. Real wages (I) are the nominal wages deflated by the 17 cities CPI. Real wages (II) are nominal wages deflated by the off- Java rural rice price index. - 45 - Table 6.4: CONSUMPTION OF COCONUTS AND EDIBLE OILS BY EXPENDITURE CLASS (1984 annual values) Bottom Middle Top 29Z 472 24Z Urban Average Consumption Coconuts (nuts) 7.29 11.14 15.1 Coconut oil (liters) 1.33 1.79 1.7 Other cooking oil (liters) 2.37 5.05 9.1 Average Expenditures (Rp,capita) Coconuts 1,527 2,435 3,780 Coconut oil 1,198 1,739 2,184 Other cooking oil 2,465 97 10,080 Share of Total Expenditures (2) Coconuts + cooking oils 4 2 2 Cooking oils 3 1 2 Share of coconut consumption by top class (Z) 53 Share of coconut oil consumption by top class (2) 38 Share of other oil consumption by top class (Z) 94 Botto- Middle Top 23Z 47Z 30Z Rural Average Consumption Coconuts (nuts) 10.38 15.68 24.29 Coconut oil (liters) 3.72 1.64 2.93 Other cooking oil (liters) 1.02 2.07 4.03 Average Expenditures (Rp/capita) Coconuts 1,760 2,476 3,943 Coconut oil 01 1,696 3,124 Other cooking oil 1,013 2,146 4,253 Share of Total Expenditures (Z) Coconuts + cooking oils 7 7 6 Cooking oils 3 4 4 Share of coconut consumption by top class (Z) 56 Share of coconut oil consumption by top class (Z) 58 Share of other oil consumption by top class (Z) 69 Note: Data from the 1984 SUSENAS survey of the Central Bureau of Statistics. Class values are population-share weighted averages of contiguous class-means. Share of consumption by class is derived relative to the total value of consumption. Source: BP. 1984 SUSENAS Print-Outs. - 46 - Table 6.5: A COMPARISON OF INDONESIAN AND ROTTERDAM COOKING OIL PRICES Cooking oil from CPO Cooking oil from CCO Year/ Jakarta Rotterdam Jakarta Rotterdam month (Rplkg) (Rplkg) Z (1)/(2) (Rp/kg) (Rplkg) 2 (1)/(2) (1) ~(2) ()(2) 1984 1 1.007 1,041 97 1,071 1,097 98 2 867 1,057 82 938 1,188 79 3 840 864 97 963 1,152 84 4 860 873 98 1,052 1,180 89 5 771 975 79 1,044 1,348 77 6 750 800 94 1,027 1,468 70 7 750 647 116 997 1,306 76 8 750 672 112 971 1,107 88 9 750 675 111 848 1,200 71 10 750 694 108 807 1,206 67 11 750 711 105 804 1,019 79 12 750 672 112 798 944 85 C.V.(Z) 10 18 10 12 1985 1 731 698 105 777 951 82 2 725 675 107 775 840 92 3 744 725 103 838 937 89 4 770 829 93 850 854 99 5 767 765 100 786 735 107 6 750 681 110 740 639 116 7 720 572 126 723 578 125 8 574 511 112 577 507 114 9 588 457 129 605 474 128 10 547 411 133 575 478 120 11 512 428 120 541 442 122 12 605 480 126 584 439 133 C.V.(Z) 14 23 16 29 1986 1 637 424 150 687 431 159 2 624 374 167 623 361 173 3 592 345 172 588 332 177 4 539 372 145 554 302 184 5 511 369 139 556 264 210 6 479 378 127 533 288 185 7 480 293 164 525 249 210 8 585 318 184 599 239 250 9 612 455 134 626 395 159 10 653 567 115 717 707 101 11 774 631 123 867 646 134 12 707 572 124 816 649 126 C.V.(Z) 14 25 17 40 - 47 - Table 6.5: (Cont'd) Cooking oil from CPO Cooking oil from CCO Year/ Jakarta Rotterdam Jakarta Rotterdam month (Rp/kg) (Rp/kg) 2 (1)/(2) (Rp/kg) (Rp/kg) Z (1)/(2) (1) (2) (1) (2) 1987 1 728 651 112 826 699 118 2 768 653 118 862 663 130 3 744 615 121 829 566 147 4 707 620 114 780 640 122 5 700 615 114 778 666 117 6 713 628 114 840 741 113 7 681 577 118 789 728 108 8 650 612 106 791 787 100 9 679 641 106 842 789 107 10 698 638 109 833 561 149 11 707 671 105 818 638 128 12 822 781 105 899 666 135 C.V.(Z) 6 7 4 11 1988 1 968 957 101 1,054 962 110 2 880 819 107 975 901 108 3 783 731 107 ,18 877 105 4 781 750 104 934 865 108 5 791 772 102 961 906 106 6 917 887 103 1,080 1,044 103 7 945 872 108 1,144 1,132 101 C.V.(Z) 9 9 Y 1U Note: Exchange rates used to convert world market prices to Rupiah equiva- lents are annual average market exchange rates: 1984 US$1.00 = Rp 1,026 1985 US$1.00 = Rp 1,111 1986 US$1.00 = Rp 1,134 1986 (post-September) US$1.00 = Rp 1,644 1987 US$1.00 = Rp 1,644 1988 US$1.00 = Rp 1,700 World prices are CIF Rotterdam as reported in Oil World. Domestic prices are quotations from the Department of Trade, reported monthly. - 48 - Table 6.6: BORDER PRICE PARITY COMPARISONS FOR CPO AND COPRA AT THE PRIMARY PRODUCER LEVEL CPO World Official Reported market Incidentals Incidentals Factory PTP-VII PTP-VII Parity Parity CPO to Indonesian to factory parity sale sale price price Year price porto gate price price price ratio ratio ($/ton) ($/ton) (Rplkg) (Rp/kg) (Rp/kg) (Rp/kg) (I) (II) (1) (2) (3) (4) (5) (6) (4)/(6) (4)/(5) 1980 584 60 20 309 220 140Z 1981 571 60 20 303 260 1162 1982 445 60 21 234 260 105 902 2232 1983 501 60 21 379 295 133 1292 2852 1984 729 60 22 664 425 153 1562 4342 1985 501 60 23 467 400 152 1172 3072 1986 257 40 24 255 425 119 602 214Z 1987 342 60 24 439 425 134 1032 3282 1988 464 60 25 662 500 132I COPRA Wnrld market Incidentals Farmgate Domestic Parity Copra to Indonesian Transport parity price in Domestic price price Year price ports to farmgate price Sulawesi shrink-drying ratio ($/ton) ($/ton) (Rp/kg) (Rp/kg) (Rp/kg) (Rplkg) 1980 454 50 24 229 190 209 131t 1981 379 50 25 183 221 832 1982 314 50 25 150 167 184 812 1983 496 50 26 379 237 260 1462 1984 710 50 26 651 422 461 1412 1985 386 40 27 357 279 306 3172 1986 198 40 27 176 281 308 57Z 1987 309 50 28 398 402 439 91Z 1988 391 50 30 t50 505 551 1002 Note: World market prices are CIF Rotterdam for CPO and Copra. Freight and insurance costs are based on private trade sources. Domestic transport costs, drying costs and shrink losses are based on private trade sources and Madecor, 'Coconut Marketing in Indonesia,* Report Prepared for the SECDP Project, 1.987. Sulawesi price refers to the price of copra at 12-152 moisture in South Sulawesi as recorded by the Department of Trade. Official CPO price is the government mandated procurement price from the PTPs. Reported PTP price is that provided by BUMN. For CPO, Parity Price I is with respect to the official procurement price. PRrity Price II is with respect to the reported PTP VII sale price. - 49 - Table 6.7: TRENDS IN IMPLICIT TARIFFS FOR CPO AND COPRA CPO Copra Year (I) (II) (I) 1970 -6? 1971 -- -- -29? 1972 -57Z -55? -47? 1973 4Z -20Z -24X 1974 114? 92? 33Z 1975 25? 282 =31Z 1976 15Z 6Z -44Z 1977 62? 52? -401 1978 88Z 722 -44? 1979 78Z 61? 47Z 1980 462 38? -3Z 1981 18? 25Z -39Z 1982 -1lZ -17Z -402 1983 322 -12? lO. 1984 59Z 1O0 20Z 1985 17Z -10Z -- 1986 -52? -55Z -60? 1987 3? -12? -31Z 1988 34Z Note: The implicit tariff is computed as the difference between the world price and the domestic price, divided by the domestic price. For comparison (I), the export parity fob price was used. For comparison (II), the export unit value price is used. For these comparisons a 102 margin was assumed between the wholesale price and the export parity price. For the CPO comparisons, the administered CPO price is used as the domestic wholesale price. For the Copra comparisons, the Java- wholesale copra price is used. - 50 - Table 6.8: ESTIMATED PROFITS ON ADMINISTERED TRADE OF CPO Volume purchased Volume Sale Sale domestic purchased Total price price Gross market for export purchases exports domestic revenue Year ('000 mt) ('000 mt) ('000 mt) (Rp/kg) (Rplkg) (Rp billion) 1984 871 107 978 507 520 507 1985 558 504 1,062 405 450 455 1986 354 584 938 255 402 291 1987 231 585 816 420 480 357 PTP raw PTP raw Total Total material material Export Domestic costs at costs at sale sr1.e marketing marketing PTP sale PTP sale price (I) pri'e (II) costs costs price I price II Year ---------------- (Rp/kg) ----- -------- -- fRp billion) -- 1984 425 153 26 35 449 183 1985 400 152 27 38 460 196 1986 425 119 28 41 430 143 1987 425 134 30 45 375 137 Net profit Net profit Z profit E profit at PTP sale at PTP sale at purchase at purchase price I price II price I price II Year ------- (Rp billion) ------- (Z) Z) 1984 58 324 11 64 1985 -4 259 -1 Di 1986 -138 149 -48 51 1987 -18 219 -5 61 Note: Volume purchased is defined as market operations plus domestic allocations plus exports of CPO, olein and stearin (all in CPO equivalent). The export sale price is defined as the export unit value reported by the Central Statistics Bureau. The domestic sales price is defined as 672 of the Jakarta CPO-based cooking oil price, based on estimates provided in the University of Indonesia, 'Pengkajian Penelitian Potensi, Masalah dan Prospek Minyak Nabaiti di Indonesia 1969-2000," 1986. Purchase price I is defined as the official selling price for PTP/PMA CPO according to the Ministry of Trade price decrees. Purchase price II is the average sale price reported by PTP VII according to BUMN reports. Domestic allocations are defined as the sum of market operations and allocations are defined as the sum of market operations and allocations for domestic processors. Exports are defined as exports licensed by the Ministry of Trade. Export marketing costs and domestic marketing costs are estimates provided by representatives of the Directorate General of Inland Trade in the Ministry of Trade. - 51 - Table 7.1: kREA ELIGIBLE FOR CONVERSION BY PROJECT (ha) Total Eligible Provided 2 of 2 of Project/Foreign program Area for land eligible planted assisted (ha) planted conversion titles Audited Converted lands lands NES-I 11.500 11,500 9,236 3,355 4,835 3,334 36.10 28.99 NES-II 19,186 18,994 13,521 1,312 0.00 0.00 NES-III 28,000 27,305 19,115 1,049 2,858 443 2.32 1.62 NES-IV 8,000 7.200 7,200 103 2,337 1,010 14.03 14.03 NES-V 32,400 25,247 16,653 2,983 2,754 1,087 6.53 4.31 NES-VI 9,500 7,757 3,812 0 116 116 3.04 1.50 NES-VII 42,72R 19,842 9,289 0 0 0 0.00 0.00 ADB NES 1,250 1,250 1,250 875 875 828 66.24 66.24 OPHIR NES 4,800 4,188 4,188 1,850 1,850 1,100 26.27 26.27 NES-Sugar 7,800 5,275 4,900 247 1,003 209 4.27 3.96 Domestically Financed Local PIR-I 61,055 40,226 33,993 5,296 8,508 2,274 6.69 5.65 Local P'R-II 3,110 2,100 1,610 148 510 148 9.19 7.05 Special PIR-I 85,500 55,240 23,901 4,262 2,724 1,890 ;.91 3.42 Special PIR-II 122,000 61,919 30,108 3,446 2,446 2,000 6.64 3.23 PMUJ Projects SRDP 86,831 74,554 12,042 -- - 1,850 15.36 2.48 SCDP 75,618 49,870 3,618 --- --- 1,124 31.07 2.25 PRPTE 544,922 321,023 43.358 --- --- 13 026 30.04 4.06 Others 13,300 12,717 3,627 --- --- 1,284 35.39 10.09 Source: Ministry of Finance, 1988. Table 7.2: COST RECOVERY IN TREE CROP PROGRAMS (Rp'000/ha) SRDP-Typ SCDP-Type NES-PJR (Rubbr) Ex-Ante PMU Rubber Repay- Repay- Expen- Repay- Repay- Expen- Repay- Repay- Expen- Repay- Repay- BRI collection costs Expenditures Meats ments ditures ments ments ditures ments ments ditures ments Ments Year PMU NES I II I II I II I II 1 0 0 838 80O 2,653 714 2 0 0 181 171 370 163 3 0 0 199 168 416 191 4 0 0 187 144 298 163 S 0 0 204 144 -15 -15 298 '40 6 1S 11 271 -16 -16 -16 -20 363 -11 -11 246 -16 -16 7 31 11 69 39 33 14 14 6 130 82 8 32 12 270 179 110 96f 64 603 412 9 33 12 372 260 148 93 231 158 733 603 10 34 13 450 306 178 114 302 208 781 636 11 36 13 539 366 202 130 346 238 606 343 12 37 13 189 122 89 51 433 299 13 38 14 522 361 1 14 39 14 550 380 Ln 16 41 16 548 379 16 42 15 642 376 17 43 16 474 327 WV at 10% 1,466 733 486 991 281 163 3,532 1,158 794 1,249 1,128 766 NPV at 16% 1,294 437 289 892 166 94 3,197 592 405 1,103 792 469 NPV at 20% 1,200 315 208 838 118 68 3,010 389 266 1,024 507 344 Subvd Ratio Rat of NPV SRDP-I SRDP-II SCDP-1 SCDP-II NES-I NES-II PMU-I PMU-II ((Repayment-Collection Costs)/Credit))60% 33% 28% 18% 33% 22% 90X 61% * * * * * 34% 22% 19% 11% 19% 13% 63% 43% * * * 26% 17% 14% 8% 13% 9% s0X 34% Note: Collection costs are the Bank estimates based on adjusted BRI Unit Dess Costs. All costs and returns are in constant 1988 terms assuming a 6% inflation rate after 1988. Project costs are based on World Bank and Tim Khusus/DGE estimates. Assumed Credit Toeos and Conditions: SRDP--6 years interest-free grace and 12% interest thereafter, SCDP--S years interest-free and 6.f6 interest thereafter. NES--6 years interest-free and 10.6% interest thereafter. Ex-Ante PMU (rubber)--18% interest fully capitalized, no interest-free grace period. Repayment Rate II includes a 30% default rate. Annual repayments are definea as the payment stream minus collectionu costs. Repayments are limited to 30% of gross revenue, except for the ex-onte PMU for which the limit is 40%. - 53 - Table 7.3: EXPORT/IMPORT TAX RATES FOR TREE CROP COMMODITIES Commodity Tax rate Additional tax Rubber: Export Tax Period: 1970-76 10 1976-81 5 1981-88 0 Rubber: Import Tax pre-1985 0 1985-88 5 Crude Palm Oil: Export Tax 1976-82 5 1982 0 1983 0 8.90 1984 (to July) 5 37.18 1984 (post July) to July 1985 5 10.00 1935 (post July) to June 1986 5 0.00 1986-88 0 0.00 Crude Palm Oil: Import Tax 1983-85 40 10.00 1985-88 20 10.00 1988 90 10.00 Stearin: Exporc Tax 1981 5 1982 0 1983 0 4.92 1984 (to May) 5 26.17 1984 (to July) 5 18.48 1924 to August 1985 5 0.00 1985-88 0 0.00 Stearin and Olein: Import Tax 1985-88 20 10.00 1988 90 10.00 - 54 - Table 7.3: cont'd Commodity Tax rate Additional tax Palm Kernal: Zxport Tax 1976-84 5 1985 (to July) 5 6.00 1985 (July) 5 0.00 1985 (August) to 1988 0 0.00 Palm Kernal Oil: Import Tax 1983-85 40 10.00 1985-88 20 10.00 1988 90 10.00 Coconut Oil: Export Tax 1980-April 5 1980-May to 1984 0 1984-86 5 1986-88 0 Coconut Oil: Import Tax 1983-85 40 10.00 1985-88 20 10.00 1988 90 10.00 Copra: Import Tax 1983-85 30 1985-88 10 1988 90 Note: Export tax is the ad-valorum base rate computed as a share of the unit- value fob check price. The additional export tax is computed on the remainder. The additional import tax refers to the value added tax and saies tax (PPN) valued as the ex-import tax unit value of the goods. Source: Ministry of Trade and Ministry of Finance. Table 7.4: EDIBLE OILS EYPORT TAX SIMULATION RESULTS Production Domestic Export Export S Tax Revenue Producer Farugate Production CPO Demand CPO Quantity CPO Value CPO CPO Revenue, CPO Price, CPO Coconuts (Copra Eq.) Scenario Scenario Scenario Scenario Scenario Scenario Scenario Scenario Base- Base e Base- Base * Base- Base + Base- Base + Base- Base + Base- Base t Base- Base t Base- Base * line tax line tax line tax line tax line tax line tax line tax lin- tax X X % X X 2 X 2 X 2 X 2 X I X Year Change Change Change Change Change Change Change Change Change Change Change Change Change Change Change Change 1989 0.00 -0.06 0.00 1.73 0.00 -1.07 0.00 -8.02 . . 0.00 -8.72 0.00 -8.67 0.00 -0.44 1990 0.00 -0.06 0.00 1.66 0.00 -1.12 0.00 -8.06 . . 0.00 -6.71 0.00 -6.67 0.00 -0.69 1991 0.00 -0.04 0.00 1.63 0.00 -1.13 0.00 -6.07 . . 0.00 -8.71 0.00 -6.67 0.00 -0.84 1992 0.00 -0.04 0.00 1.81 0.00 -1.20 0.00 -8.14 . . 0.00 -8.70 0.00 -8.67 0.00 -0.68 1993 0.00 -0.04 0.00 1.68 0.00 -1.31 0.00 -6.24 . . 0.00 -8.70 0.00 -6.67 0.00 -0.88 1994 0.00 -0.04 0.00 1.56 0.00 -1.40 0.00 -6.33 . . 0.00 -8.70 0.00 -8.87 0.00 -0.70 1995 0.00 -0.04 0.00 1.64 0.00 -1.63 0.00 -8.46 . . 0.00 -6.70 0.00 -6.67 0.00 -0.71 1996 0.00 -0.04 0.00 1.51 0.00 -1.74 0.00 -8.86 . . 0.00 -6.70 0.00 -6.67 0.00 -0.72 1997 0.00 -0.03 0.00 1.49 0.00 -2.01 0.00 -6.91 . . 0.00 -6.70 0.00 -6.67 0.00 -0.73 1998 0.00 -0.03 0.00 1.47 0.00 -2.37 0.00 -7.25 . . 0.00 -8.70 0.00 -6.67 0.00 -0.73 1999 3.00 -0.03 0.00 1.46 0.00 -2.87 0.00 -7.73 . . 0.00 -8.70 0.00 -6.87 0.00 -0.73 2000 0.00 -0.03 0.00 1.43 0.00 -3.88 0.00 -8.49 . . 0.00 -6.70 0.00 -6.87 0.00 -0.73 Table 7.4: Cont'd Production Dometic Export Export * Tax Revenue Produc-r Farugate CCO Demand CCO Quantity CCO Valu- CCO CCO Revenue, Copra Price, Copra Scenario Sconario Scenario Scenario Scenario Scenario Scenario Baae- Base t Ba%e- Base Base- Base * Base- Bas + Base- Base + Base- Base + Base- Base t lin, tax line tax line tax line tar line tax line tax line tax % X % % ' % % % % % % % % x Year Change Change Change Change Change Change Change Change Change Change Change Change Change Change 1989 0.00 -0.80 0.00 0.12 0.00 22.12 0.00 -16.02 . . 0.00 -7.08 0.00 -6.67 1990 0.00 -0.28 0.00 0.07 0.00 -8.69 0.00 -11.38 . . 0.00 -7.21 0.00 -6.67 1991 0.00 -0.85 0.00 0.04 0.00 -32.57 0.00 -35.94 . . 0.00 -7.26 0.00 -6.67 3 1992 0.00 -0.63 0.00 0.02 0.00 -16.78 0.00 -20.94 . . 0.00 -7.29 0.00 -8.87 1993 0.00 -0.90 0.00 -0.01 0.00 -37.29 0.00 -40.43 . . 0.00 -7.30 0.00 -6.67 1994 0.00 -0.80 0.00 -0.04 0.00 -18.43 0.00 -22.51 . . 0.00 -7.32 0.00 -6.67 1996 0.00 -0.95 0.00 -0.07 0.00 -20.04 0.00 -24.03 . . 0.00 -7.33 0.00 -6.67 1996 0.00 -0.90 0.00 -0.11 0.00 -11.89 0.00 -16.30 . . 0.00 -7.34 0.00 -6.67 1997 0.00 -0.98 0.00 -0.16 0.00 -9.76 0.00 -14.26 . . 0.00 -7.35 0.00 -6.67 199e 0.00 -0.96 0.00 -0.22 0.00 -7.00 0.00 -11.66 . . 0.00 -7.36 0.00 -6.67 1999 0.00 -1.00 0.00 -0.29 0.00 -6.76 0.00 -10.46 . . 0.00 -7.36 0.00 -6.87 2000 0.00 -0.98 0.00 -0.36 0.00 -4.42 0.00 -9.20 . . 0.00 -7.35 0.00 -6.67 Table 7.4: cont'd The Demand elasticities are as follows (evaluated at 1985 prices and quantitites: Ordinary Demand Elasticities CPO CCO Expenditure CPO -1.6 -0.08 1.74 CCO 0.59 -0.92 0.33 Compensated Demand Elasticities CPO ccO CPO -1.74 1.58 CCO 1.58 -1.42 Supply Elfasticities CPO 0.001 CCO 0.26 Export Prices are CIF Northwest Europe. Export Reverue was calculated as Export Prices minus transportation costs of $20 minus taxes (under the export-tax scenario). The farmgate price is based on a weighted average of allocat.on price and export prices net of transportation and taxes. For the projected period farmgate prices were assumed to remain at about 75Z of N.W. Europe prices. Tax revenues are defined as 5! of the Export Revenue. Producer Revenue is defined as farmgate prices times production. Appendix 1 - 58 - Page 1 iNDONESIA STRATEGIES FOR SUSTAINED DEVELOPMENT OF TREE CROPS Environmental Impact Assessment and Management 1. In 1986, Government promulgated an environmental impact assessment regulation (Regulation 29/1986), which requires preparation of a Preliminary Environmental Information Review (PEIR) for all projects and a detailed EIA for projects expected to have significant adverse impacts. Review of PE!Rs and EIAs is the responsibility of the concerned sectoral agency. A backlog of perhaps 350 to 400 ongoing agricultural projects, of which an estimated 120 are in the tree crop subsector, is currently awaiting retrospective review by the Ministry of Agriculture (MOA), and approximately 200 to 300 new projects, about 80 of which will be in the tree crop subsector, will come up for review each year. An Environmental Review Commission has been established in MOA in Jakarta, as required under Regulation 29/1986, but pending promulgation of an MOA decree to guide its operations, the Commission is not yet operational. 2. Given the size of the agricultural project portfolio and the lack of famiiiarity with environmental impact assessment in Indonesia, MOA needs to focus its limited resources for EIA review to make its review procedures as efficient as possible. The following measures would improve the efficiency and effectiveness of MOA's procedures: (a) sorting projects according to design type, and requiring different ervironmental assessment procedures for each category; and (b) designating projects involving large blocks of land or major environ- mental impact for national-level review, and smaller projects for provincial review. 3. In the case of large block planting schemes, which have potentially significant impacts, detailed EIAs would be prepared. The EIA would include: (a) a description of the siting of the project and an inventory of adja- cent forest, water, soil and wildlife resources likely to be affected by project activities; (b) an analysis of soil and slope characteristics of the proposed sites, alternative crop selections and land clearing i d planting methods, and, where indicated, measures needed to mitigate and/or compensate for effects on forests, water, soil and wildlife; (c) a review of pesticides used and an evaluation of their impact on users and on adjacent plant life, waterways and wildlife; and (d) where the project involves agroprocessing, estimated processing effluent loads and measures to ensure compliance with national and provincial effluent standards. Appendix 1 - 50 - Page 2 It would be essential that EIA preparation be begun as early as possible in the project design and site identification process. Detailed mitigation and compensation measures recommended in the EIA would be incorporated into an environmental management plan, which in turn would be incorporated into proj. ect design and implementation. Government may wish to designate approval of the environmental management plan by the reviewing agency at the national level as "environmental clearance" for large projects. 4. Smaller-scale estates would be expected to complete EIAs and submit them for provincial-level review. 5. Detailed EIAs would not be required for PMU, partially assisted and dispersed nursery schemes. Environmental review of these projects would be an iterative process which would be integrated into project preparation and implementation and would be carried out primarily at the provincial level. Environmental review procedures for these projects would include the follow- ing. The Kanwil Pertanian would convene an annual workshop to evaluate past environmental impacts and identify key environmental issues and objectives for tree crop subsector development in the province. PMU staff or their consul- tants would prepare an initial PEIR for each project area, which would address the issues and objectives defined by the annual workshop, would be briefer than an EIA and would include: (a) an inventory of forest, water, soil and wildlife resources in protec- ted or ecologically vulnerable areas that are likely to be affected by project activities; (b) suggested criteria for acceptance of smallholder plots into the proj- ect, related to soil, slope and proximity to protected or ecologic- ally vulnerable areas; (c) 3 management plan, consisting of suggested measures for mitigating soil and fertility loss and effects of pesticide use, to be applied according to slope, soil and locational characteristics of each plot; and (d) reconmended changes in monitoring procedures, if any. PEIRs and periodic updates would be reviewed at the provincial level. The reviewing agency would either certify that an environrmiental management plan adequately addresses the issues and objectives identified by the workshop and is being adequately implemented, or require that the plan be revised. Govern- ment may wish to designate approval of the management plan by the reviewing agency at the provincial level as "environmental clearance' for smaller proj- ects. - b0 Appendix 2 Page 1 INDONESIA STRATEGIES ?OR SUSTAINED DEVELOPMENT OF TREE CROPS An Alternative to the Present NES/PIR Approach 1. Under the alternative approach, proposed to replace the present NES/PIR models for the development of new areas, each participant would be allocated 2.0 ha within a block planting of a tree crop and 0.5 ha as a house and garden lot within a village. There would be no additional area for food crops, in view of the lack of soils suitable for sustained annual cropping in the outer islands where most new tree crop planting is expected. Participants would, however, be encouraged to intercrop one hectare of their tree crop area (or more if family labor permits) during the first 2-3 years after tree crop ei:tablishment. A crop of upland rice each year would be typical, followed by dry season crops such as maize, groundnuts, soya or mung beans. The tree crop area would be cleared and 2.0 ha of tree crop planted by a contractor, who would also plant legume covers on one hectare but leave the second hectare for intercropping. Once the tree crop and cover are accepted as satisfactorily established, their maintenance would be taken over by the participant, who would not be paid for his labor on his own lot. The house lot, similarly, would be cleared and ploughed by a contractor who would also build a house. it is expected that the majority of block planting participants would be as- sisted transmigrants and that financial assistance for their resettlement would continue more or less as at present. It would include the provision of a house and inputs for the initial cultivation of the garden, also inputs for the first intercrop, without charge to the participant, but land clearing and all establishment costs for the tree crops and cover would be charged to the participants. 2. This model is designed for the settlement of landless people without significant resources. The critical requirement is. therefore, that partici- pants should have sufficient family labor to cultivate their garden and inter- crops, to maintain their tree crop area and still have a surplus of labor to earn wages for subsistence through the period that the tree crop, which will be their permanent cash income source is immature. The most demanding crop in this respect is rubber, as it does not come into production until about the sixth year after planting and requires heavy labor inputs for establishment and then markedly lower inputs for maintenance unt.il maturity. To provide necessary cash wages for settlers, planting and building contractors would be required to employ settlers, insofar as they are available, for all unskilled work. Also, whenever possible, a commercial estate would be established in conjunction with the smallholder developments and these estates would also be required to employ settler labor. (Where no estate development is possible, subsistence credits may be necessary if no off-farm employment is available.) Many permutations uf development combinations and phasing could be possible, and would be very different for rubber, oil palm and coconut. As rubber is the most difficult, the labor requirements for this crop, are considered, to demonstrate the feasibility of the model. Only direct field labor require- ments are considered, although labor will be required for house construction, and also the contractors providing social and administrative infrastructure will be required to employ settlers, wherever possible. Appendix 2 -61 - Page 2 3. The assumptions used in the model are: (a) a settler and his wife will have 560 mandays available per year; (b) each family will cultivate 0.45 ha in a house lot of 0.5 ha; (c) in each hectare of intercropped rubber, net intercropping area will be 0.8 ha in the first year, 0.6 the next and 0.5 ha in the third year, and also for a final rice crop harvested early in the fourth year; (d) a crop of upland rice will be followed by dry season crops each year through the third year; (e) field labor requirements per hectare for tree crop development will be the same for smallholdings and estates and will be Planting Year -1 0 1 2 3 4 5 6 Mandays 111 226 107 58 54 52 48 24 and on (f) a minimum of 240 days wage employment/family/year will be provided to those who want it, by planting contractors and the estate; and (g) settlers will join the project at the start of the wet season, so that they may immediately plant food crops. 4. On the basis of these assumptions the Tables in the attachment show the details of settler labor availability and requirements. The position may be suimnarized as follows for development of 5,000 ha smallholdings and a 5,000 ha estate. SETL.ER LABOR AVA:LABILITY AND LrrILIZATION Proinct Year 1 2 3 4 5 6 7 a 9 10 11 12 S a I.bor/family - 233 Lp 560 560 560 560 560 Utilized on Gan lot 160 424 306 196 144 136 Balance for *oploynt - 73 136 254 362 416 424 L ail I. 2500 faala - 36 104 224 344 464 548 480 360 240 120 - Contract Dlabor re lOr.d 111 337 337 337 226 - - - - - - - S.,rpl.s (Deficit) of sett:er lat-, (111) (301) (233) (113) 7 238 548 480 360 240 120 S.,rpl. (Daf.cit) of settler labor (111) (301) (344) (450) (437) (264) (6) (17) 41 4 (82) (172) La Settler' a'r on &;to only f.e onrt6s in fi rt yea' of participator Appendix 2 -62 - Page 3 While contractor employment alone is not sufficient to provide 240 mandays of employment for eachi family year, the establishment of an associated estate provides ample opportunity for those families wishing to do so to earn signi- ficantly higher wages through most of the rubber development period. 5. Assuming the employment of all labor (Attachment Table) up to a maxi- mum of 240 man days annually, the regular cultivation of a garden lot and the cultivation of intercrops on a reducing scale over four years, settler family income is estimated as follows through the immature years of a rubber crop. ESTIMATED SETTLER FAMILY INCOME (Rp '000 in constant 1988 terms) Tree crop planting year 0 1 2 3 4 5 Garden crop value 50 100 100 100 100 200 Intercrop revenues (net) Rice - 3'0 310 258 207 - Dry season ctops - 154 154 127 - - Wages income (maximum 240 days) 131 245 432 432 432 432 Total Income 181 /a 808 995 917 739 532 /a Year 0 to 5 months on project. Resettlement allowances will be added for assisted transmigrants. 6. Settlers will be able to generate family income above the subsistence leveL of Rp 720,000/year estimated for the outer islands, except in the fifth year of participation if paid employment is limited to 240 days per year for each family. The deficit can be made up in part for the first and second intake of settlers from the unsatisfied demand for rubber estate labor, but this demand will fall off after estate planting is completed in the eighth project year. There will, howevF , be continuing demands for construction of estate and settlement infrastructure and from the fifth year, for rubber tapping and processing. Further, it would not be unreasonable to assume that the settlers will be able to carry forward to (tree crop) Year 5 part of the income generated above the subsistence level during each of the preceding four years. From Project Year 9 onwards, that is for the third, fourth and fifth groups of settlers, there would be more than enough employment in the mature estate areas. PLactical Details 7. This model is designed to provide for landless people, without resources, who are settled in new development areas. Through Repelita V, the settlers are expected to be primarily assisted transmigrants. The model is Appendix 2 -63 - Page 4 suggested as possible alternative to the NES/PIR and PIR-Trans projects to overcome the problems which have arisen with the present generation of proj- ects. The problems are: (i) the poor quality of tree crop plantings; (ii) the loan conversion to individual participants and the related issue of delayed cost recovery, and (iii) conflicts of interest between the nucleus estate, which is a commercial operation aiming to maximize profit, and the settler who looks to minimize his credit investment and to receive the best possible price for his produce sold to the nucleus for pro(essing. 8. The disappointing quality of some tree crop plantings in NES/PIR projects is believed to be due, in part, to the overloading of the nucleus estate concerned with development obligations; the number of extent of proj- ects assigned to a PTP overextending management capabilities and sometimes financial resources. It is, therefore, suggested that settlement projects should be the responsibility of a Project Implementation Unit (PIU) rather than a nucleus estate, and that the PIU would develop each area through con- tractors. These contractors might be PTPs or private estates, or might be simply commercial operators specializing in land clearing and tree crop plant- ing. No PTP would be required to undertake smallholder development, nor to establish a nucleus estate, but might do either if it considered the activity of commercial advantage. The contracts would, similarly, be fully commercial in being procured through competitive bidding and requiring development according to specification and on time if payments were to be made. There would be no guaranteed margin for the contractor and rewards and penalties would thus be built in. The present system of a multi-year development agree- ment supplemented by annual contracts for development at budgeted costs plus 15% to cover overheads and a management fee would be abandoned. Pre-financing of the work from the government budget would not be required and payments would be made only for work completed to the standard, any substandard areas being identified as each stage of development proceeds (Lather than when the tree crop is mature) and defects being corrected by the contractor. The con- tract system would also eliminate the conflicts of interest through the deve- lopment period, the PIU acting on behalf of the settlers and having its sole objective the development of good quality plantings at minimum cost. 9. The model depends upon settlers working on their own land allocation to reduce individual credit amounts and the government budgeted costs of set- tlement. The individual lots must therefore be identified as early as pos- sible, which will effectively be after land is cleared and at the time of planting or during field preparation for planting. At this stage, the total area will necessarily be surveyed to determine progress payments due to the contractor and when the boundaries are agreed, individual 2.0 ha lots would be permanently marked out and land titles prepared by Agraria as planting pro- ceeds. Settlers would simultaneously take over their lots and commence inter- cropping on one hectare of each 2.0 ha lot. Titles would then be issued in the names of the settlers, perhaps about three months after they join the project, but could be retained by the lending bank. It will no doubt be necessary to change the names on ' few titles as some participants die or withdraw from the project. Such amendments s..ould be made at no cost to incoming (replacement) participants and the administrative inconvenience is deemed to be a small cost to pay for immediate identification of settlers with their landholdings and the opportunity for settlers to work on the land without being paid as labor. Appendix 2 -64- Page 5 10. It is assumed that the investment credit amounts would not be prefinanced by government budgets and subsequently transferred to settler loan accounts with the State Commercial Banks (SCBs) for recovery of the debts and reimbursement of the treasury. Instead, SCBs would lend directly to settlers from the start of operations. This requires that credit terms are agreed with the SCBs before a project is started, also that the participants are acceptable to the lending SCB as creditworthy. Criteria would be agreed by the SCBs with the Directorate General of Estates, the Transmigration authorities and the government of the receiving province and the selection of settlers according to the criteria would be a joint undertaking of the four insritutions. If transmigrants are involved, selection would be at their point of origin and, whatever the source of settlers, selection would start with sufficient lead time to ensure that it would be completed one year ahead of their entry into the project, in order to ensure that no contract for rubber development is signed until the settlers are identified and accepted by the lending SCB. As payments to the contractor for land clearing and tree crop planting would be made by the SCB as installments on participants' credits, the SCB would participate in procurement of these contracts, which would start about 18 months before the contracted rubber planting, as settler selection is completed. A lead time greater than one year between contract signing and rubber planting would be entirely acceptable but any lesser period might lead to work of unsatisfactory quality. 11. Even with full participation in selection of settlers and contractors, and possibly in other major procurements of credit items (such as fertilizer) SCBs will require continuous assurance that plantings are proceeding at a satisfactory quality level after maintenance becomes the res- ponsibility of settlers under the direction of a PIU. Development of a moni- toring system, independent of the PIU immediately concerned and preferably of the orzanization of which this PIU is part, would be essential. It is envis- aged that this would be carried out initially by a strengthened TKPIR but with an audit of the physical conditions on each project - and hence of the stan- dard. of monitoring - carried out by the Government Auditor (BPKP). A standard system for classification of the quality of individual holdings and project blocks would be developed as the basis for field monitoring reports, and the accuracy with which this system is applied by each PIU would also be subject to audit. Quality will finally depend upon the performance of the settlers themselves. Clear requirements for maintenance according to a strict schedule must therefore be agreed between the PIU and settlers at frequent intervals, and if maintenance remains unsatisfactory over, say, tl,ree months, there must be no hesitation in expelling a participant from the project and replacing him with another eligible applicant prepared to assume the credit obligations attached to the lot. A register of acceptable applicants would be maintained in order that there would be no delay between exclusion and replacement. These safeguards would reduce the risk accepted by the SCB but in the long gestation tree crop projects, with long credit repayment peLiods, significant risk would remain, particularly in the early years as PIUs and contractors gain experience. Through these years it could probably be necessary for loans to block planting participants to be guaranteed by GOI, preferably in full so that some commitment to achieving quality results (and hence to effective mor:itoring) may be expected from the Ministrv of Finance as well as the directly responsible Ministry of Agriculture. Appendix 2 -65 - Page 6 12. Provided that design and implementation follow the lines indicated above, the difficulties identified in ongoing projects of the NES/PIR type would be largely overcome. Only willing contractors, PTPs, or private estates would participate and would be financially responsible for the quality of tree crop establishment; land titles would be issued as soon as settlers, acceptable to the lending banks, enter the project and would provide colla- teral for credits advanced to these settlers; management and supervision would be by a specialist PIU committed solely to smallholder developments; costs would be determined by the market, without the need to establish amounts pay- able for each operation and without any agreed margins, and credit amounts would be minimized by requiring participants to maintain their own holdings without payment, while obtaining their livelihood from intercrops and paid employLnent on a commercial estate. Lending would not be funded by the govern- ment budget but would be guaranteed by GOI but with risk reduced through con- tinuous monitoring, with an independent audit of physical (as well as finan- cial) conditions on the basis of a uniform quality classification system. However, success would depend to a very large extent to the ability of the PIUs and to careful scheduling of procurement and field activities by these Units. Adequately trained and expe.ienced staff are therefore a sine-qua-non, and recruitment must be selective and programs limited to staff availability. Arrangements for Processing Facilities 13. In the model discussed, the first crop from smallholder rubber would be harvested in Project Year 8 and harvesting on the estate would start in the following year. By Project Year 9, there would be sufficient production to support a rubber factory of economic slze and production would increase rapid- ly thereafter. A factory might, therefore, be established by the estate to process the crop from the estate and smallholders, either purchasing raw mate- rial from smallholders at GOI approved prices, in the way that nucleus estates do in ongoing projects, or processing and perhaps marketing the smallholders production for an agreed charge. Another possibility would be for a factory to be financed jointly by the estate and either GOI acting on behalf of small- holders and selling its holding to the smallholders through compulsory deduc- tions from their sales proceeds, or by the SCB lending to the smallholders on a group basis. In this case, the factory would purchase raw material from the estate and the smallholders at the same base price, this price being determin- ed by processing costs without any margin added after an initial operating reserve was built up. Any profit arising at the factory would be distributed at intervals in proportion to the throughput contributed by each user of the factory. A third possibility would be for a private entrepreneur to provide processing and marketing services and purchase smallholders and, maybe, estate production at applicable market prices. The choice among these and other possibilities would depend to a great extent upon the location of the development relative to existing or other developing infrastructure and markets. However, a firm decision on the arrangements for processing would need to be made as each project is planned: a selection cannot be left until close to production time. App ndix 2 - 66 - T_blo I SETTLER FAMILY LABOR BALANCE (Mandays) Tree crop planting yoor -1 0 1 2 a 4 6 Troe CroD Plant1no Yoar Preparation of house lot - 20 Cultivation of house lot - 40 40 40 40 40 40 Intercropping 0.75 he - 100 100 Intercropping 0.626 - - 70 100 Intercropping 0.5 ha 0 - - 50 SO 20 Mointaining rubber: 1 he lntercropped - - 107 68 64 62 48 1 ha not intercropped - - 107 58 S4 62 48 Totol Labor Used - 160 424 306 198 184 136 Balance for wage employment - 73 /a 136 254 362 396 424 La Assumes 233 total days availablo during 5 months on project. Apen; 2 - 67 - CONTRACTOR LABOR REQUIREMENT AND SETTLER AVAILABILITY FOR 5,000 hA DEVELOPMENT ('000 MANDAYS) Project year 1 2 3 4 6 6 7 7 9 19 11 Contractor Re ire_nt Land proparotion 1,000 ho/yr III III III III Coapotlon of pianting 1,000 ha/yoer - 226 2 226 226 Total Reaulrem_nt 111 337 337 337 337 226 Settler Avalaobilitql proe Tr - s o6 120 120 120 120 second 500 faillee - - s0 66 120 120 120 120 Fc,r third, fourth and fifth 600 famillee - - - as 104 224 30l 360 S00 240 120 Total Availablo - U0 104 224 344 464 646 460 3No 240 120 Surplus settler labor (1li) (301 (233) (113) 7 238 646 460 360 240 1.1O L/ Assuming no moro than the minimum 240 manlays/lamil y are employed. A zdix 2 - 68 - Tr t ESTATE LA00O REQLIIREMENT, l SETTLER AVAILASJLLTY L AND BALANCE (T500 MWQAYS) Project y-.r a 2 3 4 6 a 7 S 9 10 11 12 Estate labor need - - 111 87 444 602 5U 497 819 28 202 172 Settler availability (111) (801) (288) (118) 7 286 546 4J0 J0o 240 120 - Surplus (deficit) labor (111) (301) (844) (460) (437) (264) (6) (17) 41 4 (02) (172) /a Amauming that the eetat. plants 5,000 he at the rate of 1,000 ha/year, sith land clearing starting in Year 3. b After employment by rubber planting contractor, and assuming maxlmum 240 dayl/f.i ly/yer. Appendix 3 Page 1 INDONESIA STRATEGIES FOR SUSTAINED DEVELOPMENT OF TREE CROPS Procedures for Obtaining Access to Land 1. The investor identifies land available based on a meeting with the Bupati. 2. The investor requests information on land eligible for Estate Development from the Governor's office which is provided based on the interagency land map at BAPPEDA. 3. A request is sent to the Provincial BAPPEDA for information on lands that may be developed. 4. BAPPEDA issues a reply indicating which lands may be developed. 5. A Provincial Interministerial Team, with representatives from the Depart- ments of Agriculture, Forestry, PEMDA, Public Works, Environmen:, Agrarian Affairs and Industry, meet to nominate such lands for estate use to the Governor's office. 6. Based on approval of the land site by the Governor's office 'Surat Penga- rahan Lahan"), a request is made to the Governor's office, with a 'C:yv an approval letter from the Bupati, for a letter reservi..g/ide..tfy.,. land (Surat Pencadangan Lahann). 7. Based on the results of an Interministerial meeting (BKPM.D), a rei-ommenda- tion is made to the Governor's office to issue a letter reserving l.and. 8. Either the Provincial Head of BKPMD or the Governor's office issues t`.e letter reserving land. 9. BKPMD reviews the Governor's decision, Bupati's recommendation, cor.any ownership, company status and other permits, meetb and then issues the certificate identifying land ('Surat Pencadangan Lahan") which is valid for one year. 10. The investor then requests permission to conduct a presurvev anc fasi " - ity study from EAPPEDA. 11. A meeting is called by BAPPEDA and a permit is issued authorizing :he presurvey. 12. The presurvey is conducted and submitted, via the Provincia' Estate Crc%s Service, who certify the project's technical feasibility in a reco-rer.da- tion letter to the Director General of Estate Crops in Jakarta. 13. The presurvey and feasibility study are reviewed by a coordinating team from the Directorate General of Estates. - 7n - Appendix 3 Page 2 14. Approval in the fotm of a principle permit ("ijin princip"), which is valid for one year, is issued and is sent to BKPMD in the province. 15. An interministry review meeting is held to examine the Principle Permit and then BKPMD issues a recommendation to BPKPM in Jakarta to provide a permit for establishing a Private National Estate (PBSN). 16. BPKPM requests confirmation from the Minister of Agriculture that all documents are in order. 17. BPKPM then issues a letter authorizing a permit ("ijin SPT") for a National Estate Company (PBSN). 18. After issuance of the PBSN/SPT, a formal request i- made to the ministry of Forestry for the release of forestry lands (Permohonan Princip Pelepa- san Kawasan Hutan). 19. A meeting is curiducted at BPKMD to review the request. 20. BPKMD issues a recommendation to the Ministry of Forestry to release the lands, including the amount of the land that needs to be replaced. 21. The Ministry of Forestry issues a provisional permit for the release of forestry lands. 22. This permit is returned to the province and a survey is made (by a BPKMD team headed by the Agrarian Affairs officer) to demarcate land boundaries. 23. The replacement area is identified and approved by the Minister of Fores- try. 24. The compensation cost for timber and replanting is set by the Forestry Service, which is then paid. 25. Upon payment, the investor is issued with a Permit for Forest Conversion (HPH or Ijin Pelepasan Kawasan Hutan). 26. Based on approval to convert forest lands, a request is made to the Pro- vincial Agrarian Affairs office to issue a land usage certificate (HGU). 27. Ar. intenninisterial team from Jakarta visits the field site to examine, with provincial officials, the legal status of the land. 28. A letter is issued from the Director General of Agrarian Affairs request- ing approval for the HGU to the Minister of Home Affairs. 29. Instructions are issued to the Provincial Agrarian Affairs office approv- ing the HGU. 30. A request is sent to the Kabupaten Agrarian Affairs office to prepare the HGU. Appendix 3 - 71 - Page 3 31. Upon confirmation from the Governor and Bupati, the HGU certificate is issued in the name of the investor. 32. Requests are issued to various provincial departments for operating per- mits (electricity to PLN, buildings to PU, disturbance to PEMDA, safety to the Police) for the Estate and the factory. - 72 - Appendix 4 - 72 - Page 1 INDONESIA STRATEGIES FOR SUSTAINED DEVELOPMENT OF TREE CROPS Research Institutes Rubber 1. The rubber industry is supported by work conducted at five research institutes--Bogor, Sungei Putih, Semnbawa, Tanjung Morawa and Getas. The first three come directly under the Agency for Agricultural Research and Development (AARD), the fourth is funded by PTPs I, II, III, IV and V but is scheduled eventually to come under the new Advisory Council for Estate Crops Research. Getas, also funded by a group of PTPs, works on both rubber and coconut. 2. The Bogor institute has a noncommodity-specific mandate (other than rubber technology) and is charged with the conduct of more fundamental research in support of the cther centers. It is well equipped and has excel- lent facilities (installed at a cost of US$400,000) for conducting research into tissue culture, genetic engineering, biofermentation and the use of agri- culturpl waste. The 1984-89 program contains a number of projects relating to rubber: (a) Genetic improvement (b) Development of cover crops (c) Inventory and biology of fungi associated with rubber (d) Processing of raw rubber and latex (e) Manufacture of finished latex. 3. Among the results of direct benefit to the industry, mention may be made of the release of two new rubber clones, PR 255 and PR 300, recommended for large-scale planting. Mean annual yields over the tapping life are reported to be around 1,550 kg per hectare and both Pre reported to be ade- quately resistant to wind damnage and to a nunber of diseases--including pink disease, mildew, brown bast, and black stripe. It is, however, understood that Bogor will not, in future, be involved in rubber breeding. 4. Sungei Putih, located 45 km south of Medan, was established in 1981 by a decree of the Ministry of Agr4.culture and developed at a cost of US$3 million, supported by World Bank financing (NAR 1 and NAR 2). The insti- tute has a national mandate for rubber research and development with each function under the control of an assistant director. 5. The primary research activities are in the fie.'ds of: (a) Plant breeding Appendix 4 - 73 - Page 2 (b) Plant physiology and agronomy (c) Soil fertility and plant analysis (d) Integrated pest and disease management (e) Post-harvest technology and waste product utilization and management (f) Socioeconomic studies, marketing and management. 6. The institute produces its own journal, Bulletin Perkaretan, and a series of technical leaflets designed for use by planters. The Master Research Plan cites as the principal achievements of the institute since its inception--the release for commercial planting of two new clones, BPM 1 and BPM 24 (both, in fact, the product of research carried out at Medan), and the recommendation of a series of 11 clones for estate planting. Eight of these are also considered suitable for use by smallholders. The development of new clones for the future is expected to come from the 1981 exploration in Brazil which resulted in the acquisition of 6,955 new cultivars and 102 selected clones. 7. Other successes claimed are improvements in the techniques for stor- ing and transporting rubber seed; reduction in white root disease by the application of sulphur; the development of slow release fertilizer using skim latex; and the use of the agricultural salt (NaCl) as a substitute for muriate of potash (KCl). The value of sulphur for control of white roct disease has been questioned by other researchers and it seems that its effectiveness has been limited to very specific locations. Similarly with the substitution of NaCl for muriate of potash, it is likely that the effect is merely one of ionic exchange in the soil. There seems no reason to suppose either that the response is due to the chlorine coritaiied in both fertilizers. or that sodium can substitute physiologically for potassium in the nutrition of the tree. 8. Sembawa, another new institute, was established in 1982 at a site 29 km north of Palembang. Its principal mandate is to engage in rubber research and development on behalf of smallholders though it also does some work on coffee, cocoa and farming systems. Results to date have been mainly in the field of agro-economics but the impact these are likely to have remains uncertain. 9. Tanjung Morawa, being PTP funded, does not feature in the Master Research Plan for Repelita V. Its program was, however, discussed in the AARD report--"An Evaluation of the Estate Crops Research Program for AARD"--pub- lished in August 1986. The station has no land of its own, all trials being conducted on the estates of the participating PTPs. Revenues derive from the PTP contributions (based on a percentage of their turnover). One hundred and twenty three million seeds, worth Rp 1.8 billion, were supplied to the PTPs or sold to outside estates and smallholders in 1985/86. The center is well sup- plied with modern laboratory equipment and has its own computer; however, unlike the AARD institutes, the majority of staff have no post-graduate quali- fications. Appendix 4 - 7/. - Page 3 10. At Getas the situation is similar, with all trials being carried out on the PTPs' estates. There are 14 scientists. There is a substantial work program comprising over one hundred experiments. Oil Palm 11. Marihar Research Center was established in 1964 at a site 10 km west of Pematang Siantar. Funded by PTPs VI and VII, it was created to serve their research and development needs. Since 1987 it has been brought under the aegis of the new Advisory Council for Estate Crops Research. As the major supplier of seed to the industry, the Center derives substantial revenues from planting material sales and is largely self-supporting. It is well equipped to produce both conventional and clonal material and, through its collabora- tion with the IRHO (Institut de Recherches pour les Huiles et Oleagineux) plans eventually to produce up to 5 million clonal plantlets a year. There are two substations, one in Riau, the other in West Kalimantan. The latter is intended to supply planting material for the province. 12. The other main center for oil palm research is at Medan (Balai Penelitian Perkebunan Medan or BPPM). The Institute was established as long ago as 1916 as the old AVROS station to conduct research on rubber. Its activities were extended to include oil palm as that crop expanded zapidly in the 1920s. In 1958 it became the Research Institute of the Sumatra Planters Association (RISPA). Although it continues to do some work on cocoa, its principle mandate at the present time is to concentrate on oil palm research. As currently organized it has six divisions--agronomy, plant protection, soil science, technology and chemistry, economics and statistics, and advisory and training. The last division mentioned is responsible for providing advice to estates and an extension/advisory service to smallholders, particularly trans- migrants under the NES projects. This service is provided by the Institute under a contract with the Ministry of Transmigration. 13. In addition to the work at Marihat and BPPM, oil palm research is also conducted by private sector and joint venture companies (such as Lonsum and Socfindo). Some of the PTPs have their own agronomy departments, others call upon outside consultants for advice so that, despite some limitations, the industry is rather well served by its research services. BPPM publishes its own journal, Bulletin Perkebunan, and issues technical and advisory leaf- lets for the planting community. 14. Research results considered to have had the greatest impact (Estate Crops Master Research Plan) include the production by BPPM of planting materi- als SP I, Dura by Pisifera crosses based on descendants of the original Bogor Deli Duras and the famous Pisifera SP-540, and SP II, based on Dura Dumpy palms (ex Serdang, Malaysia) also crossed mainly with SP-540 related pisiferas. SP I progenies are considered to have yield potential of 6 to 7 tons of crude palm oil per hectare; SP II rather less but with the advantage of much slower extension growth, thereby greatly facilitating harvesting in the later years ard prolonging the economic life of the palms. This will become increasingly important in future as labor becomes more expensive and fewer workers are prepared to undertake the arduous task of climbing tall palms to harvest the fruit. The genetic base of the breeding programs is, wisely, being broadened by introduction of exotic material through collabora- tion with other companies in Indonesia and with Unilever Plantations Group. Appendix 4 75 Page 4 Marihat, also, using a program of recurrent reciprocal selection, has some interesting material; with the best palms producing at a rate equivalent to 11 tons of oil per hectare. The tissue culture program, carried out with the support of the IRHO in return for an annual fee and, eventually, a royalty on the planting material produced, is beginning to make headway. There is a great deal to recommend contractual arrangements of this sort whereby technol- ogy developed elsewhere can be brought in and applied -without having to be independently developed, with consequent loss of time, by local scientists. Coconut 15. The first breeding collection was established at Bogor in 1911/12 with 240 nuts collected from Java and the outer islands. Then, in 1930, a coconut research institute was set up at Nanado, North Sulawesi, in the major coconut-producing area of the country. The experimental farm, at Mapanget, comprised 50 ha and was used to collect further material for a coconut improvement program. The original station was destroyed during the War but the collection survived. For some years, coconut research was incorporated into the program of the agricultural research station at Makassar but the crop never received attention commensurate with its social and economic importance; in 1970 there were only four scientists working on coconut. 16. In 1972 a UNDP/FAQ project was set up and this continued until 1983. Its objectives were to support the Government's coconut development program tn.ough applied research aimed at increasing the productivity of coconut hold- ings. Then, in 1984, a new Research Institute for Coconuts (RIC) was created, with World Bank support under the NAR II project, at the old Mapanget site. There is a subsidiary breeding station with 190 ha of land at Pakuwon (West Java) and there are nine experimental farms. By far, the largest single farm is at Bone Bone (South Sulawesi), with 1,180 ha, where the germplasm collec- tion is located. The total area available to the institute through its asso- ciated farms is 2.254 ha. Outside the orbit of the RIC, coconut research is also conducted at Bandar Kuala, near Medan in North Sumatra, through the Pusat Penelitian Kelapa (PPK) under funding provided by a group of PTPs and with assistance from the IRHO. 17. The Research Programs. The coconut research programs were reviewed during an Evaluation of the Industrial Crop Research Program of AARD (Report-- August 1984). They are designed to assist the Ministry of Agriculture in realizing its development objectives which may be considered in three stages: (i) short-term objectives--to improve marketing channels and institutions and to improve post-harvest technology; (ii) medium-term objectives--to promote intensification programs through the use of fertilizer and integrated pest and disease control; and (iii) to plant new areas and replant or rehabilitate unproductive coconut groves. 18. As with the estate crops institutes, the activities are organized by discipline and are not problem- or program-oriented. Ihe principal tasks scheduled under each of the six disciplines are surmarizpd below: (a) Crop Improvement. Exploration and collection of coconut germplasm, selection of breeding material, hybridization, mutation, growth anal- ysis, pollen processing, methods of crossing and seed technology. Appendix 4 - 76 - Page 5 (b) Cultural Practices. Methods of land preparation, fertilizer and soil fertility, nutrition analysis, plant density, intercropping, cover crops, sanitation, methods of rejuvenation, irrigation and drainage. (c) Plant Protection. Identification and conducting an inventory of coconut pests and diseases, biological control, chemical control, integrated pest management, monitoring of varietal resistance. (d) Product Technology. Studying copra quality and the possibilities of using coconut water, fiber, shell, stem, leaf and rib as industrial raw materials. (e) Agro-Zconomics. Cost &lysis, structure and system of coconut mar- keting supply and demand analysis, basic studies on yield quality, coconut-based farming systems, coconut statistics and regional plan- ning. (f) Agro-Ecology. Macro- and microclimatic studies and their relation to coconut production, data collection and interpretation, studies on soil and land characteristics. Studies on environmental conditions and their relationships to coconut growth, production, pests and diseases. 19. Linkages. The following obser-;ations are based largely on the find- ings of the review team cited above. The linkages which exist between the Ministry of Agriculture, the Directorate General of Estate Crops, the AARD and the CRIIC are mandated and formally organized; linkages between the research institutes and the growers, whether smallholders or estates, are much less well defined. The review team found that, in practice, programs were formula- ted within the various institutes with general regard for the national objec- tives but without any significant feedback from growers; that is, the insti- tutes worked on the basis of what they perceived the problems to be. Feedback from the extension services, which should constitute the best source of infor- mation regarding the problems of smallholders, was found to be very limited. 20. Problems. Although social goals and equity considerations feature in the definition of national objectives, there was a perception that the research priorities were technically oriented withi strong emphasis on breeding and agronomy. One alleged consequence of this difference in orientation was that most farmers were disinterested in the various rehabilitation and inten- sification schemes incorporated in the ongoing programs, which they considered poorly adapted to their needs and circumstances. In part, the problem was caused by the shortage of staff with adequate training in economics. It was suggested that until such time as the Coconut Research Institute could strengthen its own staff, more use should be made of the services of the Cen- ter for Agro-Economic Research (CAER). 21. In apparent contradiction with the finding that there was too little feedback from growers, the review team noted elsewhere in its report that the institutes are often under pressure from farmers to dedicate research time to resolving immediate local problems and that progressive farmers regularly seek advice from the research institutes; factors which, it was claimed, tended to divert researchers from attending to urgent national objectives. This t.ig- gests that the boundaries between basic, applied and adaptive research are Appendix 4 Page 6 ill-defined, that individual research officers are unclear as to the role they are expected to play, and that research/extension linkages simply do not work the way they should. Results achieved to date under the different programs are considered in the following paragraphs. 22. Crop Improvement. Although it is more than 75 years since the first collection of breeding material was assembled at Bogor, the breeding program has not yet had any measurable impact on the productivity of the sector. There are many reasons for this, some of them inherent difficulties in working with the coconut, a tall-growing, large-seeded perennial crop with a long generation time. In general, the collections have been too small to provide an effective basis for a breeding program; 'varieties' have been described in subjective terms that make quantitative treatment of comparative data virtu- ally inmossibLe and there has, until recently, been no coherent breeding strategy. 23. However, GOI is very conscious both of the shortcoming of the earlier work and of the importance of putting the matter to rights with a minimum of further delay. The con4ultancy report (TRHO Document 12026) on Coconut Germ- plasm in Indonesia, prepared by J. Meunier in 1986 on behalf of AARD, provides a sound basis for future action. 24. The most important of the existing collections are at Mapanget, with 7 dwarf varieties and 25 talls: Pakuwon, 9 dwarfs and 13 talls; and at Bone Bone, 32 talls. Although they demonstrate, already, the considerable varia- bility that exists between the coconut varieties found in different parts of the country, and hence the potential for improvement through selection and breeding, the collections have a number of disadvantages. They still repre- sent only a small fraction of the material available, yet some locations are overrepresented (19 of the North Sulawesi accessions come from a very restric- ted area and probably represent the same population). Some of the major coconut-growing regions are inadequately represented, for example East Java and Riau; others, where development programs are under way and the local popu- lations therefore under threat, are not represented at all, e.g.., Lampung and Aceh. 25. Although the Bone Bone site has been selected as the intended future home of the national germplasm collection, it has many disadvantages: broken terrain, steep slopes, poor soils, areas of marshy low-lying land unsuitable for planting and, in consequence, insufficient plantable land to house an adequate working collection. Serious thought should be given to relocating the collection while there is still time. 26. Between 1977 and 1983, 11 genetic trials were planted by the RIC at different locations, some on experimental farms, others on private estates. Only seven different hybrids are represented in these trials, though three more were added in a new trial laid down at Pakuwon in 1984. Eleven other hybrids, which have been planted on PTP estates, are being tested by PPK. It would be advantageous if there were closer collaboration between the two institutes. 27. Cultural Practices. Although the fertilizer trials program has been actively pursued in recent years, it has yielded largely inconclusive results. Appendix 4 78 Page 7 ,ae chief reason has been the choice of unsuitable experimental designs. In attempting to economize in both space and time, the researchers have come up with results that are ambiguous and which are impossible to use as a basis for making fertilizer recommendations. 28. Many, probably the majority, of Indonesia's coconut producers grow their coconuts in association with other crops. It is unfortunate, therefore, that most research has been 3n coconuts grown in monoculture. In recent years, attempts have been made to implement formal multicropping experiments, but a number of unfavorable seasons have badly affected the trials and few results are available. 29. The other major area of agronomic research has been the study of replanting techniques. The RIC has initiated a trial to compare different ways of phasing the removal of the old stard of palms with a view to assessing the economic and technical advantages and disadvantages of the various methods. It is disconcerting to note that, despite contrary evidence from experiments in other countries, the review team seems to have concluded in advance of the trial results that land clearance prior to replanting provides the best solution. 30. Plant Protection. The Mapanget program has, for geographic reasons, concentrated on the problems of North Sulawesi. Among the most important pests are treehoppers, Sexava spp., which are capably of totally defoliating coconuts and then attacking the inflorescences and young fruits. Both chemi- cal and biological controls are possible; as long ago as 1969 Lever showed that Dieldrin was effective. There are two egg parasites which also give good control; with today's emphasis on environmentally safe biological control where possible, their use is to be preferred. It has been suggested that parasitism is increased where the coconuts are intercropped with cocoa and where buCentrosema pubescens is planted as an interline cover crop. The net- tle caterpillar, buSetora nitens, periodically causes severe damage throughout Southeast Asia; in 1978 there was a major outbreak in Indonesia which spread to all provinces in Sulawesi and affected parts of Java, Sumatra and North Maluku. Azodrin, Sevin and Demicron have given effective control. Lever, 1969, noted that there were a number of parasites which normally contributed to keeping the caterpillar population within bounds; of these a tachinid fly, Chaetoxiorista javana, was considered the most effective. There would also appear to be differences between coconut vatieties in their susceptibility to attack; resistance may be associated with the number of trichomes per unit of leaf area, a factor which could explain the comparative resistance of the Nias dwarf variety. 31. Product Technology. Research has been carried out on the use of coconut sap for sugar production and on a number of other possibilities in the field of by-product utilization. However, the review team, while accepting the importance of exploiting these opportunities where they exist, felt that the practical relevance of some of the work was questionable. 32. The validity of some of the team's assertions is questionable. For example, while rightly maintaining that coconut has a special place in the ':ood industry, the authors go on to conclude that copra is a raw material of Appendix 4 - 79 - Page 8 poor quality. This is simply untrue; when properly dried, copra is a first- grade product and it is difficult to conceive of an alternative better suited to the circumstances under which the small producer operates. Of course, there would be advantages in developing a commercially viable wet process, yielding a high-quality protein-rich meal suitable for direct human consump- tion and there is no doubt that research in this direction should continue. Meanwhile, greater dividends can be expected from efforts to improve copra quality by making available simple, inexpensive dryers. 33. Agro-Economics. The review team noted that agro-economics had until recently been given low priority in the RIC program and approved the greater emphasis now given to this subject. If the training targets are achieved, the agro-economics division will have 3 PhDs and 7 MScs by 1993; only agronomy and agro-ecology (each with 4 PhDs and 8 MScs) will have more senior scientists. 34. Much of the work carried out to date has been of limited value in that it has tended to reconfirm already well-established facts rather than contributing new information. For example, one study concluded that marketing is an important issue because Java has two thirds of the population but pro- duces only one third of the coconuts; another found that the use of fertiliz- ers could be profitable in certain circumstances. Given better direction, the staff involved are certainly capable of making a greater contribution than this. Regrettably, even the review team seems to have considered the future in terms of studies appropriate to a particular discipline rather than in terms of identifying problems and designing multidisciplinary programs to solve them. 35. Agro-Ecology. The division is undertaking studies on the effects of soil, topographic and climatic conditions on the productivity of coconuts in different parts of the country. Interesting though these studies may be, the work needs to be more focused if it is to yie'd results of practical value. ppendix 5 80- Page 1 INDONESIA STRATEGIES FOR SUSTAINED DEVELOPMMENT OF TRE}E CROPS Simulation Model for Assessing the Impact of a 5I Tax on Rubber !Exports The simulation model 1/ is a quarterly econometric model of the world rubber market. Production of natural rubber is defined as a function of potential production, based on the vintage distribution of the capital stock, the world price of RSSl and relative stock levels. Potential supply is a function of past and contemporaneous supply together with exogenous new and replacement investment. Supply is disaggregated into estate and smallholder segments for Malaysia and Indonesia. No significant price response for supply was identified for Indonesian estates. Quarterly smallholder supply response was or. the order of 0.15 to 0.2. Aggregate supply equations are used for Thailand, Philippines, India, Cameroon and Brazil. Total natural rubber demard is modeled in autoregressive share form, relative to total world elastomer consumption. This is modeled as an autoregressive function of the share of radial tires in total world demand and the US export unit value of styrene-butadiene rubber. Prices are determined in the world market but are influenced by inflation rates, interest rates and currency exchange rates. The price equation is modeled as a function of previous period prices, a dollar-hased price index of minerals, ores and metals, world rubber consump- tion. th'- dollar to SDR exchange rate, world natural rubber production, privatE stocks and INRA stocks. For simulation, potential production, total wor!c! rubber consumption (under a -ange of scenarios), the share of radial tir:- and non-rubber price indices are forecasted exogenously. Exchange rates ate held fixed at a 1988 base value. Buffer stock levels, private stock ievels, natural rubber prices, n'tural rubber consumption, regional natural rubeer prices (adjusted for duties/exchange rates), regional natural rubber procbx.-ttion and world rubber production are solved endogenously. The Smit model was modified to include a 5Z ad valorem tax on Indoresian natural rubber exports, beginning in the first quarter of 1999. Domestic natural rubber consumption was estimatud at 1OZ of domestic supply. A l57 .iiscount, based on the difference between mid-1988 SIR20 and mid-1988 RSS' fc'b prices. was used to adjust for quality differences between Indonesian an1fA F.S-S prices. Domestic consumer prices were valued at 4.6Z below the exp(ort price, to account for the effects of the tax on domestic prices. A si.;uitl on was conducted with and without the 5Z export tax, using Smit's rr,ei;'.-l'evel world demand fcrecasts. All target variables are measured in real 1988 rupiah. Simulation results are contained in Table _ below. Results of the Smit model are reported in H.P. Smit and P. Jumpasut, "The Regional Outlook alnd Structural Change in the World Rubber " Dmey" X International Rubber Study Group, Hamburg, 3987. The model resented in K. 3ui-ger and H. Sm!!it, "Long-term an' Short-term -oic for the Natural Rubber Market", ESI, F'ree University. Am,sterdam, August 1988. A copy of the linearized model was made iva`lable to the Bank Team by Dr. H.S. Dillon, Chief, Commodity analysis Division of the Ministry of agriculture, Jakarta. Appendix 5 -1 Page 2 Table --: RUBBER SECTOR SIMULATION RESULTS (Real 1906 Rp) With export tax (CX . Without export tex % change 1990 199C 2000 1990 19f5 2000 1990 1996 2000 supply (000 ton) Indon-elsn SUPDIy A. Sealiholder 684.19" 1,039.782 1,24. 990 869.911 1,048.447 1,24C.08U -0.6 -0.63 -0.6 B. Estates 3*2.016 406.167 419.806 352.018 406.157 439.300 0.00 0.00 O.C Totel 1 216.216 144S 939 1 e74.301 1 221.927 1 404.104 1 S43 -0.47 -00 -o.e Roet of the World Suppli 3,! 924 4,314.373 4,764.116 3,668.800 4,3C0.276 4,747.114 0.13 0.14 0.1 World Supply 6,07v .9 6,760.312 6,426.417 6,080.227 6,762.079 6,431.467 -0.02 -0.04 -O.C Price RSS1 price (St/ton) 1,676.396 1,542.921 1,620.627 1,638.6U6 1.534.616 1,610.904 0.77 0.66 0.C FOB price (Rp/kg) 1,172.802 977.010 871.478 1,1638.07 971.689 066.901 0.77 0.65 0.e Domestic price (Rp/kg) 1,118.663 932.068 831.386 1,110.348 926. 99 826.07 Demand ODO ton) 16,474.483 17,061.442 18,64680.6 16,474.468 17,061.442 17,8465.86 0.00 0.00 S.C Total Consumption 6,069.401 6,729.868 6,409.80o 6,062. W 6,782.027 6,412.046 -0.06 -0.04 -O.C Nr 2hare 32.70% 8.568X J4.011 82.71X 83860x 38.93X -0.06 -0.04 -6.3 Tar Revenue (000 Rp) 64,187,079 63,671,365 65,659,662 0 0 0 Rubber Sector Income (million Rp) Total 1.8655.61 1.342,827 1,866,737 1,416,642 1.406,920 1.461.788 -4.24 -4.57 -44 Smallholder 964,268 966,490 1,022,80J 1,007,820 1,014,076 1,073,121 -4.42 - .79 -4.C Estates 892,860 877,187 363,864 407,822 392,843 378,646 -3.79 -4.OC -3 S Note: Tax revonue is defined a. 65 of the unit value of exports, at fob prices. Export unit volu is defi;ec as 901 of total domestic production. Total income is defined not of tax. Seallholder and Estate sectc income are defined baosd on the share of production accounted for by each group. !0% of domeatic production In valued at domestic prices; 90% at the fob price to dorive sectorsl income. Source: Modeled using tho international rubber model presentad In Burger and Smit (1988). Appendix 6 - e Page 1 INDONESIA STRATEGIES FOR SUSTAINED DEVELOPMENT OF TREE CROPS Disnersed Nurseries for Smallholder Plantings Clientele The smallholders expected to benefit from dispersed nurseries are those able to muster some of their own resources for tree crop development and requiring primarily reliable planting material and technical guidance. Each individual smallholder can be expected to apply different levels of inputs in the way of regular maintenance and fertilizers. The range could be from the absolute minimum of weeding to allow rubber or coconuts to survive, right up to the smallholder who weeds three or four times each year and apDlies ferti- lizer at least evrery six months and possibly more frequently. The level of inputs will be reflected in the length of time before trees become productive and in the yields obtained; low inputs mean a longer immature period and low yields throughout the productive life of the planting. The results achieved by plantings supplied with materials from dispersed nurseries will vary according to the maintenance provided by indivi- dual smallholders through the immature phase. For evaluation purposes, it is assumed that any smallholder using materials from the nurseries will be distant from a full PMU development, that much of the rubber replanted will have been neglected over many years (indicating the sm'allholders' pre-occupa- tion with other income sources) and that a low level of maintenance will continue in the new rubber. It is therefore envisaged that plantings assisted only with planting material and technical advice will come into production in the eighth year after planting ana over a (reduced) tapping life o. 2.i years will achieve an average yield of 756 kg per ha per year (albeit, higher than the present yield level of 495 kg per ha) compa.ed with 869 kg achieved by farmers in the neighboring areas of major PKU activity and the 1,058 kg average achieved by fully assisted participants in PMU and block planting schemes. Siting of Nurseries A major advantage of dispersed nurseries, apart from the cost, will be that they may be sited wherever smaliholders wish to be active in rubber cr coconut planting or replanting. If nurserv costs are to be miinimal however, considerable effort must be made to deter-mine where nurseries can usefully be located. This could be undertaken by the existing extension service or by special teams set up by DGE for the purpose. In areas of dense tubber planting where it seems probable that replanting is needed, the mass media could first be used to explain the advantages of replanting and the importanre of good quality, high yielding plantin. material. This program would be followed by meetings in the area and if there appeared to be interest in replanting, the existing rubber wou7d then be surveyed. Particular attention would be paid to bark reserves and the approximate yield levels and, as the survey progressed, smallholders would be registered if they stated they wish Appendix 6 -953 - Page 2 to plant or replant within three to four years. These early contacts should not be rushed, and may require up to twelve months of planned operation. This expenditure of time is necessary in view of the fact that in most old rubber areas there has been negligible replanting and a significant change in small- holder attitudes is needed. Size of Nursery To justify initial land preparation costs, each nursery should be used for a minimum three years and maybe up to five years. Each should, therefore, serve a locality large enough to provide a minimum 300-400 ha of rubber planting or replanting, at an average rate of about 100 ha per year. However, the first year should preferably aim at planting no more than 50 ha while nursery procedures are refined and smallholder contacts extended. The initial smallholder response must be expected to be slow particularly if emphasis is, as it should be, on replanting which requires the cutting out of existing rubber or coconuts. It may be envisaged that a nursery will initially be of about 0.5 ha (sufficient for 50 ha field planting) and this would then increase to 2 ha during the second or third year of development. However, nursery numbers need not be restricted and nurseries may grow to whatever size is needed to supply demand in their sicinity. Nursery Operations Nurseries might be of three types: (a) operated on force account; (b) operated through a contractor; or (c) operated by private entrepreneurs. The force account nurseries would require a manager on site f-.l1 time regard- less of the size of nursery and this could clearly be a disadvantage in the case of very small nurseries. Further difficulties would be that some equip- ment would be required at each nursery and that although semi-skilled labor could probably be obtained it is unlikely that skilled budders would be avail- able in all areas. (A rubsidiary objective of the dispersed nursery scheme could well be the training of budders throughout the country, but this would be a long term operation and could not provide immediate needs for the dispersed nu-series themselves.) Nurseries operated by contractors employed by Government would requ_re close supervision but would not require the full- time attention of an official anrd thus could be the responsibility of an extensionist who would spend a manor part of his time working with small- holders. Nursery contractors might ½r some instances be farmer groups or it is also possible that unpaid farmer groups could operate nurseries under the guidance of an extension officer to supply themselves with material. Private nurseries would have the advantage of requiring negligible Government atten- tion but it would be necessary to ensure that materials would be available to meet the demand created by e).tenr.in a4dvilc. Close collaboration would be necessary between the extenscicL service and the nursery operators. On balance, it would seem desi.rable to encourage indepe-dent private nurseries wherever it is deemed thzit this can serve smallholder needs and elsewhere to Appendix 6 -84 - Page 3 operate Government nurseries through closely supervised contractors. Where Government nurseries are used, efforts should be made to persuade the small- holders to donate land for temporary use through, say, four yearq and where thi. is not possible, to offer rent in the form that the land .s left after the nursery use as a field planted with rubber or coconuts. Such planting would be done as nursery operations cease. Nursery Material3 Whatever the type, the nurseries would offer budgrafted rubber materials to smallholders, preferably in the form of 2-whorl polybag plants which suffer minimum transplanting shock upon transfer to the field, but as bare root budded stumps where transport difficulties make polybag plants impractical. In either case, it is essential to ensure that the material distributed is true to label, that is for rubber of the clone specified or for coconut, hybrid seedlings. In the case of rubber, skilled workers trained and experienced in clone identification will be required and might be either specially selected members of the extension service undertaking no other duties, or the staff of DGE or a smallholder development authority, if it evolves. These staff would inspect each budwood nursery before each crop is cut, the inspections being possible at any time after a scion shoot is four months old. If private nurseries prove popular, as has happened as a spin-off from some existing projects, it would probably be desirable to set up a formal scheme for approved nurseries, registered and regularly inspected by Goverrment staff. This could form a part of the dispersed nursery operations, with the inspectors dealing with all rubber nurseries, however operated. Extension Assistance The objective of the dispersed nur ery is to reach as many small- holders as possible at minimum cost to Government. The extension service must therefore be at minimum cost but it is considered that individual farm visits must, nevertheless, form the basis of advisory service to growers of perennial crops, where each may be following different but satisfactory schedules. In the case of the dispersed nursery scheme, the number of visits to each small- holder must be minimized and the need is expected to average the equivalent of four visits in the initial year and the following year of planting. Then two visits each year until the year of tapping, in which four vis_cs will again be required. Thereafter extension requirements should be very small but provi- sion would be made for one visit each year to each smallholder. While visits to individual participants would be geared to basic technical advice, probably about the same amount of extension time should be spent on group activities. Initially these would be predominantly aimed at promoting the scheme and replanting, and would use l-he mass media and meetings arranged ir. the villages throughout the Rural Extension Center (REC) area of coverage as well as at the REC itself. Subsequently, it might be possible for nursery extension staff to offer a series of structured training cours'es for smallholders. These might be conducted in selected villages for groups of not more than. 30 smallholders, and would use local farms for demonstrations and practical work and any available site--a school, conmnunity hall, or Government of,-ce or private house--for lectures. Courses might occupy one half day each wt<-k over a period of three to six months during which all aspects of rubber grc*i ng, processing and marketing would be covered. Appendix 6 - 85 - Page 4 Assuming that each nurs,ry will be the responsibility of an extension officer but that normally nurse:ies would be operated by a contractor, or would be private, each person should be able to deal with approximately 100 ha field planting per year. The first year of nursery operation would be an exception, when no more than 50 ha should be attempted. As demand grows how- ever, a second person would be added, and the team of two could be taken as the standard requirement for each small dispersed nursery. Price of Nursery Materials Planting materials could be sold to smallholders at approximately the cost of production. Prices would be harmonized with those charged by SRDP to partially assisted smallholders, and it may be desirable for a standard price to be determined for different regions or on a countrywide basis. Prices would be ex-nursery with smallholders making their own arrangements for transport to their holdings. A major problem in nursery operation is to produce enough material to meet demand but not to produce an excess which must be discarded. it is thus necessary to obtain as accurate as possible an estimate of smallholder demand about one year in advance o: the field planting season. As an aid to this end, smallholders could be required to make a down-payment at the time material is ordered, and in association with this requirement, a meaningfu1 discount might be offered for full payment at the time of ordering. The balance would be paid in cash immediately prior to delivery and no credit would be provided by the scheme. Smallholders requiring financial assisg anee would obtain this from the banking system, their cooperatives or the in±+rmal traditional sources in the area. Other Support To be successful, smallholders undertaking replanting must have ready access to fertilizers and sometimes to herbicides. It would be an objective of the disbursed nursery schemes to ensure that all such inputs are available in a loral town or even in villages, through private sector dealers. The scheme would not handle these inputs but only inform smallholders on what should be used, where these inputs might be obtained, and what are their reasonable prices. Appendix 7 - 86 - Page 1 INDONESIA STRATEGIES FOR SUSTAINED DEVELOPMENT CF TREE CROPS Funding Smallholder Tree Crops After the Financial Sector Reforms 1. Tree crops provide healthy rinancial returns to smallholders and sound economic returns to the nation. In many outer island areas tree crop cultivation is virtually the only sustainable agricultural activity capable of having a major impact on rural incomes, employment and exports. The program has thus been an important part of the Government's strategy to reduce poverty by creating assets capable of providing improved income to farmers. Govern- ment policy has been to recover from the beneficiaries the full cost of the productive assets through credit, but the policy was for GOI to subsidize the cost of administration and some of the risk associated with long-term credit. Implementation of the policy has not been fully successful, however, and recovery by GOI and the state banks of the Rp 1 trillion of smallholder loans is now in doubt. Problems include slow start-up of the credit recovery pro- cedures and the lack of detailed procedures for dealing with problems asso- ciated with substandard plantings. Because of these problems new programs aimed at existing smallholders and present transmigrants living in poverty are at a standstill. Tnese poor farmers are unable to make long gestation irvest- ments without financial assistance, and commercial banks are very reluctant to take the risks associated with Jong-term investments of this nature. In the new competitive environment for financial institutions, it is important that the state banks do not impair their competitiveness by undertaking low return or high risk business. Without a solution to the burden sharing of these risks, Indonesia is unlikely to meet its agricultural growth targets, prov;de adequate income for transmigrants, and support employment growth objectives in the outer islands. Past and Current Strategies 2. Two strategies have been followed in the past ten years for funding and cost recovery in smallholder tree crop projects: the channelling bank approach, u.hich used the Investment Funds Account to provide government loans to smallholders, to be collected by Bank Rakyat Indonesia; and the executing bank approach, which enlisted the state banks, as national development agents, to grant smallholder loans. (The latest proposal for executing bank loans is that they be financed 302 by Bank Indonesia liquidity credits at 42 interest, 60Z by on-lent external borrowings at 9.47 interest, with a 102 contribution from state bank funds. .he interest rate to smailholders would be 16Z.) In recent years, the channelling approach has been dropped for new projects because it requirce commitment of government budget financing rather than banking system funds, and because it was felt that the banks wovld more vigor- ously pursue loan repayments under the executing bank approach, which more closely conforms to conventional banking practice. 3. The Lurrent strategy is to use the executing bank approach to finance all on-farm development costs and to minimize or eliminate GOI budgetary con- tributions to the program. As discussed below, the strategy is not working as .intended. Appendix 7 - 87 - Page 2 Experience With These Strategies 4. Funds provided under these strategies have enabled Indonesia to plant some 700,000 ha of smallholder tree crops during Repelita III and IV. How- ever, three main issues have emerged: (a) Recovery of existing loans (Rp 1 trillion) is not proceeding as planned, because of administrative difficulties, problems with the incentive structure for the banks, and the insufficient income of some smallholders due to substandard planting quality. (b) Commercial banks are reluctant to make new loans to existing small- holders and transmigrants, as they consider that such loans are too risky, and that establishing operations in sc ctered remote areas to administer them is too costly. (c) The financial sector reforms make it necessary for state banks not to impair their competitiveness by undertaking high riok or low return operations. To enhance the competitiveness of their operations, a basic need is soundly stated accounts, and in this connection, the overstated value of executing bank tree crop loans (Rp 650 billion) is a significant obstacle to sound reporting of assets and income, and thus to good management. 5. In considering this experience, four basic questions are posed: (a) Do the difficulties encountered in implementing good quality small- holder tree crops indicate that funding for the program should be severely curtailed? No. The potential of the ptogram for poverty alleviation and employ- ment in the outer islands, and for export growth, continue to provide compelling economic and social reasons for maintaining a substantial program, while redoubling efforts to deal with implementation prob- lems. (b) Should the policy ob4ective of full cost recovery be retained? Yes, in the sense that most smallholders can afford to repay on-farm development costs in full, plus 162 compound interest. This substan- tial and positive interest rate nevertheless is short of that required for market rate credit. In addition, procedures need to recognize that a proportion of smallholders will not be able to repay in full. Some write-downs will be needed for smallholders with sub- standard plantings. And in times of low prices, repayments will temporarily suffer. (c) Should the state banks be required to restructure their portfolios, to arrive at more realistic assessments of collectible loans? Yes. The banks must have soundly based accounts if they are to man- age their operations well in the new competitive financial environ- ment. - 88 - Appendix 7 Page 3 (d) Can banks be expected to con-it funds on a substantial scale for long-term tree crop loans to existing transmigrants and established smallholders? No. In the new banking environment, the banks are likely to concen- trate on developing profitable short- and medium-term loan business. Very long-term tree crop loans pose greater risks and extra technical problems, such as the mismatched maturities of deposits and loans. If and when the banks move into long-term tree crop loans, they would give preference first to better risks such as estates and well estab- lished farmers, rather than to the poorest farmers without equity. What Should be the Strategic Themes for the Future? 6. The difficulties that have arisen will obviously take a number of years to resolve, and in considering measures that may be appropriate to deal with the situation, some objectives that might underlie policy decisions a-Id actions are as follows: (a) For the short-term, there is a need to rectify the present impasse related to recovery of existing loans, and to put in place an arrangement that wculd ensure that the flow of investment financing for smallholder tree crop agriculture to existing farmers and trans- migrants is revived. (b) For the medium-term, the Government would want to ensure "hat the funding and cost recovery procedures are inexpensive to administer, equitable in their impact, viable from a budgetary viewpoint, and capable of sustaining the tree crop development program over time. (c) In the long-term, the needs would be: (i) to create viable rural financial institutions to mobilize savings and provide a broad range of financial serv:ces, including credit for on-farm investments to develop, for example, tree crops; and (ii) to increase rural incomes to help farmers become creditworthy for commercial financing. 7. The suggested objectives tie in with three areas of current IBRD work. Related to the long-term financial sector goals, the Bank is working at two levels. At the general level, the Financial Sector Report contains speci- fic ideas regarding more realistic provisioning for doubtful debts, to be achieved by mandating a direct link between delays in interest or principal payments and establishment of provisions. The changes would be reinforced by permitting a larger proportion of bad debts to be written off against taxable income. Under the proposal a substantial increase in provisions could be expected, compared to the current limitation of 6Z of total loans outstanding. After these changes, banks would be able to set lower spreads betweer the cost of funds and interest rates on loans. Possible changes in the rules regarding distribution of profits of the banks, especially the state banks, in order to encourage substantial retention to improve their equity positions are also discussed in the Financial Sector Report. Crncernirng rural lending, the BAnk is discussing with GOI officials the preparation arrangements for a proposed Agricultural Financing Project, which would build on recent reforms with a view to supporting over time eqtablishment of a wide network of viable rural - 89 - Appendix 7 Page 4 financial institutions. The main objective of the proposed project would be to improve the availability, efficient use, and sustainability of credit to agriculture in order to support the Government's objective of maintaining agricultural growth, incomes, employment and exports on an efficient basis. 8. Looking towards the medium term, this report, after reviewing various financing/indirect cost recovery options in Section VIII, re'onimends a modest export tax on rubber. This would be an optimal tax leading :o a welfare gain. The administration and collection costs would also be very low. 9. In the short-term, Gover-ment may wish to consider some concrete steps as follows: (a) Restructure the state bank portfolios to reflect the current value of executing basic tree crop loans. (i) One option for achieving this would be to create increased provisicns as mentioned in para. 7, and write down associated state bank liabilities (Bank Indonesia liquid- ity credits and external funds on-lent by GOI). As few loans are up- to-date in their repayments, provisions may need to cover a very high proportion of the Rp 650 billion currently outstanding. The maia advantage of this option lies in the incentive thereby created for aggressive pursuit of collections. (ii) It may, however, be more straightforward and more realistic to totally remove the loans from the state bank balance sheets, by converting them to a channelling basis. In this case the total state bank liabilities to repay liqui- dity credits ani on-lent external funds would need to be written off. The interests of the Government as both owner and creditor of the banks support taking either of these steps, which would acknowledge both the original noncommercial nature of the arrangements and the current reduced value of the assets and liabilities involved. Small- holders' obligations to repay would not be affected by either of these changes as such, but separately there is a reed to undertake technical assessments of substandard plantings and write down small- holder obligations in accordance with the reduced value of the tree crops. (b) Increase the 2.5Z collection fee on channelled rubber and coconut credit to a sliding scale of fees (perhaps rising to lOZ or more on collections higher than 75Z of amounts due), make a concerted effort to collect, and encourage prepayments at a discounted value. At the same time, the administrative requirements for loan formalization should be reviewed to reduce obstacles to collection of repayments. For example, loan agreements specifying repayments terms should ideally be signed at the outset, rather than after trees have been established. (c) Use a modified channelled credit pproach for cost recovery under new rubber and coconut smallholder projects aimed at scattered farmers and existing trar.smigrants. Details will need to be carefully leviewed, and s.-me --iternativc scenarios can also t)e considered if necessary. Appendix 7 - 90 - Page 5 (d) Establish a Smallholder Tree Crop Development Fund to finance the program, including its administration and infrastrucLure costs not subject to cost recovery. The,Fund would bring focus and transpar- ency to the financial issues, and would lead to clearer reporting and accountability for the smallholder tree crop program. It could be administered by the Department of Finance, and this report also sug- gests placing both implementation and funding responsibility under a unified Tree Crop Development Authority, in order to obviate diffi- culties arising from the present divisions of tasks. (e) Discuss with donors possible specific assistance for the Fund. Spec- ific multi-year assistance would enable planning to proceed on a sounder footing than is possible by reliance on annual special assistance. It would also alleviate the increased budgetary demands for counterpart funds caused by the change of strategy, pending implementation of the medium-cerm measures to assure financial sus- tainability of the tree crop program. Having regard to the country's overall balance-of-payments and budgetary situation, a separate point that the Government may wish to raise with donors, especially if funding were available on favorable terms, would be the possibility of external assistance for reszructuring the portfolios of the state banks and the Investment Funds Accounts. 10. The above agenda is radical, but it or some close variant will be needed to resolve the conflict between the previous executing bank strategy and the new banking environment. It would remove any possible cons,7aint upon the state banks' competitive ability to pursue profitable business. The gov- ernment loans approach, being based on the existing channelled credit system, is capable of early implementation. It is admittedly a deviation from the ultimate goal of having a financial structure able to deal with long term higher risk lending. However, the exception is justified given the current low state of development of agricultural lending institutions in Indonesia (which the Agricultural Financing Project would seek to address over time), the fact that it is desired to target poor farmers who are not creditworthy according to conventional banking practice, and the sound economic and social benefits of smallholder tree crop development. Chart 1: THE SMALLHOLDER TREE CROP DEVELOPMENT AUTHORITY CONTROLLING BOARD CHAIRMAN DEPUTY CHAIRMEN EX-OFFICIO MEMBERS APPOINTED BY MINISTERS CONCERNED Director General of Estates Representatives of Ministries of BAPPENAS Deputy for Economic Affairs Finance Forestry MEMBERS APPOINTED BY MINISTER OF AGRICULTURE Interior Trade Representatives of Transmigration Smallholders Private Estates Government Estates (PTPs) Agricultural Research .__ _~~~__ CENTRAL EXECUTIVE | Executive Director uD - Internal Auditor __ _ § , | D~~~~~~~~eputl Executive Director | |eputi Executive Director| Dputy Executive Director {mplementation dministration Plnnning and Monitoring _ I r _ X l ~~~~~~~~~~Director Director Dilco Director Director Director Director Implementation Implementation Finance Administration Planning Monitoring Technical - ew Areas - Existing Areas -Program -Technical field esearch -Project -Project -Budget Personnel planning monitoring liaison formulation formulation -ccounting -Secretariat -Prograj -Quality classification -Technical Project -Project review rocedures processing processing -Expenditure -rcurement -Unit cost monitoring programs control and control lI Implementation ImJplementation -Project progress LEProblem direction direction -Foreign monitoring solvingai -Non-technical -Non-technical implementation implementation procedures procedures PROVINCIAL EXECUTIVE PROVINCIAL EXECUTIVE | Provincial Direcf Hr (One in each province with ) -1 (tree crop project activity) Provincial Deputy Provincial Deputy Plannin' and Monitoring Implemenitation -Planning liaison with -PIU operations BAPPEDA and control Provincial monitoring -Provincial technical liai::;oni and advice _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' Io Chart 2: COOKING OIL PROCESSING CHANNELS Oil Palm Products Coconut Products Fresh Fruit Bunch Coconut Palm [GPO Kernel Gopra (sold fresh) _~~~~~~~~~~ I milling refining fractionation milling E-S I 1 Ii I --1 - -1 | FFA RDB Crude Crude Copra Klentik Consumed Palm Oil Olein Stearin CCO meal Oil fresh refining Santan PKO RDB RDB ! FFA I Stearin Olei_i RCO blending blending Cooking Cooking Cooking Cooking C ng Oil Oil Oil Oil Oil Cooking Cooking Cooking Oil Oil Oil Key: 'tradables" are in "boxes' 'RDB" = refined, deodorized, bleached 'FFA- free fatty adids (e.g., 'RDBO" = refined, deodorized, bleached, olein) 'PKO' palm kernel oil RCO = refined coconut oil