COMPETITIVENESS ANALYSIS OF ROBUSTA COFFEE IN EAST JAVA, INDONESIA.

Author:Winarno, Sri Tjondro
Position:Report
 
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INTRODUCTION

In the Regional Medium-Term Development Plans 2015-2019, The Provincial Government of East Java will improve an inclusive, independent and competitive economic development based on agribusiness/agro-industry and industrialization. Currently, the problems faced by Robusta coffee farmers and the government are very complex. There are 6 (six) strategic issue in plantation development, including Robusta coffee, namely: low productivity and quality; limitation of fertile land for plantation cultivation; low soil organic material; limitation of plantation infrastructure, high attack of pest and business interruption of plantation commodities, and low institutional capacity of farmers in accessing technology, market information, capital, and partnership (Strategic Plan, Plantation Agency, East Java Province, 2014-2019). Coffee in East Java is one of the strategic and superior plantation products in supporting the export of Indonesia. Coffee is expected to be able to give a real contribution in national economy, such as: (1) employment and community income sources; (2) raw material of processing industry; (3) creating added value through postharvest, processing, and distribution activities; (4) non-oil and gas foreign exchange source through export activities to several destination countries and (5) creating markets for non-agricultural products (Dradjat et al., 2007).

The researches about coffee competitiveness in Indonesia have been conducted by some previous researchers. Purnamasari et al. (2014) used the measurement of Revealed Comparative Advantage (RCA), Comparative Export Performance (CEP) and Market Share Index (MSI). The result explains that Colombia, followed by Brazil and Vietnam have a comparative advantage compared to Indonesia. Indonesia is still ranked in the fourth place. Another finding is that 90% of Indonesian coffee products are Robusta coffee which has low quality, so it will have an impact on lower places compared to other countries. On the other hand, the research conducted by Murtiningrum (2013) found the result that Robusta coffee farming still has excellent competitiveness (competitive and comparative advantage) although there is a change of input and output with the assumption the other factors are remain (ceteris paribus). The condition in East Java about coffee competitiveness is examined by Prayuginingsih et al. (2012). The post-harvest processing of coffee uses two methods, which are wet and dry processing method. The research result shows that smallholder coffee farming in Jember Regency has high competitive and comparative competitiveness, indicated by the Private Cost Ratio (PCR) value of 0.3679 in wet processing and 0.4261 in dry processing, and also Domestic Resource Cost Ratio (DRCR) value of 0.5135 in wet processing and 0.4397 in dry processing. The research result from Muafi et al. (2016) recommended that there must be a harmonious combination of resources owned by an area and the ability to achieve competitive advantage. The resource itself can include tangible and intangible resources (Muafi, 2017; Ejrami et al., 2016; Todericiu & Stanit, 2015). Therefore, the purpose of this research is to analyse comparative and competitive knowledge of Robusta coffee in East Java. It is important so that the problems faced by farmers and government in East Java can be overcome properly so it will be useful to improve the performance of coffee industry in the future.

LITERATURE REVIEW

Competitiveness: Competitive Advantage and Comparative Advantage

Competitive advantage will be strongly related with external and internal factors. The approach of Porter's Diamond has been known to offer four criteria to measure the level of strength of competitiveness. This approach has been widely used to assess the feasibility or competitiveness of a country, region and/or industry (Porter, 1998). It also used to analyse the competitive advantage of an area, region or city (Windsberger, 2006; Allen & Potiowsky, 2008). The four factors are: (1) Condition, including the component of production factors such as human resources, capital, physical infrastructure, and information. If the quality of factor condition is higher, then the opportunity for industry to compete will be greater. (2) Demand, related the number and demand quality. If the demand is increasing and harder, then the community will be more capable and advance. (3) Related industry or supporters, which is giving added value because it can complement the main industry attributes and (4) Strategy, structure and competition, which means that the condition of an industry needs to be in the same alignment with the environment, strategies that must be taken and analysing how organization competitor is formed, managed and raised.

Allen & Potiowsky (2008) conducted research by offering a model to build a green area in Portland through the model of "Porter's Diamond' to support green areas. In order to apply a sustainable framework of green areas or "environmentally friendly' area, it is important to seek education, training, research and regional capacity development by involving the community, farmers, and local government. The area identification in supporting and growing sustainable green area development is carried out by realizing the potential to develop the economy and offer green building mapping. Green areas have the potential to accelerate sustainable resources for economic development (McCauley & Stephens, 2012), can also grow and develop clusters on an ongoing basis (Allen & Ptiowsky, 2008). In Indonesia, Handayani et al. (2012) examined the competitiveness of a regional in general which is determined by the factors of a region's conditions, supporting industries, demand conditions, corporate strategies, and role of government, opportunities and social capital. Schaller et al. (2018) also found the result that agricultural activity is an important driver of competitiveness in many rural areas. External and internal environmental factors have similar importance. These two factors have a very important and strategic role in influencing the competitiveness. The research result from Lopez-Garcia et al. (2008) about coffee industry recommended that the technical standard for coffee industry and regulation enforcement are important in the effort to increase quality, safety and competitiveness of all sectors. Shifting consumer demand and awareness will have an impact on consumer's willingness to pay higher prices for high quality products, so coffee certification...

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