System Dynamics Model for Cocoa Agroindustry in Indonesia

Abstract

Indonesia is one of the largest cocoa producer in the world, however, production of processed cocoa is still very low and the cocoa processing industry did not develop. This study aims to: develop a system dynamic model of cocoa agro-industry, analyze the impact of Gernas kakao and cocoa export tax policy achievement on cocoa downstream industry performance and farmers’ revenue, and develop policy alternatives for the development cocoa downstream industry and increasing farmers’ revenue. This study used system dynamic model approach. The cocoa agroindustry system dynamics model that has developed can illustrate the cocoa agoindustry system properly. The analysis showed that behavior of the cocoa processing industry’s ability to absorb the production of cocoa bean during the analysis period (2008 - 2025) in the actual conditions had a declining trend. The share of volume and value of processed cocoa products export and farmers’ revenue showed declining trend too. Gernas kakao and export tax policy simultaneously can increase the industry capacity to absorb domestic production of cocoa beans. The policies are also able to increase the share of volume and value of processed cocoa export. However, the policies are only able to raise the revenue of farmers who join the Gernas kakao policy, while who do not follow the program have revenue levels lower than actual conditions. Thus, Gernas kakao and export tax policies are more likely had positive impact on the processing industry, but had a negative impact to the farmers who are not involved in the Gernas kakao policy. Policy alternatives with scenario 8 could encourage the development of cocoa agro-industry as a whole system better than the other scenarios. Therefore, alternative policies should be implemented by the government to develop cocoa agro-industry are: continue to implement the Gernas kakao policy; increase productivity and quality of smallholders cocoa plantation which was not involved in the Gernas kakao policy; eliminate cocoa exports tax policy, but the government must be provide fiscal and monetary incentives to the processing industry and improve the business climate to encourage the growth of the cocoa processing industry.