Transaction Cost of Small Scale Fisheries

Abstract

Marine is one of the most important natural resources of Indonesia which covers 70 % of total area. Nevertheless, contribution of fisheries as a whole to GDP is very low which is 2.2 % and it is dominated by fish capture which its quantity of production in 2005 was about 4.7 million tones (BPS, 2005). The big problem of marine and fisheries sector in Indonesia is the low welfare of big number fishermen. Many efforts are run by government to solve this problems that derived become many kinds of programs such as grant for boat and gear, grant or cash for work, etc. Most of those programs use productivity approach and it is rather difficult to prove that the programs work well. For example, grant for boat--especially large boat--will enable fishermen to catch fish in along distant from shoreline. The fact, most of them lack of capital for operational cost, therefore they cannot operate their boats continuously, and finally they will depend on informal lender to support their business. This relationship will cause snowball effect to fishermen and also will make transaction cost for them. The problem is not only caused by low production factor or high production cost, but also non production costs faced by fishermen which is called transaction cost. Ronald Coase in his paper titled ”The nature of the firm” in 1937 defined transaction cost as the cost of using the price mechanism. But then it develops that not only market structure causes transaction cost but also social structure and property right. Transaction cost is ubiquitous, and fishermen face high transaction cost it makes economic pressure. High transaction cost reduces fishermen income. Aggregately it decreases economic efficiency of fisheries. Reducing transaction cost must get big attention from many parts as one of exit solutions from vicious cycle of poverty of big number fishermen. This paper studies about transaction cost of small scale fisheries and its impact to fishermen’s community welfare.