FP Local Institutions and Regional Spesialisation_Prihadi Nugroho_Track 6

8/8/2019 FP Local Institutions and Regional Spesialisation_Prihadi Nugroho_Track 6

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DOES THE ROLE OF LOCAL INSTITUTIONS REMAIN IMPORTANT TO PROMOTE

AGRICULTURE-BASED REGIONALISATION POLICY IN INDONESIA?:

THE CASE OF BANDUNGAN REGION IN CENTRAL JAVA PROVINCE

Prihadi Nugroho

Department of Regional and City Planning, Diponegoro University

ABSTRACT. Agriculture-based regionalisation policy basically remains relevant to promoting regional spesialisation in

response to the challenges of decentralisation and globalisation towards Indonesian economy today. Within the

context of regional autonomy, regional specialisation is not supposed to be defined through policies that promote the

intensification of regional competitive products only. More importantly, it should be examined whether the economic

benefits resulted from such policies are advantageous for local stakeholders. Indeed, it might be difficult task to limit

the flows of commodities, capital and other resources for the sake of local economic developmentper se. Resources

mobility in fact cannot be confined within particular region, therefore parties who search for more benefits should

compete in the market. As a result, local players who are not ready to compete are likely to be marginalised and in

turn they might become spectators within the market economy. This condition is getting threatening particularlywhen globalisation with the massive capital inflows tends to takeover domestic market. To make it worst, what if

someday local stakeholders are losing their power to control local resources?

This research attempts to examine whether the role of local institutions remains important to promote agriculture-

based regionalisation policy. This research will focus on the case of Bandungan Region in Central Java Province. The

focus on local institutions is based on the hypothesis that their bargaining positions are threatened by the external

players who are controlling the distribution and marketing network of respective agriculture commodities. The

presence of external players with cartel-typed organisation is likely to threaten the competitiveness of local products

as well, mainly because they also play as an agent of marketing for similar products from outside. The research

methodology used here combines both quantitative and qualitative analyses. Some variables examined include the

forms and patterns of local institutions, the interaction patterns and hierarchical relationships among related

stakeholders, and the flows of resources within the observed location. In the end, the research is expected to produce

some inputs associated with the determinants of synergistic cooperation among stakeholders which may be useful to

formulating policies and institutional framework more effectively.

Keywords: regionalisation, agriculture-based commodities, local institutions

I. INTRODUCTION

Regionalisation policy basically is about the way to determine an imaginary border of region in

which particular functions of natural environments and human activities may persist. It contains

government will and interventions for ensuring the working of natural, physical, economic, social,

and political interactions in a society properly. This aims to create desired order of both natural

and artificial resources utilisation to meet the goals and objectives of development. Thus,

regionalisation policy on one hand will act as a space for accommodating planning processes and

project implementation within the region. On the other hand, it also provides instrumental tools

of direction and control over development initiatives as well as commonly human activities in a

society. Thus, it forms an institutional milieu which permits and constraints the patterns of human

activities that may exist following certain norms and values (Friedmann, 1965; Gore, 1984; Levine,

2001). According to classical theory of regional planning, regionalisation can be established on the


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basis of three criteria: homogeneity, administrative, and nodality. Homogeneity-based

regionalisation is characterised by similar features of either natural physical landscapes of the

region or ethnicity and other sociocultural bonds of neighbourhood. Administrative-based

regionalisation is formed by legally formal jurisdictions of local authorities by which they are

responsible for and have political power to conduct local developments. Meantime, nodality-

based regionalisation features certain functional coherence and interdependences of variouspatterns of interactions among urban and rural centres ranging from local to global levels

(Richardson, 1979; Hilhorst, 1990). However, in reality the forms of regionalisation may emerge as

a mixture of those criteria creating a unique spatial framework that may change over time.

Typically, agriculture-based regionalisation policy in Indonesia emerges in response to

abundant resources of agriculture sector in terms of product variation, land suitability, manpower,

and market demand. Within the context of decentralisation era today the policy is still relevant to

promoting regional specialisation where some local governments can rely on their economic

growth based on endogenous agriculture potentials (Hinderink and Titus, 2002). This leads to

initial efforts to intensifying the specification of locally competitive products in order to gain

greater market share and to improve farmers livelihood. Instead of social and economic

rationalities, regional specialisation may perform as a useful instrument for increasing bargaining

power of region in globalising world through government protection on domestic agriculture

products for instance. However, approaches to agriculture-based policy is mostly associated with

product prices ranging from pre- to post-production processes which demonstrate (inevitable)

prices inequality the farmers should deal with. Commonly the farmers should bear prolonged

losses over time due to the lower product prices that cannot meet the break even point of entire

production costs. Moreover, they should survive from climate change problems recently where it

becomes more difficult to predict cultivation periods. Dealing with combined natural and

economic transaction problems it seems that the only future the farmers are likely to attain is

sustained impoverishment rather than living standard improvement.

One of failures in existing agriculture-based regionalisation policy is it is less concerned

with the role of local institutions in determining product exchanges at grass root level. All policies

related to agriculture development mostly work on regional/provincial and national levels. For

instance, the prices of fertilizer, gasoline, minimum wage, and final product. If local governments

attempt to reduce the risks of farmers losses, they cannot intervene deeper since their technical

and financial capacity to provide social safety net programs is very limited. In addition, the market

transaction at the grass root level is quite dynamic involving a strongly primordial ties among key

stakeholders so that the farmers are commonly coerced into take it or leave it situation to

survive. The presence or absence of broader opportunity for the farmers to improve their

livelihood is socially determined by the existence of local institutions in their daily life. They are

not fully independent in deciding what are the preferred commodities to grow and how they

would like to market them. This means that the role of local institutions is so powerful in shaping

farmers choices that the market competition at the grass root level is likely to depend on the

performance of these institutions (Bebbington, 1999). Ironically, many cases show that the actors

who steer behind such local institutions are the external players. Mostly they are not local


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residents therefore their concerns on increasing local products competitiveness as well as local

farmers living standard are questioned. Hence, this research will primarily focus on whether the

role of local institutions remains important to promote agriculture-based regionalisation policy in

Indonesia with reference to Bandungan Region in Central Java Province. By examining the key

issue of bargaining positions between external and internal players in promoting local products

competitiveness, this research is expected to provide some inputs for policy improvements.

II. AGRICULTURE-BASED REGIONALISATION POLICY IN BANDUNGAN REGION

The introduction of agriculture-based regionalisation policy in Bandungan Region is stated out in

the official strategic plan ofDinas Pertanian, Perkebunan, dan Kehutanan (Dispertanbunhut) or

Agriculture, Plantation, and Forestry Agency of Semarang Regency Year 2006-2010. According to

the plan, the Agency has two visions as follows: i) creating a durable and independent agriculture

development supported by natural resources and human resources potentials and ii) attaining

ecosystem sustainability to promote the social welfare in Semarang Regency. These visions clearly

address the importance of local resources utilisation for the sake of local stakeholders welfare in

terms of self management and self benefits. To attain these visions the Agency points out four

missions: i) to increase food security program through product intensification, ii) to increase

farmers income through entrepreneurship development program, iii) to preserve natural

resources, and iv) to improve public services in agriculture sector. As part of Agencys programs to

realise its visions and missions then the agriculture-based regionalisation policy is introduced as a

spatial development strategy as mandated in both Peraturan Daerah (Perda) or Local Government

Regulation No. 3 Year 2002 about Strategic Plan for Semarang Regency 2002-2006 and Rencana

Strategis Dispertanbunhut(Renstra Dinas) or Agencys Strategic Plan 2006-2010. According to

these regulations, it is endorsed 11 Kawasan Pengembangan Ekonomi Terpadu (KAPET) or

Integrated Economic Development Region and Kawasan Sentra Produksi(KSP) or Production

Centre Region. Bandungan Region is one of these special regions which is primarily directed to

develop: i) tourism sector based on agriculture, natural conservation, and sociocultural heritage, ii)

potential agriculture commodities mainly vegetables, flowers, and fruits, iii) animal husbandry

commodities like cows, rabbits, and land fisheries, iv) handicraft souvenir industries, v) public

infrastructure such as roads, pedestrian ways, market places, public transportation, and utilities,

and vi) the preservation of reserved forestry and cultural heritage site of Gedongsongo temple

(Dispertanbunhut, 2007).

On policy implementation stage the Government of Semarang Regency intends to improve

local products competitiveness in order to achieve economic growth as well as social welfare. The

success on selling these products is assumed to generate the improvement of local livelihood.

Product intensification and marketing thus become a means of local economic development with

more emphasis on result oriented process rather than self empowerment process. Even though

the government agencies gradually draw their direct involvement on most development projects

by positioning themselves as a facilitator and enabler of development, in fact they remain act as

the leading sector at the backstage. In general, at least there are four contradictory issues related


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to this government policy. First, the horticulture commodities (vegetables and fruits) which are

mostly cultivated in Bandungan Region have a less economic viability. Even though the policy has

met some principles of homogeneity and administrative regionalisation, it does not clearly

mention how local economic development may be attained. Regarding the chosen potential

commodities, their natural feature as a non-durable and climate sensitive goods has caused them

having less added value. Besides they are still easily produced in traditional ways stimulating thegrowing number of competitors from outside regions. For instance, cabbage, tomato, carrot,

potato, shallot, celery, and capsicum are not the specific products of Bandungan since they are

also produced in neigbouring regions such as Temanggung, Wonosobo, Magelang, and

Karanganyar. Even some products like cabbage, tomato, and shallot are also supplied from East

Java Province and West Java Province on Bandungan market. This implies on the growing

pressures on local products price competitiveness (Jamhari et al., 2006; UPTD STA Jetis, 2009).

Second, that Bandungan Region recently has been facing a serious problem on land

conversion. As can be seen on Table 1 during 2007-2008 there was a dramatic land use change on

housing and building and dryland farming where each rose up to 100 per cent just within a year. In

contrast, the use of state forest suddenly disappeared and the wetland paddy field was relatively

constant. Such dramatic change is mainly associated with the intensive growth of the number of

Figure 1. The Administrative Map of Bandungan Region

Source: BAPPEDA Kabupaten Semarang (2009)


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villas, resorts, hotels and private housings in the region in response to government policy which

directs Bandungan Region as one of the major tourism destinations in Semarang Regency

(BAPPEDA Kabupaten Semarang, 2007). However, it has worsened the deforestation levels in the

region where the converted forest was previously occupied by the state. This fact demonstrates

how the policy ingredients have been contradicting one another.

Table 1. The Characteristics of Land Use in Bandungan Subdistrict 2007-2008

No. Types of Land Use2007 2008

(Ha) (%) (Ha) (%)

1. Wetland paddy field 52.08 16.16 52.10 11.99

2. Dryland farming 78.13 24.24 215.20 49.54

3. Housing and Building 80.15 24.86 160.06 36.85

4. State forest 106.00 32.88 0.00 0.00

5. Others 6.00 1.86 7.04 1.62

Total 322.36 100.00 434.40 100.00

Source: BPS Kabupaten Semarang (2008, 2009)

Third, the agriculture-based regionalisation policy in Bandungan Region has focused too

many on local products intensification and marketing but tended to ignore the increase of self

empowerment for local stakeholders, particularly local farmers and traders. According to Jamhari

et al. (2006), local products from Bandungan farmers have been collected and exchanged at most

in local market place i.e. Jetis Agribusiness Subterminal (STA Jetis). Based on 2006 data, about 300-

400 tones vegetables and 800-1,000 thousands flowers were exchanged daily. With exception to

flower commodities, in fact a big portion of vegetables commodities was supplied by outside

regions. This means that Bandungan Region plays as an important trading place from which the

spillover of economic benefits is greatly gained by outside regions.

Fourth, the establishment of STA Jetis in 2000 is not supported by sufficient institutional

framework. The government-led organisational form within the structure of STA Jetis

Management to some extent has caused a rigid coordination among related stakeholders in

developing local products competitiveness (see Figure 2). According to Unit Pengelola Teknis

Daerah (UPTD) or STA Jetis Management (2009), the Management conducts partial duties of the

Agency in managing STA Jetis operations. It has some responsibilities to: i) develop its own

working plan and budget, ii) provide market price information and product supply, iii) facilitate

agriculture products marketing, iv) facilitate product management, v) conduct respective attempts

to increase local government revenue, vi) conduct its own public and financial administration, vii)

conduct the treatment of on-site cleanliness, tidiness and security, viii) conduct monitoring and

evaluation over market activities, ix) develop program implementation report towards the Head of


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Agency, and x) conduct the other duties to support its function. As a result, the bureaucratic styled

management in STA Jetis is unable to respond the dynamics of product transaction at the grass

root level so that the key market players such as big traders, intermediate traders, and collecting

traders (tengkulak) have built some informal institutions to take control over the distribution and

marketing of agriculture commodities. Ironically, such product exchange occurs outside STA Jetis

location therefore it fails to function as a fairly trading place for local farmers.

Therefore, the existing agriculture-based regionalisation policy in Bandungan Region is

problematic in accomplishing its objective. It could not integrate intersectoral development yet,

particularly between two major sectors of tourism and agriculture. In reality the uncontrolled

REGENT

(Bupati)

Executive Board of Local

Government Agencies

Agriculture, Plantation and Forestry Agency Local Finance Management Agency Transportation Agency Co-operation and Small-Medium Enterprises

Agency

Industry, Trade and Investment Agency Tourism and Culture Agency Economic Division of Local Government

Secretariat

Himpunan Kelompok Tani Indonesia /HKTI(Indonesian Groups of Farmers Association)

Kelompok Tani dan Nelayan Andalan/KTNA(Leading Farmers and Fishermen Groups)

THE MANAGEMENT OF

JETIS AGRIBUSINESS

SUBTERMINAL

Associations of Farmers and

Traders

TradersDirect Buyers

Supermarkets Hotels Restaurants Hospitals Manufacturing industries

Others

Groups of Farmers

Figure 2. The Relations Between the Management of

Jetis Agribusiness Subterminal and Related Stakeholders

Source: Jamhari et al. (2006)


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growth of accommodation facilities related to tourism attractiveness of Bandungan Region

recently has created a dilemma for local economic development. It has indeed increased market

demand for local agriculture products but on the other hand their existence has escalated land

conversion and environmental degradation. Actually, the increasing demand on local agriculture

products is not quite significant to creating local multipliers due to sustained marketing pattern

which mostly promotes large trading instead of retail trading, involving a large number of externalcommodities and players. Hence, the policy has demonstrated inconsistency in both its conceptual

ingredients and practical instrumentality.

III. THE ROLE OF LOCAL INSTITUTIONS IN PROMOTING AGRICULTURE PRODUCTS

Responding to the failure of STA Jetis Management to conduct a fairly trade through open auction

mechanism, the government established a quasi non-governmental institution in 2006 to take

over this task. Meantime, the role of STA Jetis Management is reduced to undertake trade

reporting and administrative tasks only. This newly institution is an association of farmers and

traders in Bandungan Region which represents the interests ofGabungan Kelompok Tani

(GAPOKTAN) or the Groups of Farmers and individual farmers. Interestingly, the Association has

such a flexibility to find potential buyers outside STA Jetis place. By widening the market

segmentation, it is expected that the product price competitiveness of local agriculture

commodities can be improved.

POTENTIAL BUYERS

Large traders Supermarkets Hospitals Hotels Industries Others

FARMERS-TRADERS

ASSOCIATION

Group of

Farmers

Group of

Farmers

Group of

Farmers

Individual

Farmer

Individual

Farmer

Individual

Farmer

Individual

Farmer

Individual

Farmer

Individual

Farmer

Figure 3. The Relations Between Farmers-Traders Association and Related Stakeholders

Source: Jamhari et al. (2006) with modification


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In the vision of Associations programs it is clearly mentioned that its establishment is to

create a fairly trade mechanism for achieving better welfare of farmers and traders independently.

Some missions of the Association are: i) revitalising Associations institutional framework in

accommodating members aspirations and marketing strategy planning, ii) strengthening

Associations capacity by creating business network and capital intensification, and iii) improving

both farmers and traders capacity in production process, product handling, marketing, businessnetwork, and information development. Distinguished from STA Jetis Management, the major

executing power of Association rests on the hands of the representatives of GAPOKTANs whereas

the role of government representatives is limited to advisory board only (see Figure 4).

The existence of Association basically is aimed to demolish the long-lasting cartel practices

in agriculture marketing in Bandungan Region, namely mafia selendang (scarf-throwing mafia). It

is a kind of socially constructed rules of the game where a small number of large traders called as

juragan(s) can freely decide the ceiling price of exchanged agriculture products. There is no

common agreement betweenjuragan(s) to get the price fixed at certain levels. However, once

certainjuragan has put certain price levels onto the desired products then the rest cannot put it

on at higher prices. In addition,juragans may pick up the preferred products from suppliers

directly through their downliners, the intermediate traders (brokers). These brokers play the key

role in introducing the fixed price to suppliers and determining whose products they prefer to buy.

Once the brokers throw their scarf to particular suppliers products frequently the brokers take

arrest for suppliers trucks on the middle of the road or jumping into the vehicles before entering

to STA Jetis so the rest of intermediate traders should not bargain for these products. The

ADVISORY BOARD

1) The Head of Agriculture, Plantation andForestry Agency Semarang Regency

2) The Head of related local governmentagencies

1ST

CHAIRPERSON 2ND

CHAIRPERSON

SECRETARYTREASURER

PROCUREMENT

DIVISION

PRODUCT HANDLING

DIVISION

MARKETING

DIVISION

PARTNERSHIP

DIVISION

Figure 4. The Structure of Farmers-Traders Association Krido Roso Manunggal

Source: Jamhari et al. (2006)


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no link no link

no link

FARMERS

COLLECTING TRADERS /

SUPPLIERS

(Tengkulak)

INTERMEDIATE TRADERS

/ BROKERS

(Mafia Selendang)

LARGE TRADERS

(Juragan)

Figure 5. The Existing Cartel-Typed Mechanism in Agriculture

Commodities Marketing in Bandungan Region

Source: Direct observation (2010)

STA JETIS

brokers may get the desired products either from collecting traders/suppliers usually called as

tengkulakor individual farmers. The brokers operate outside STA Jetis site and waiting for the

suppliers to come to sell their products (see Figure 5).

Unfortunately, such mechanism does not give any benefits to suppliers at all. They actually

have no bargaining power to get higher prices for their products. Usually the brokers put very low

prices on the products. If the suppliers refuse to sell to the first scarf throwers, then there will be

no more scarf thrown to their products. Furthermore, it is also difficult for the suppliers to find the

other potential buyers either inside or outside STA Jetis. Inside STA Jetis there are mostly small

scale traders who are accustomed to demand freshly horticulture products in very specific types of

and limited numbers of commodities depending on their targeted market demand. These traders

have their own customers whose demands are not always predictable. That is why these traders

have never stocked for a large number of commodities. In the meantime, the suppliers always sell

their products in large parties so that the transactions between them are seldom occurred. The

suppliers also have very limited opportunity to sell their products outside STA Jetis including to

potential buyers from other regions. This is mainly caused by suppliers limited capacity to spend

extra money, time and transportation arrangement to expand their markets further. In addition,

the large traders (juragans) are controlling the marketing and distribution channels outside

Bandungan Region as well since they are connected to interregional marketing and distribution

network. Therefore, the suppliers are hardly to compete within such a cartel-typed market

mechanism.

Responding to such unfair trade mechanism there are at least four types of local

institutions exist in Bandungan Region currently (see Figure 6). The type I informal collective action

is presented by the role of Association namely Krido Roso Manunggal. As described above the

Association basically features as a quasi non-governmental organisation, where the major role in

directing Associations daily operations is held by the representative members of farmers and

traders and the governments role is limited in advisory body only. In fact, it is found that the


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Association existence is insufficient to cope with mafia selendang practices. As a group the

Association does not represent the interests of all farmers and traders in Bandungan Region

entirely. There is still a large number of farmers and traders who have not already joined into the

Association. This simply means that the Association must compete openly vis--vis the rest of non-

member farmers and traders. As a result, the Association fails to take control over the sustaining

cartel mechanism because of reasons as follows.First, there are only 15 large traders who have joined to the Association. They have a quite

powerful bargaining power to offset the ceiling price of desired horticulture products

independently so that the mafia selendang actors cannot fluctuate the prices irresponsibly. This

means that the Association perhaps may prevent the suppliers from being the losers of such cartel

mechanism in particular, but it cannot protect suppliers interests to get involved in reshaping

fairer trade since its members obtain and share the reasonable market prices of certain products

exclusively while the suppliers have no access to such market prices information. As a result, the

Association members still can sustain their own cartel practices inside the organisation where such

circumstance could have not improved suppliers bargaining power yet.

Second, the suppliers are reluctant to search for alternative market destination. They

greatly depend on the existing marketing system instead of looking for the other potential markets

abroad. It is found that suppliers vulnerability to voice their own interests is related to their

internal capacity to transport their products financially and technically, the great number of

competitors of similar products both outside and inside the region, the lack of information about

potential markets disseminated to local suppliers, and the commonly suppliers attitude and

behaviour to submit their production and marketing processes to the predetermined norms and

mechanisms, i.e. the existing patronage and cartel system.

Third, there are neither government policies and regulations nor particular monitoring and

control mechanisms to correct such a market distortion. The government through STA Jetis

Management indeed has been undertaking routine inspection monthly over the prevailing market

prices of horticulture products, but it is only limited to prices recording. There are less government

initiatives to stabilise market prices if they go up and down dramatically. Furthermore, regarding

the structure of Association the government cannot steer up and intervene further on institutions

decision making process. Thus, the government role is constrained in reshaping the existing

market system of horticulture products in Bandungan Region.

The type II individual leadership marketing network is similar to type I but the Association

is overridden by a person who has a great authority inside the organisation, namely Mr. Farkhan.

He is the member of Association who represents GAPOKTAN Prima Tani, Prima Lestari, and

previously pioneered in the establishment of Association. His position is influential in determining

how the Association running businesses and due to his personal marketing network he can also

influence the shaping of horticultures market prices. He enjoys his position to get suppliers

bargaining power improved by purchasing their products and selling them directly to potential

buyers outside the region. He voluntarily initiates to help local suppliers from being marginalised

from the practices ofmafia selendang. However, his action also demonstrates his dissatisfaction

on Association performance in proposing more reasonable prices of horticulture products.


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INDIVIDUAL

FARMERS

GROUPS OF

FARMERS

FARMERS-TRADERS

ASSOCIATION

Krido Roso Manunggal

DIRECT

BUYERS

STA JETIS

no linkno link

TYPE I. INFORMAL COLLECTIVE ACTION

INDIVIDUAL

FARMERS

GROUPS OF

FARMERS

INDIVIDUAL LEADERSHIP

MARKETING NETWORK

(eg. Mr. Farkhans links)

DIRECT

BUYERS

STA JETIS

no linkno link

TYPE II. INDIVIDUAL LEADERSHIP MARKETING NETWORK

GROUPS OF

FARMERS

CLOSED INDIVIDUAL

MARKETING NETWORK

(eg. Mr. Indros links)

DIRECT

BUYERS

STA JETIS

no linkno link

TYPE III. CLOSED INDIVIDUAL MARKETING NETWORK

FARMERS-TRADERS

ASSOCIATION

Krido Roso Manunggal

indirect link

INDIVIDUAL

FARMERS

CLOSED GROUP OF FARMERS

(eg. GAPOKTAN Bina Remaja)

DIRECT

BUYERS

STA JETIS

no link no link

TYPE IV. CLOSED COLLECTIVE ACTION

INDIVIDUAL

FARMERS

Figure 6. Four Alternative Types of Agriculture Commodities Marketing in Bandungan Region

Source: Direct observation (2010)


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Even though type II seems to provide an alternative to horticulture commodities marketing

chain it cannot cover entire interests of local suppliers. The number of products that can be

collected and distributed through this individual network is very limited mainly because it depends

on individual capacity to purchase their products. Moreover, the working of such network mostly

relies on trust relationships and social closeness between the traders and suppliers. Hence, the

network sustainability merely depends on individual voluntary actions to promote local products.The type III closed individual marketing network is similar to type II but it only serves for a

small group of local farmers. This kind of network works on very limited coverage area of

horticulture producers where it exists independently separated from the influences of Association

and traders. The network is based on individual leadership of Mr. Indro who obtains his current

authority due to his formal position as Kepala Dusun (Hamlet Chief) and the Head of GAPOKTAN

Sido Makmur. In addition, he also has direct access to Semarang Regency Legislative Assembly as

well as Semarang Regency Government Agencies through which he can build and maintain

exclusive marketing links with potential buyers outside Bandungan Region. Principally, he is only

concerned with the social welfare of 15 members of GAPOKTAN Sido Makmur based on socially

primordial ties but sometimes he is also welcoming those non-member farmers who need to his

support either for products marketing or other horticulture development issues.

Regarding this type it is clear that the mixture of individual leadership, social relationship,

and access to key decision makers is beneficial to fostering particular marketing channels in order

to improve the living standard of local farmers. In this case we can see how a prominent leader in

society can take an advantage from authoritative influences of bureaucratic systems at both grass

root level and higher decision making level for the sake of particular groups interests. However,

such individual institutionalisation is inadequate to generate local economic development since it

is likely to augment higher dependencies of local stakeholders to personal figure. This might be

worsening if the local stakeholders mostly surrender their livelihood improvements to the hands

of this leader therefore they will become more vulnerable to deal with market uncertainties.

The type IV closed collective action is similar to type III but it more focuses on alternating

horticulture commodities to higher value added commodities. This network is also built based on

individual leadership of the head of certain group of farmers to broaden marketing opportunities

of local products. In this case the local farmers are introduced to alternate their products instead

of depending solely on horticulture commodities. They are asked to divide off some of their

farmlands to cultivate coffee beans by the Head of GAPOKTAN Bina Remaja in Banyukuning Village

since it offers better economic viability such as more durable products, quick yield harvesting,

easier production process, and higher income. Typically, the marketing network built in this type

covers perhaps the broadest range of marketing area compared to other networks in Bandungan

Region as the marketing of local coffee products involves direct exporters outside the region.

Despite the virtues of type IV marketing network, such alternative is currently developed as

a pilot project in one village only so that its suitability to be adapted as a local strategy in fostering

local products as well as farmers livelihood still require some time to be implemented widely. This

type seems promising in improving the bargaining position of local farmers against the practices of

mafia selendang, but there is a big challenge in shifting farmers mindset to diversify their


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products. Traditionally, local farmers are used to growing horticulture products as their main jobs

and often alternating to other commodities such as rice, corn, and cassava. Such practices are

inherited from their predecessors over generations. Therefore, the local farmers tend to continue

such a cultural heritage in part of their obedience to local norms and traditions in spite of their

reluctance to undertake product diversification in order to broaden their opportunity to income

generation.The existence of these four alternatives of marketing systems along with the prevailing

mafia selendang practices has demonstrated the richness of social capital networking in

Bandungan Region. It is obvious that all of these systems underpinned by the structure and flows

of social relations among local stakeholders. The pursuit to economic benefits therefore is

undertaken by overriding the existing social order for the sake of either individual or groups

interests in particular. In this context, when the government fails to accomplish its intermediate

functions in bridging market and society as a whole, as exemplified by the malfunctioning of STA

Jetis Management, hence the (informal) prominent leaders who have a great power and relations

in society will take a lead to reshape and control the marketing systems of local horticulture

products. Their influences are much more powerful than local government agencies in decision

making process at grass root level. However, when the government withdraws its role in

controlling the existing horticulture trade in Bandungan Region, this maneuver does not work to

reduce the effects ofmafia selendang practices. As shown in the case of Association building in

which the role of government is limited to undertake advisory stuff and the director board is

consisted of the representatives of local farmers and traders, the greater the decision making

power is held by nongovernment actors does not guarantee the more effective control over the

existing marketing system. Instead, the malfunctioning of Association creates greater opportunity

to sustain cartel mechanism.

Therefore, the presence of these alternatives perhaps may challenge the importance of

collective action in reframing the building of suitable institutional foundation for supporting the

agriculture-based regionalisation policy in Bandungan Region. Dealing with the hegemony of cartel

mechanism in horticulture trade in the region, initial efforts emphasising on the role of collective

action of groups are likely to fail against such a cartel organisation. As indicated by the emergence

of these alternatives, mostly they are underpinned by individual leadership instead of depending

on the working of collective actions. The leaders or initiators will commonly work alone to foster

the development of certain horticulture products as well as the wealth of farmers who have

already joined to their networks. Mostly these networks are built and sustained based on social

closeness and common interests so that they may work for fragmenting the sphere of influences

of large traders (juragans) over local suppliers. However, in general such individual-led

institutionalisation still has insufficient power to overcome mafia selendang practices. Instead,

they may create an exclusive institution rather than an opposing group to compete against the

existing cartel organisation.


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IV. SOME CHALLENGES TO THE CREATION OF SUITABLE INSTITUTIONAL FRAMEWORK

Regarding the case of Bandungan Region the role of local institutions is much more important than

formal institutions in determining the common practices of agriculture-based regionalisation

policy. Even though this paper discloses the aspects of marketing mechanism at most it shows

clearly how socially-constructed institutions are dominant in shaping the rules of the game as well

as the organisations that may prevail in the region. The border of regionalisation here thus cannotbe constrained in terms of administrative jurisdictions but more properly the outreach of social

networking supported by the key players in the region (Keating, 2001; Richardson and Jensen,

2003; Dulupu, 2005). The large traders (juragans) and the informal leaders or initiators with their

own groups are the key players who determine the effectiveness of regionalisation policy

implementation. In this sense the range of social networking thus represents the range of

regionalisation boundaries. As a result, the borders of regionalisation area may expand and shrink

flexibly depending on the continuation of social networking between these key players with other

stakeholders, particularly their potential buyers. In addition, the size of group members in

respective networks sometimes is less important in confining such a sphere of influences of

regionalisation area. As demonstrated in type IV network, the social and economic connectedness

does matter rather than physical distance. In this case even though the group size is relatively

smaller than other marketing networks in Bandungan Region it can sell local products to

international market. This example provides a contrast between the hegemony of cartel

organisation whose marketing distance is limited to regional/national levels only.

However, empowering the role of local institutions in order to support the implementation

of agriculture-based regionalisation policy actually is not an easy task to accomplish. Apart from

the problem of policy consistency as discussed earlier in Section 2, there is a gap between policy

makers and policy implementers and targeted groups. Since the beginning the policy making does

not involve the contribution of policy implementers and targeted groups adequately. The policy is

created and introduced by the government but when the policy implementation cannot meet its

goals and objectives in this case the malfunctioning of STA Jetis Management as the only formal

government institution to facilitate the exchange of local horticulture products then the

government calls for the involvement of local institutions to overcome policy failures as shown by

the creation of Association Krido Roso Manunggal. This may lead to a tricky circumstance since the

government seems to lose off the monitoring and control over policy implementation and give

away this task to the hands of Association. In fact, the Association board of director and its

members of farmers and traders have never got involved in the policy making so that their

objectives and interests may differ from the government ones. As a result, once the Association is

unable to perform its functions there is no initial corrections from the government to improve its

performance. Instead, the Association is misused as a vehicle either for a group of large traders

the case of type I with 15 large traders or individuals the case of type II with Mr. Farkhan

initiatives who have been Association members already to achieve their own agenda regardless

of the fulfillment of initial policy goals and objectives. Again, in this situation the government does

not take any actions to correct such authority misuse. As a result, the existence of Association is


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elusive in contributing to overcome mafia selendang practices. In other words, there is no big

difference obtained before and after Association establishment.

The third challenge is related to the frictions between formal and informal institutional

leaderships. Referring to the case of Bandungan Region, it is obvious that the role of informal

leaders is dominant in determining how local institutions work on horticulture trade mechanism.

Their role is also influential to succeeding whether policy implementation completed or not.Hence, there might be conflicts of interests between government agencies and local key players

mainly because of the differences of decision making milieu between bureaucratic system and

socially-constructed setting. Some issues related to such circumstance are coordination,

responsiveness, accountability, and reliability (North, 1990; Morrison, 2006). In bureaucratic

system coordinating functions are associated with formal positions of officials within public

organisations regardless of individual capabilities to handle particular duties professionally. In

contrast, informal leaders getting their positions with regard to the compliance with local norms

and traditions and their contributions to society. The speed of responsiveness between formal and

informal institutions is also different. The formal leadership tends to comply with a set of

predetermined regulations and procedures in responding particular issues and takes a rigid

coordination based on merit-and-sanction scheme in decision making process. This differs from

informal leadership which responds issues based on voluntary actions and power relations within

social structure. The degree of accountability in formal institutions is more complex than informal

institutions as it refers to certain standards of benchmarking for public organisation performance

where government leaders are not only responsible to organisation but society as well. Meantime,

the informal leaders are mostly responsible to the groups or communities where they are being

attached to. Lastly, as the resultant of previous issues hence the formal leaders are usually less

reliable than informal leaders to tackle the changing environment occurred during policy

implementation. This relates to their internal capacity to resources mobilisation and incentives for

undertaking particular actions.

With regard to these challenges the building of suitable institutional framework in

Bandungan Region should pay more attention to the common practices of local norms and

traditions. Creating synergistic co-operation between formal and informal institutions thus should

take social setting into account. The incorporation of the elements of social capital such as trust,

shared norms and values, and reciprocity (Lyon, 2000; Middleton, Murie, and Groves, 2005) into

formal policy making process is required in order to overcome mafia selendang practices. As long

as the government keeps the distance with policy implementers and targeted groups during entire

policy process, there remains great resistance from local stakeholders to comply with policy

setting. Therefore, both formal and informal leaders should work together in designing more

appropriate policy and institutional framework to improve the existing horticulture products trade

mechanism and local farmers bargaining power as well.


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V. CONCLUSION

In the case of Bandungan Region, the role of local institutions in promoting agriculture-based

regionalisation policy is vague following its inconsistency to improve the bargaining positions of

local farmers. This has contributed to the creation of somewhat chaotic alternative institutional

milieu to overcome the long-lasting cartel mechanism in horticulture products trade. There is

some evidence to explain such a hazy contribution of local institutions despite their dominatingrole in the region compared to formal institution. First, the large traders (juragans) who control

the marketing network of horticulture products have been supporting structural marginalisation of

local suppliers. Actually the big portion of horticulture stocks exchanged in Bandungan Region is

supplied from other regions due to the low productivity of local farmers to produce required

commodities. Such circumstance is exploited byjuragans to force down the prices of local

products. Thus, even though mostjuragans are local inhabitants they have already encouraged

the external suppliers indirectly to compete against local suppliers. Second, the prevailing local

institutions tend to compromise with the practices ofmafia selendang. Some of key players in

Bandungan Region indeed have created alternatives for marketing local products outside the

region, but still it cannot disrupt the hegemony of cartel mechanism. Perhaps the core problem

rests on the failures of existing social order in preventing the overriding of social norms and

traditions by certain parties to achieve their own goals regardless of the pursuit of social welfare.

In this sense, the economic benefits have been regarded at most rather than social equity in order

to achieve better living standards. In other words, market economy has eroded the functioning of

bonding social capital to deal with unfavoured situation. Therefore, local customs and social ties

have become meaningless in reshaping the betterment of local livelihood.

ACKNOWLEDGEMENT

The author is heavily indebted to Ms. Laila Rahmah Shiamy for her genuine ideas, perspectives,

and great enthusiasm in supporting the poor and the marginalised groups of society, the basic

ideas that underpin the paper writing. She has made some time and long-lasting concerns on

some issues related to sociocultural inequality, empowerment, and gender mainstreaming in

development from which the author get inspired so much to do this research work. A deep and

lovely gratitude has been given to her contribution in enriching this paper. The author would also

like to thank to Ms. Indah Saptiningrum and Ms. Septiyati Ganjarsari who have helped in data

collection and interpretation. Their inputs during a series of discussions are useful to reshape

authors understandings on the research issues. Last but not least, the author would also like to

gratitude Dr. Joesron Alie Syahbana and Mr. Jawoto Sih Setyono as the executive chairs in Master

Program in Regional and City Development at Diponegoro University for providing initial research

funding. Without their assistance this paper might not be available to read in front of you.


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Documents

FP Local Institutions and Regional Spesialisation_Prihadi Nugroho_Track 6