Improving Agricultural Market Performance:
Creation and Development of Market Institutions
49
2.5.3. Public-Private Collaborations
Cocoa Development Centers in Indonesia
Indonesia is the world’s third largest cocoa producer, after Côte d’Ivoire and Ghana.
Production has fallen, however, from a peak of nearly 850,000 MT in 2009 to about 350,000
MT in 2016.95 This decline is attributed mainly to aging cocoa plants, which has led to lower
productivity. 95% of the country’s cocoa plantations are smallholdings, whose owners lack
funds to invest in replacing aging plants, inputs, and better production techniques. Very few of
these farmers ferment their cocoa, thus reducing its market value.96
Various low-cost methods to address declining cocoa productivity and unsustainable farm
practices have been introduced by numerous public and private sector organizations across
Indonesia since the 1990s have sought to improve cocoa productivity, with limited success.
Indonesian plantations suffer from cocoa borer infestation, and farmers have adopted the
intensive use of insecticides, creating sustainability challenges, since the intensive use of
agrochemicals has led to soil degradation. “The apparent failure of past technology transfer
programs to drive a shift towards more sustainable cocoa farm practices suggests a demand
for innovative approaches to farmer-oriented knowledge exchange systems”.97
Most of Indonesia’s cocoa is produced on the island of Sulawesi, where it is a fairly recent
introduction, dating only to the 1980s. “When initially planted, cocoa required little
management: soils were fertile, hybrid cocoa planting material was available, and pest and
disease problems were insignificant, thereby resulting in high yields averaging 1,700 kg/ha.
Good financial returns led to expansion of the crop by smallholders who frequently migrated
from more densely populated regions of Indonesia to participate in the boom, inevitably
encroaching upon what were previously forest lands… the initial boom in cocoa planting [was]
facilitated by the “hands-off” approach of the Indonesian Government, allowing space for
smallholder dynamism and a highly competitive marketing system. Farmers generally
obtained knowledge on farming practices and planting material through informal social
networks and the Government did not develop the effective capacity to deliver agronomic or
technical support to most farming communities.” 98
Over time, however, soil fertility declined, cocoa plants started to age, and pest and disease
problems surfaced. Although the Government promoted integrated pest management
techniques, they were labor intensive, and most farmers turned instead to chemical pesticides
and synthetic fertilizers, or cleared forest land for new plantations, neither of which could
ensure sustainability. By the late 2000s, yields had fallen to about 400 kg/ha.99
95 Global Business Guide Indonesia (2016), Overview of Indonesia’s cocoa industry: lack of supply still hampers growth and
investment, available at
[Accessed June 2017].
96 Sikumbang, Z. (2012), “Revolution of Cocoa Industry in Indonesia,” Indonesia Cocoa Association, available at
[Accessed July
2017].
97 Neilson, J. & McKenzie, F. (2016), “Business-oriented outreach programs for sustainable cocoa production in Indonesia: an
institutional innovation,” in FAO/INRA (eds.), Innovative markets for sustainable agriculture – How innovations in market
institutions encourage sustainable agriculture in developing countries, pp. 17-32, Rome: Food and Agriculture Organization of
the United Nations and Institut National de la Recherche Agronomique.
98 Ibid
99 Ibid