Who Benefits and How Much?: An Evaluation of Contract Farming Systems in Indonesia

Abstract

This study evaluates the benefits to smallholders and agribusiness firms from participating in contracts in the eastern islands of Indonesia, specifically Bali and Lombok. These areas represent a range of farming systems and a diversity in social and institutional support structures. Bali is becoming increasingly dominated by tourism and construction industries, which have forced up labour costs and discouraged private investment in agricultural industries. Lombok is a more traditional rural area with lower labour costs and less opportunity for off-farm work. This has led to greater opportunity for agribusiness in Lombok to build partnerships with smallholders than has occurred in Bali. A total of 300 smallholders were surveyed in Bali, 150 of whom were at the time participating in the production of seed rice under contract to the semi-government firm PT Pertani. The remaining 150 were non-contract farmers who were selected due to their proximity to the contractors and their similar resource endowments. In Lombok there were 200 smallholders interviewed, 80 of whom had contacts with Nusantara Unggasjaya (NUJ) to grow out broilers. The remaining 120 did not have broiler chicken contracts.