ABSTRACT
Martha Masterman

This paper focuses on the prospects for developing Indonesia's cash crop sector, particularly in light of the financial crisis of the last two years. The transitional nature of rice as a primary crop has led to the need for crop diversification. Additionally, the increased value of cash crops on the world market with the weakened rupiah has created a boon for rural farmers and exporters of these crops. Many of these crops are early in their transitional stages, and thus are prime candidates for assistance as they have the potential for increased yields and productivity.

In light of these two issues -- the need for diversification away from rice and the recent refocus on the agricultural sector -- this paper will concentrate on cash crop development for export to Western developed countries (i.e. U.S. and Western Europe). In the short term, developed Western markets are the most viable targets for export due to the current recession of Japan and the general economic malaise of the Southeast Asian region. Thus, for the purpose of this study, the target crops should meet the following criteria: 1) dominated by smallholders, 2) growing demand by developed (Western) countries, and 3) have the potential to increase productivity i.e. are in early stages of agricultural transition.

In addition to identifying those crops which have potential to stimulate Indonesia’s economy, it is also important to analyze how rural small-landholders can integrate with urbanizing communities to realize growth and equitable economic gain. There exists an opportunity to develop the rural agricultural population, but in order to create sustainable growth of this sector, policy alternatives should be considered carefully. This requires a close study of the value chain, from the producer to marketing the product to consumers. Currently, there are several intermediaries in the process of getting the coffee cherry to the coffeepot, for example, which may or may not have inefficiencies. Additionally, it will be helpful to review past government policies in both the rice sector and cash crop sector, both to provide a context for future development and to avoid past mistakes.

Finally, other models of rural agricultural development may serve as positive examples that could be transferable to Indonesia. In particular, this paper will explore the development of cocoa farming in Sulawesi, and coffee production in Kenya. These models identify policies and systems that helped to integrate the rural farming sector into the national, and ultimately, the world economy.