Alternatif Institution for Palm Oil Farmers More Independent and Prosperous
Maybe not many Indonesian people know that every 12th of July is celebrated as the Cooperative Day. Historically, the development of cooperatives was introduced by R. Aria Wiraatmadja who founded a Bank for civil servant (prijajis) at Purwokerto in 1896. The spirit of the cooperative was then continued by parties in the period before the independence of the Republic of Indonesia, such as Budi Utomo, Serikat Dagang Islam)and Partai Nasional Indonesia. Then after Indonesian independence, on July 12, 1947 the first Cooperative Congress was held in Tasikmalaya. And precisely this year, Indonesia celebrated its 73rd Cooperative Day.
Cooperative is an implementation of the people’s economic concept that has been mandated by the 1945 Constitution. The economic system was first conceived by Bung Hatta, where the economic system is based on the strength of the local people based on the knowledge and skills in carrying out economic activities in managing natural resources, especially in agriculture, animal husbandry, handicraft and food sectors in order to achieve the welfare and prosperity of the community.
Oil palm plantations which are one of the agricultural sub-sectors, where the people through smallholder oil palm plantations are able to become an important actor with a share about 41 percent of the total area of Indonesian oil palm plantations. The large contribution of the people in the national oil palm plantations is the implication of various patterns of oil palm plantation partnerships such as: Special Nucleus Estate Smallholder (NES) and NES Local, NES Transmigration, NES Credit Cooperative for Members (PIR KKPA) and Plantation Revitalization. The basis of these various partnership patterns that have succeeded in bringing Indonesia to become the largest palm oil producing country in the world is the partnership pattern developed between oil palm farmers through cooperatives in partnership with plantation companies (nucleus). This shows that cooperatives play an important role in the development of the national palm oil industry.
The existence of cooperatives has proven to be able to increase the success of smallholders oil palm plantations. This was also confirmed by the results from the research of PILAR and CPI that the partnership scheme managed by the oil palm farmers’ cooperatives showed better performance in terms of crop productivity, farmer income and risk management. Research Suharno et al. (2019) also mentioned that in addition to increasing welfare through increased income, the participation of oil palm farmers in cooperatives also had a positive impact on the socio-economic of the community such as infrastructure development, housing conditions, ownership of motor vehicles, access to education to pilgrimage/umroh activities.
But over time, the operations of cooperatives that oversee oil palm farmers and cooperation with partner companies do not always run smoothly. One of the factors that caused the oil palm cooperatives to go bankrupt was miss-management because of the existence of opportunistic cooperative management officers who misused their authority for personal gain. Due to the many cases of cooperatives going bankrupt and the loss in income received by their members, causing many oil palm farmers who are reluctant and even tend to be anti-cooperative.
Whereas if the management of cooperatives is carried out by competent and professional management, the social and economic benefits received by cooperatives and members will be very large and more profitable. In addition, the role of cooperatives as an institution for oil palm farmers is also needed to access various government programs such as the Smallholders’ Palm Oil Replanting (PSR) grants as well as the ISPO certification which requires farmers to join in an institution. Therefore, the formation and strengthening of cooperatives or other oil palm farmer institutions is important to do.
To accommodate oil palm farmers who are anti-cooperative because of the trauma of the many cases of miss-management in cooperatives, other institutional alternatives are needed such as: BUMDesa (based on Regional Minister’s Regulation No. 4/2015) and Private Limited (PT) or Commanditaire Vennotschap (CV) (based on Law No. 40 / 2007). Various institutional alternatives for oil palm farmers can be chosen according to the values and vision of their members. This is very important to consider in the context of the formation of institutional oil palm farmers. The background of the establishment of the institution and the level of trust of the members to the institutional management are two factors that can determine the chances of success of the institution in carrying out its functions.
In order to create independence and improve the welfare of its members, the institution must also be equipped with a variety of supporting units, from production input procurement unit, financial unit, downstream palm oil based product unit, and other supporting units.
Production input procurement unit has a function to guarantee the procurement of production inputs such as fertilizers, pesticides to seeds needed for oil palm cultivation and replanting. Not only related to the provision of production facilities for oil palm plantations, but this unit also can facilitates the improvement of the competence of oil palm farmers to implementing Good Agricultural Practices (GAP) as well as following the rules of sustainability in both the ISPO and RSPO certification scheme.
Financial unit, this unit has a function to integrate various sources of financial assistance available both for plantation operations and downstream development carried out by oil palm institutions. This is because currently there are many sources of financing, both from the state budget, regional budget, oil palm companies or banks, but have not been properly distributed and targeted to oil palm farmers. In addition, the second function is collective funds taken from joint ventures of members or a proportion of the proceeds from the sale of oil or downstream products. The collective funds can be used to prepare the funds needed by oil palm farmers in replanting activities and oil palm plantation operations.
The downstream unit referred, which is this institution must also be equipped with palm oil milling for greenfuel. This palm oil milling will process FFB’s smaillholder farmers into palm oil which is used as raw material or feedstock for greenfuel such as palm oil diesel, palm oil gasoline and palm aviation fuel. In addition, the management of oil palm biomass into products that have high economic value such as palm charcoal, woven plates, broomsticks, oil palm sugar to biogas/bio-electricity, also has the potential to be utilized as other palm oil downstream product diversification.
Downstream products from biomass/waste can also be sold at convenience store (other supporting units). This unit will also as market to provide product household for oil palm farmers and the public community.
The alternative of institutional oil palm farmers described above is a fairly revolutionary and comprehensive form of cooperative that has been developing in Indonesia, but still holds a strong foundation of people’s economy. The design of smallholder palm oil farmers which is expected to be able to increase productivity and efficiency so that it has implications for increasing income and welfare and creating sustainable economic independence, is also a hope for the 73rd anniversary of Indonesian Cooperatives.
Happy Cooperative day!
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