The Economic Development of Indonesia's Sea Fishing Industry 1

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Page 1: The Economic Development of Indonesia's Sea Fishing Industry               1

This article was downloaded by: [Memorial University ofNewfoundland]On: 07 October 2014, At: 08:57Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number:1072954 Registered office: Mortimer House, 37-41 MortimerStreet, London W1T 3JH, UK

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The EconomicDevelopment ofIndonesia's Sea FishingIndustrySulaeman KrisnandhiPublished online: 18 Aug 2006.

To cite this article: Sulaeman Krisnandhi (1969) The EconomicDevelopment of Indonesia's Sea Fishing Industry , Bulletin of IndonesianEconomic Studies, 5:1, 49-72, DOI: 10.1080/00074916912331331342

To link to this article: http://dx.doi.org/10.1080/00074916912331331342

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THE ECONOMIC DEVELOPMENT OF INDONESIA'S SEA FISHING INDUSTRY'

Between 1951 and 1967 the production of sea fish? rose from 324,000 tons to 638,000 tons, that is by 97 per cent, or at the rate of 4.1 per cent per year.3 In the same period the number of fishermen rose from 315,000 to 836,000, that is by 165 per cent, or at the ratc of 5 '9 per cent per year. The number of fishing vesscls rosc from 80.400 to 245,200, that is by 205 per cent, or at an annual rate of 6.8 per cent.' Catch per boat and catch per fisherman, however, fell during the same period from 4.0 tons to 2.6 tons in the case of the former, and from 1.0 tons in 1951 to 0.8 tons in 1967 in the case of the latter. It is therefore safe to say that, since 1951, the fishing industry has grown but has not developed. It was able to grow because more men turned to it for a livelihood (even though returns to labour were probably declining), and because the rate of profit to bc carned from investment in new vessels remained sufficiently high. But as will become clear almost all the expansion occurred in the traditional sector of the industry. Only a little capital was invested in modern equipment, modern processing facilitics, or in refrigerated carrier ships, and the labour that entered the industry possessed for the most part only traditional skills.

Translated and edited by D. H. Penny. ZUnless otherwise specified, the terms fish, fishing, and fishermen will

be used to refer only to the sea fishing industry. 3Praduction of sea fish was higher in 1966 than in 1967, a record

total of 721,000 tons. Total production from inland fisheries was estimated to he 450,000 tons in 1967 (H. Saanin, 'Fishetier Products', Paper XI, Working Group 111, NAS-LIP1 Workshop on Food, Djakarta, 1968, p. 9) .

* I t should he noted that boats it~e not an ideal indicator of changes in the industry's capacity to produce as other types of fishing equipment also play important roles (Table 3 ) . But no data on changes in the latter are available.

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In 1961 the fishing industry employed 2.7 per cent of Indo- nesia’s labour force, and produced 2.2 per cent of Indonesia’s net national product. These figures suggest that fishing is by no means a prosperous occupation (income per man is below the national average), hut the fishing industry possesses considerable potential for both increased production and for higher returns to labour and capital employed. While fisheries resources are not yet fully explored, it is estimated that current production represents only onc-sixth of known potential.: Many people have come to feel sceptical and not a little cynical when they hear it said that Indonesia is a rich country, hut it may he safely claimed that there is still much unexploited potential in the sea fishing industry. The tropical seas in the Indonesian archipelago are not only better stocked with fish than the seas in colder areas, hut are also better stocked than many other tropical seas.

The substantial expansion that has occurred in capacity to produce and also in production is in itself pcrsuasive evidence that there is scope for development. Indeed. given the lack of investment in modern processing and other facilities, the ineffi- ciencics of the inter-island shipping and markcting systems, and the obstaclzs set up by government regulations, it is perhaps surprising that the industry has grown as much as it has since 1951. Its process of growth bears, moreovcr;many resemblances to the growth that has occurred in the rice industry outside of Java during the same period.6 Both the rice and the fishing industries have had their growth centres on the outer islands, both have had to face very much the same sorts of problems, both have had to operate in the same unstable economic climate, and, despite a number of policies specifically designed to boost production, no technological or managerial breakthrough occurred in either industry before 1967.7 The analogy with the rice industry in the outer islands should not, however, be pressed too far. Fish, unlike rice, is mainly a commercial rather than a subsistence product; it is highly perishable, and not much less so after being processed in traditional ways of salting and drying;

Saanin, op. cit., p. 7. ‘For data on the situation in the rice industry in the outer islands

see L. A. Meam and Saleh Affif, ‘A New Look at the Bimas hogram and Rice Production’, Bullerin No. 10, June 1968.

The Philippine rice varieties, a ready availability of fertiliser, and new incentives to invest in ricemilling equipment, may well have pro- vided the basis for a breakthrough in rice production since 1967.

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Page 5: The Economic Development of Indonesia's Sea Fishing Industry               1

it is not a staple food and income elasticity of demand for it is rather high; and the amount of investment required to service one major fishing region with modern facilities is greater than for any given rice-growing region, for there are more economies of scale in the fishing industry than in food crop production.

To say that there is much potential in the industry does not mean that it will be easy to realise it. The present type of fishing enterprise, which depends on the catch of a few limited species popular on the domestic market, soon faces diminishing returns, as it cannot profitably use the many other species which are found in abundance in the warm scas close to shore, nor are such enterprises geared to exploit the fisheries resources in the deeper waters where one or two commercial varieties are in ample supply. Moreover, policy-makers and entrepreneurs have not, until recently, been fully aware of the magnitude of the task, although the interest shown in the industry by foreign investors, particularly the Japanese, has given a new stimulus.

TABLE 1 Boats and Fishermen in the Sea Fishing Industry, Indonesia, 1951-67

- Boats Fishermen

Motorised Non-motorised Totala Year ('m) ( 'OOo) ('000) ('000) 1951 0.11 80.3 80.4 315 1952 0.33 90.4 90.7 356 1953 0.75 92.6 93.4 393 1954 0.80 96.8 97.6 430 1955 0.67 123.9 124.6 452 1956 0.76 129.2 130.0 464 1957 0.89 138.0 138.9 478 1958 1.42 154.3 155.7 67 Ib 1959 1.46 175.6 177.0 735 1960 1.46 168.0 169.5 747 1961 2.21 195.4 197.6 804 1962 2.87 206.8 209.7 874 1963 2.99 212.7 215.7 852 1964 3.20 235.0 238.2 873 1965 3.26 235.2 238.5 892 1966 3.36 236.5 239.9 897 1967 3.35 241.8 245.2 836

a Discrepancies due to rounding. bThe sharp rise in the number of fishermen in 1958 may be accounted

for by statistical reasons (e.g. better coverage, wider definitions, etc.). Source: Central Bureau of Statistics and Sea Fisheries Service.

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TABLE 2 Fish Production, Catch per Boat and per Fisherman, I940 and 1951-67

Production Catch per Catch per Year fresh weight boat fisherman

('000 tans) (tans) (tons) 1940 320 4.0 1.0 1951 324 4.0 1.0 1952 365 4.0 1.0 1953 314 4.0 0.9 1954 401 4.1 0.9 1955 412 3.3 0.9 1956 418 3.2 0.9 1957 406 2.9 0.8 1958 43 1 2.8 0.6 1959 400 2.3 0.6 1960 412 2.4 0.6 1961 525 2.7 0.6 1962 538 2.6 0.6 1963 559 2.6 0.6 1964 590 2.5 0.7 1965 661 2.8 0.7 1966 721 3 .O 0.8 1967 638 2.6 0.8

Source: Central Bureau of Statistics and Sea Fisheries Service.

THE ECONOMIC SlTUATIONa

Production and Productivity. It has already been pointed out that fish production and the amount of capital and labour employed in the industry rose steadily between 1951 and 1967 (Tables 1 and 2).

During the same Deriod Indonesia beean to aouroach self- - sufficiency in fish pioduction. Between 1936 anh ̂ 1940, fish imports had averaged 69,200 tons annually. Imports were still

8The data in this section are largely taken from the 1965 Fisheries Survey. This Survey was sponsored by the Department of Sea Fisheries. The survey work was carried out by the Fishcries Faculty of the Institute of Agriculture, Bogor, of which the author was then a member of staff, in conjunction wlth the Economics Faculties of the University of Indonesia, and of Airlansga, Sriwidjaja, and Hasanuddin Universities. The survey was conducted in the eight major fishing areas of the country, hut it proved possibk to analyse the data from only seven: Bagan Siapi-api (North Sumatra); Belitung Island (South Sumatra); Pontianak (West Kalimantan): Kotabaru (South Kalimantan); Bontang and Samarinda (East Kalimantan); Makassar and Pare-Pare (South Sula- wesi); and Muntjar (East Java).

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61,300 tons in 1952, but fell steadily thereafter, from an average 41,000 tons a year during the period 1951-55 to 22,000 tons a year in the period 1 9 5 6 6 0 and to an average of 3,000 tons a year for the six years 1961-66. Exports on the other hand have never been high. The highest recorded export foc the 1936-40 period was 6,200 tons (five-year average 5,900 tons), and the highest postwar export was 1,800 tons in 1952, while recorded exports in 1966 amounted to only 2 tons.9 The substantial decline in net imports has been accompanied by an increase in fish consumption per head (Table S ) , which suggests that the prices of domestically produced fish have fallen in relation to those of imported fish.

The fishing industry is far more geographically dispersed than agriculture where the major market for the produce of a sub- sistence farmer is his own household. The productivity of the industry also varies considerably from region to region, and catch per fisherman is some six times as high in Sumatra and Kalimantan as it is in Java (Table 3).

The data in Tables 1 and 2 show that, while total production has been increasing, resource productivity has declined. The decline in productivity has, moreover, been more substantial than the figures suggest as the increase in the numbcr of motor- ised boats has been greater than for for non-motoriscd boats. The motorised boats are larger, can go further from shore, and can stay longer at sea. The influence of modern cquipment on average level of productivity in the industry can only be slight, howwer, as nearly half of the motorised boats arc out of com- mission, and the remainder spend 56 per cent of their time unproductively.' 0

Most fish catching is still done with traditional equipment in traditional ways. Such equipment is of two sorts, fixed (fish traps of various sorts) and mobile (boats). With such equipment the fisherman can work only the fishing grounds that lie in shallow water or close to shore. The amount of capital required to build the small fishing boat, typically made of wood and less than 5 metres long, is not large nor is any great amount of specialised

'Data on exports and imports are from the Central Bureau of Statistics.

lo The breakdown of the 56 per cenr is as follows: 30 per cent spent unproductively in dock, 17 per cent in port, and 9 per cent at sea (Saanin, op. cit., pp. 14-15). The main reasons given by Saanin for these losses are shortages of spare parts, shortage of ice, and the elaborate procedures for obtaining sailing permits.

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TA

BL

E 3

The

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Sour

ce:

Saan

in,

op.

cit.,

pp.

11-

12.

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Type

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Page 10: The Economic Development of Indonesia's Sea Fishing Industry               1

skill required to put the new boat to use. Table 4 gives some details on types of equipment used.

If one assumes that the price of rice at the time the survey was undertaken (mid-1965) averaged Rp400 per kg, one can see that the annual incomes of fishermen from fishing were for the most part quite low, the equivalent of only about 410 kg of rice." A rural day labourer in agriculture typically earns a wage of one and a half kilograms of rice a day; per capita rice con- sumption in Indonesia is about 90 kg per year or 360 kg for a family of four. There is, as might be expccted, a quite close relationship between the size of capital invested and the capacity to produce (compare the data in column 3, Table 4, with those in column 1 ) ; the survey results also revealed that the larger investments earned higher returns per unit than the sma1ler.l~

That there are economies of scale in fishing is confirmed by the data from the Fisheries Survey, and by two series of cxperi- ments, the first undertaken in 1941 and the second in 1956, to establish the extent of economies attained through the use of capital intensive methods (Table 5 ) .

The results of the two experiments are not dircctly comparable for the most part, nor are they reconcilable with the data from the Fisheries Survey, but they do at least show that the use of more capital intensive methods will raise returns to both capital and labour. These experiments, however, merely compare the profitability of different methods of catching fish. The creation of a modcrn fishing industry requires much more than thc mod- ernisation of craft and other traditional equipment. There is great need for increased capital investment not only in modern boats and fish carriers but also in modern processing facilities, modern storage facilities, etc.

Thus, even though it has been known that investment in larger and more modern equipment of all sorts can contribute to the development of the fishing industry, almost all the invest- ment that has taken place since 1951 has been of traditional

Simple average for returns to labour for the twelve types of equip- ment listed (Table 4. col. 6 ) .

=The figures in the first COIULM give current (depreciated) values for each type of equipment; the replacement values are not known. The total capital required to install even the largest of the fishing units (bubu) is unlikely to he m01e than the equivalent of 80 tons of rice, or some $10,000. 'The assumptions underlying this very rough calculation are (a) local rice price Rp400 per kg, (b) world rice price $120 per ton, and ( c ) average depreciation S O per cent.

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TA

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E 5

Eco

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Y41

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sorts, and returns to both labour and capital have heen low. The fishing industry is easy for men with little capital to enter and, as has been mentioned, the expansion that has occurred in the industry since 1951 bears many resemblances to the way in which the rice industry has expanded in the outer islands. ‘Static expansion’ is not a phenomenon confined to the agricultural field alone in Indonesia.

Prices and Financing. Fishermen everywhere face the un- certainties of wcather, fish supplies, and market fluctuations. Indonesia’s fishermen have for many years also had to cope with the uncertainties caused by the unstable cconomy. It i5 unfortunately not possible here to give data showing how prices received by fishermen in each of the major fishing areas have fluctuated over time or to determine whether over the period the price of fish rose or fell in relation to the prices of rice and the other goods fishermen must bny, hut sufficient information is available to illustrate some of the difficulties fishermen must face when they sell their output (Table 6).

The price data in the table show that there are very consider- able interregional differences in all prices, for not only is the pricc of ikon teri twice as high in Bagan Siapi-api as in Pare-Pare hut the price of rice wa$ in mid-1964 more than four times as high and the price of salt two and a half times as high in the former than it was in the latter place. Both rice and salt are

TABLE 6 Fish, Rice, and Salt Prices and Price Ratios, bv Reaion. mid-I965 . .

Prices (Rpikg) Price ratios Flsh- Fish-

Region/Town Fisha Riceb Salt rice salt Bagan Siapi-api 525 850 100 0 .6 5 . 2 Belitung 41 2 425 80 1 . 1 5 .9 Bontang 400 410 60 0 . 9 6.6 Pontianak 315 450 90 0 . 8 4 .2 Kotabaru 291 308 50 1 .o 5 . 9 Muntjar 291 235 7s 1.3 4 . 0 Pme-Pare 251 190 40 1.3 6 . 3 Djakarta 1,480 344 1 8 0 C 4 . 3 8.2C

*All fish prices me for ikon feri, ihe cheapest salted fish. The Djakarta price is a retail price, and the prices in the regions are those received by producers who were not in debt.

b Rice of average quality. cThe salt sold in Djakarta is of higher quality than that used for

salting fish. Source: Fisheries Survey, 1965.

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important cost items in the industry and, while the price ratios in the fishing areas (Table 6, col. 5 ) do not show the extreme regional disparitics revealed by the absolute (rupiah) figures, they are nonetheless unfavourahlc for producers compared with the price ratios prevailing in the Djakarta market at the same time. At the time the survey was undertaken, a safe rule of thumb calculation was that most fishermen received prices for their catch of just half the amounts shown in column 1 of Table 6, and that consumers paid three times as much on average.

As it happens, the nnfavourable price ratios for Bagan Siapi-api shown in Table 6 are not typical. Normally the fisher- men in this area are not forced to buy rice at prices so much higher than those prevailing in the other areas. Since fish prices are also consistently higher in this area than elsewhere (mainly due to lower marketing charges which are in turn a function of the largcr quantities produced and sold) thc fish-rice price ratio is usually quite favourable. This has enabled the fishermen of this region to exploit otherwise low-value fish for sale to special markets and has encouraged them to invest in modern equip- ment. Between 1959 and 1963, when the number of motorised fishing boats rose from 1,460 to 2,990 in the country as a whole, the proportion of all such boats registered in the provinces of North Sumatra and Riau (the Bagan Siapi-api fishing region lies partly in both provinces) rose from 49 to 78 per cent of the total. The total number registercd in all other provinces actually fell during the same period, from 740 to 650.

While the capital needed to become a fisherman is not great, most fishermen are nevertheless in debt. Between 60 and 80 per cent (depending on the region) of all fishcrmen who operate the somewhat larger types of equipment (sero, bagan, and nylon gillnet; see Table 4) are in debt, for the most part to fish traders. Table 7 gives some data on the relationship bctwecn indebted- ness and prices reccived.

Most of the loans are very short term, a few days or weeks at most, and serve to finance operating costs. The fishermen in debt are al5o required to pay higher than market prices for what they buy; in South Sumatra the premiums ranged from 16 per cent for rice to 50 per cent for coffee. The other commodities surveyed were kerosene (20 per cent), salt (39 per cent), and sugar (45 per cent).lx

"In a 1966 study of smallholder rubber marketing in South Sumatra and South Kalimantan it was shown that all rubber growers are dis- advantaged by the very high marketing margins that prevail, and that

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TABLE I Fish Prices Received by Fishermen Indebted and Non-indebted, mid-I965

Prices received Fishermen Fishermen in debt (x) not in

Fishing Type of fish debt (y) Ratios Area method product (Rp/kg) (Rp/kg) y+x

Belitung Island, seines S. Sumatra

fixed lift net large dip net seines

Kotaharu, seines S. Kalimantan hamboo

fishing stakes

Makassar, flying fish S. Sulawesi floating trap

seines

dry salted dry salted k Y salted fresh

fresh

dry salted

wet salted fresh

305

320

300 so*

80

264

182 145

433 1.4

500 1.6

483 1.6 275 5 . 5 a

159 2.0

450 1 .7

251 1.4 275 1.9

~

a In this case the very low price received by the fishermen reflects the fact that the creditor paid a subsistence allowance in addition to pro- viding working capital.

Source: Fisheries Survey, 1965.

Marketing. Of all Indonesia’s fishing regions only Bagan Siapi-api has begun to enjoy the profits to be gained from largc- scale operations. In all othcr regions, fishermen using traditional skills and small-scale equipment are in a weak bargaining posi- tion ws-&vi$ the fish buyers. Indonesia’s fish traders, most of them of Chinese origin, have developed a marketing system” that is well geared to satisfy consumer demand in domestic

the. farmers who are in dcbt are even more disadvantaged both through lower sale prices for rubber and rhrough higher prices for consiimption goods. (R. Sinaga, Tataningo Knret Rnkjjat [Smallholder Kubbcr Market- ing], Agra-Economic Survey, Djakarta, 1969.)

“For a more general and detailed discussion of haw Indonesia’s marketing organisation has operated, see Panglaykim. ‘Marketing Organisation in Transition’, Bulletin No. 9, pp. 3 8 4 2 in particular. What the author sa)s here abcut the collection. distribution, financing, etc. of smallholder products also applies to fish marketing.

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markets, hut it is neither low-cost nor modern, nor is it one that gives fishermen adequate incentives to exploit the potential that undoubtedly exists.

Much of the fish produced in Indonesia is sold and consumed locally. Some of course is consumed by the fishermen themselves. It is not, however, thc strength of these local demands that determines priccs in regional markets but rathcr the dtmand in major consumption centres. These centres, each of which has its own characteristics, are for the most part far from producing areas. Meeting the market demand for a perishable product, the supply of which fluctuates, and meeting also the capital needs of the producers. requires considerable capital and also a willing- ness to assume quite high risks of loss. Under thc conditions that have so far existed in Indonesia the capital and willingness to bear risks are forthcoming only under conditions approaching monopsony (towards the large number of fish producers) and monopoly (towards the even larger number of consumers).

The lyncbpin of the national marketing organisation is the Djakarta firm Perapin. The firm is an association of thirty trading firms (including one representing the fishermen at Bagan Siapi- api) and it co-ordinates almost all the interregional trade in fish.‘5 It does this by keeping in touch with member firms in the producing areas to inform them of prices of different types of fish in each market. by financing the operation of each firm and through them the fishermen as well, and by arranging for the sale and distribution of the produce when it reaches the consuming areas. Perapin itself charges a 5 per cent commission on sales to cover the costs of operation.

In some respects Perapin performs its middleman’s functions extremely well. It provides the money needed to finance both trade and production, it knows the markcts throughout the archipelago (in both producing and consuming areas), and it is able to bear the not inconsiderable risks of loss in a very uncer- tain and fluctuating business. But, as the enormous margins between producer and consumer prices show, it provides market- ing services at a very high cost. As a result, incomes of producers are depressed, detracting further from the resources or incentive to modernise the industry and expioit its potential.

‘ s F ~ r example, in 1962 Perapin handled 41,000 out of the 54,000 tons of fish in inter-island trade (Central Bureau of Statistics and Perapin records).

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It is a commonplace in Indonesia to blame traders for this kind of situation. In the case of Perapin, the critics have some case since the trade association commands a position of virtual monopoly (although there is little reason to believe that pro- ducers or consumers would fare much better if the thirty trading firms did not co-operate). But the root of the trouble is not monopoly but inefficiency, not the high profits hut the high costs of marketing.

Fish processing methods, like the fish catching and fish marketing methods, are still only of the traditional sorts. The fish are dried, salted, or turned into paste before being sent to distant markets. There is almost no canning or freezing, nor are there any facilities to make fishmeal. As it takes three months on average for fish to travel from producers to consumers, heavy salting is required-and fish that are heavily salted do not appeal to every taste. Since, moreover, salted fish has to travel as general cargo, shipments are often delayed because shippers dis- like a smelly cargo and one which also turns their boats into rust- huckets.IR The unwillingness of shippers to carry fish is com- pounded by the fact that the government has always enforced a low freight rate (salt fish being one of the nine so-called essential commodities for which consumer prices are kept low). Under such circumstances it is unlikely that any marketing organisation could do the job unless it possessed substantial amounts of capital and was willing continually to assume substantial risks of loss.

The creation of an efficient fish marketing system requires an efficient communications system, efficient processing plants and storage facilities, adequate supplies of salt, ice, spare parts, docking facilities and other inputs, and an economic environment favourable to efficient management. It is the lack of all these pre- requisites in the Indonesian fishing industry that chiefly accounts for the high costs of marketing.

Fish Consumption. While rice consumption per head has declined since before the war, fish consumption per head has risen (Table 8). The slight rise in overall fish consumption per head is not accounted for by rising demand and rising real incomes. Rather it reflects the fact that it has proved easier to increase the output of fish through the use of traditional methods than it has been to increme the output of rice by traditional methods.

“Saanin, op. cit., p. 18.

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TABLE 8 Fish Consumption per Head, I940 and 1951-66 Consumption

Der heada Year (kc) 1940 8.4 1951 7.7 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966

8.6 8 .4 8.4 8.4 9.0 8.8 8 . 0 8.4 8.3 9.6 9.3 9.1 9.1

11.4 -

=Includes net imports and fish from inland fisheries, that is total fish supply for Indonesia. Figurcs represent the equivalent in fresh fish. The follawmg con\'ersion factors were used to convert to fresh fish equivalent (= 1 .0 ) ; for dry salted fish ( X 2 ) ; for cooked fish ( X 1.5); for dried shrimp and shrimp paste ( X 3) ; for canned fish ( X 1); and for dried or smoked trepang ( X 10).

Source: Central Bureau of Statistics.

Table 9 gives data from the National Sample Survey showing consumption of fisheries product5 by household expenditure classes in Java and Madura. They indicate that in Indonesia, as elsewhere, the income elasticity of demand for fish is quite high. Table 10 gives somewhat different data for fish consumption in Java and the outer islands. They reveal a markedly lower level of consumption of fish in Java, reflecting both lower incomes per head and higher fish prices than in the producine reeions. The figures incidentally help to explain why Perapin, serving mainly the Java market, handles so small a proportion of the total Indo- nesian production of fish.

The demand for fish in particular markets is not only a func- tion of differences in real income per head or of relative prices. Preferences for different types of fish products also vary consider- ably from place to place within Indonesia. Consumers in East

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TABLE 9 Consumption of Fisheries Products per Head by Household Expenditure Classes, Java and Madura, I964

(kg per head per year)

Fish product I I1 I11 IV V households

Fresh 1.2 1 . 8 2.9 4 .7 7 . 4 3.4 Driedandsalted 1.6 2 . 8 4 .2 5 . 3 7 .0 4.1 ShrirnDs. etc. 0.2 0.2 0.3 0.7 0.7 0 .4

Household expenditure class8 All

a Household expenditure classes: I Up to Rp 6,000 per week.

I1 Rp6,001-10,000 per week. I11 Rp 10,001-16.000 per week. IV Rp 16,001-30,000 per week.

Over Rp 30,000 per week. N o wnversion into dollar equivalent is offered because of the continued inflation during this year and the varying rates of exchange.

Source: Pengeluaran Unluk Konsumsi Penduduk Djawo-Moduro, National Sample Survey, Report No. 1, Table 6. Central Statistical Bureau, Djakarta, 1966.

V

TABLE 10 Consumption of Fisheries Products per Head b y Regions, 1964

JavaandMadura Outer Islands (kg/head/ycar)

Fish Product Fresh 2.6 16.1 Dried and salted 3.1 5 . 2

Source: Asikin Natasasmita and Harimurti Martojo, 'Meat Production and Marketing', Paper IIIA, Working Group 111 (Production and Marketing of Protein Rich Foodsluffs), NAS-LIP1 Workshop on Food, Djakarta, 1968.

Java, for example, do not much like fish that is heavily salted, but producers in the same area make such fish for sale on the West Java market. Fish consumers in East Java are scrved in turn by fish brought from Bandjarmasin. Similarly, consumers in East and Central Java do not like to buy or eat fish from Band- jarmasin more than one month after it has been caught and processed while Djakarta consumers are still willing to buy it after two months, and consumers in Padang after three months.

Earlier it was noted that Indonesia used to import quite sub- stantial amounts of fish. These fish came mainly from Singapore and Thailand, and were imported to meet demands for types of processed fish that could not be supplied locally.

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TABLE 11 Fish Production by Regions, 1965-67

Production per head ('000 tons) (kg)

Production

Sumatra 274 15.3 Java Kalimantan

140 87

1.9 18.7

Sulawesi 123 15.3 Rest of Indonesia 49 6 . 1 All Tndnnesia 673 6 .1

Sources: Col. 1 Saanin, op. cit., p. 10. Col. 2 Pooulntion Census 1961, Central Bureau of Statistics,

Djakarta. Figwes adjusted for a rise from 97m. to 1 lorn. in total popula- tion years 1961 to 1967.

The Fishing Industry, 1951-67. The industry has expanded substantially since 1951, for not only has total production risen hut so also has fish consumption per head. The industry has been able to do this only by making substantial investments in fishing equipment. It has done this, moreover, from its own rzsources during a period when the national cconomy was becoming more and more unstable and thc climate for economic enterprise was becoming progressively less favourable, and in the face of very considerable specific handicaps-poor communications, poor transport facilities, a lack of modern processing and storage facilities, and a high cost marketing system.

Under these circumstanccs it is not surprising that investments by producers for the most part took traditional forms or that returns to capital and labour declined. There is a closc analogy with farmers in the outer islands who were also able to increase substantially their production of rice in the same unstable and unfmourable economic environment. The unstable economic conditions that have prevailed since 1951 have not been inimical to all forms of enterprise but have militated against the develop- ment of a modern fishing industry that will give readily attainable higher returns to both capital and labour employed in the industry.

TOWARDS A DEVELOPMENT POLICY FOR THE FISHING INDUSTRY Although hard to establish with any finality, a good case can be made for the view that, up to a certain point, capital invested in the Indonesian fishing industry will give higher returns than in agriculture. The physical potential exists, markets at home and

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abroad can absorb more fish and fish products at remunerative prices, and there are a number of technological improvements that can he easily introduced. However, before any consider- ation is given to the forms a development strategy might take, something should be said about what governments in Indonesia have done to promote development in the industry.

Policy in the Colonial Period (1904-41). The Dutch did a number of things designed to help the fishing industry. These included thc establishment of a fishcries research station at Pasar Ikan (Djakarta) in 1904 and of a number of substations in the following years. Experiments wcrc conducted with modern trawlers on several occasions from 1910. A number of fish markets and a cold store o f 400 tons' capacity'' were built and an open auction systcm established. Encouragement was given to the establishment of fishcries co-operatives, and between 1912 and 1941, lifteen co-operative socicties, with twenty-two branches. came into existence, most of them in Java. Credit was made available through the People's Bank; fishing equipment of all sorts was exempted from customs dutics; and a number of useful surveys were made.

The fishcries policy of the Dutch undoubtedly provided bases for improvement in several parts of the industry. But the Dutch regarded the modernisation of the industry as of little importance, preferring instead to direct their efforts towards improving the performance of a traditional industry and the welfare of the people in it,lh For example, even though their fishing experiments showed that returns to labour and capital were highcr if modcrn boats were used, the Dutch did not press for their widesprcad adoption because, first, catches were so large that the domestic market could not absorb the catch at reasonable prices and, second, much of the catch consisted of types of fish that did not have a domestic market if sold fresh or in the usual dried or salted form.

Policy since Independence. The efforts of the Indonesian government in the fisheries field have been rather more wide- ranging. The work started by the Dutch was continued but there were also new departures, including the establishment of a fish- eries faculty at the Institute of Agriculture, Bogor; the building

l'This cold store is still the only one for fish in the whole country excluding Wert Irian. (Saanin, op. cit., p. 20.)

"The emphasis in the rice-breeding program was similar; most efforts were directed to the breeding of higher-yielding varieties that did not need fertiliser.

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of two modem processing facilities at Kotabam and Ambon; the purchase of a refrigerated fish carrier; the building of new ice factories; and more determined attempts to break Perapin's n e a monopoly in inter-island trade. Several of these new activities did not prove to be nearly as successful as had been hoped-the factories at Kotabaru and Ambon have suffered from shortage of tinplate and of fish as well; and the establishment of a single- buyer single-seller system in South Kalimantan in 1964 by the state trading enterprise Budi Bhakti caused priccs to producers to fall rather than rise and led to a decline in production from 84,000 to 60,000 tons.'o

Efforts along lines begun by the Dutch were probably on balance more successful. For example, by retaining the duty-free exemption for fishing equipment, and by making credit more readily available, the number of motorised boats was encouraged to rise from 115 in 1951 to over 3,300 by 1967.?O The number of co-operative societies also expanded greatly, to 886 with 349,000 members in 1964, though few of these societies were sufficiently strong to enable members to get appreciably better prices for their catch.

The work done by the fisheries research and extension people has helped to lay a foundation for future development, but it has not been as effective as it might have been. There are two main reasons for this. One is that money and trained people have been in short supply. The second and no less important is that the main goals of the fisheries program have remained the same as thoqe pursued by the Dutch, namely, national self- sufficiency and improved welfare for fishermen rather than the development of the industry as a whole.

Possible Development Strategies. The expansion of Indo- nesia's sea fishing industry that has occurred since 1951 pro- vides persuasive evidence that it should not be too difficult to create a morc productive modern fishing industry financed largely from within the industry itself.

Recent dcvclopments in Indonesia hold out the promise of considerable changes in Indonesia's fisheries policy in the next few years. One is the government's stabilisation program which will be followed by a development program. These have as their aim the creation of an environment which encourages construc- tive economic enterprise. The second is the decision of the

"Figures for all Kalimantan. =It is reported that much of this credit was not repaid.

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government to allow private foreign investment in the fishing industry.

Before World War 11, Japanese fishermen introduced to Indo- nesia several new methods of catching fish which were subse- quently adopted by Indonesian fishermen. The Japanese fisher- men, however, like the European planters and the oil companies, were not producing for Indonesia's domestic market but for export.

After Indonesia gained its independence, foreign private investment was discouraged in all fields, although in the fisheries field there was some illegal fishing by foreign, particularly Japanese, fishermen, evidence that it was not unattractive to private cntcrprise. Following the change in Indonesia's policies towards foreign private investment after 1965, many private investors have indicated their willingness to invest in Indonesia. Of $324 million committed by October 1968, $1 1.5 million (or 3.6 per cent of the total) was for investment in fisheries: Table 12 gives details of some of the projects.

It has not been easy in some cases for the Indonesian govern- ment to conclude agreements with prospective investors in the fisheries field. The fishcrics agrecment with Japan was signed on 27 July 1968, but only after discussions lasting more than half a year. In the process of reaching agreement, pressure was apparently exerted by the Japanese government which threatened to delay the transmission of credits needed for the stdbilisation program, and when agreement was finally reached it was felt that Indonesia had been disadvantaged because the royalty was too low and because no provision had been made to make pay- ments of the ADO (the 10 per cent export tax paid directly to provincial government) to the provincial govzrnments in whose waters the fish were caught.*I

It is hard to come to any firm conclusion at this stage about the general desirability of increased foreign investment in the fishing industry in the longer term, but a number of points can be made. First, the foreign investors arc export-oriented, and if exports expand as hoped, this will represent a welcome addition to Indonesia's foreign exchange earnings. Second, the methods they use to catch, process, and market the fish are more effective than those presently in use by Indonesia's own fishing industry, since the foreign firms conduct integrated operations covering all aspects of the industry. Third, the foreign firms could serve to

" B Y , 8 Aug. 1968.

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TA

BL

E 12

Fo

reig

n C

apita

l Znv

estm

ent i

n In

done

sian

Fish

erie

s In

done

sian

In

vest

men

t In

vest

men

t Fo

reig

n in

vcst

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terp

art

ratio

$m

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on

'Typ

e of

fis

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A

rea

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Cor

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70%

-30%

1

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Pear

l A

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m, K

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and

Tan

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r Is

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s (M

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n T

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P

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90%

-10%

2.

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on K

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%-1

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and

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2.

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and

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th S

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est

of A

mah

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and

Nor

ther

n pa

rt o

f C

entr

al

Ccl

ebes

(T

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Don

do a

nd

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uran

g),

and

sout

hern

par

t of

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tral

Cel

ebes

(T

eluk

L

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) A

roun

d L

aut

and

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Isla

nds

(Sou

th B

orne

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and

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teng

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Bur

ung

(sou

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va)

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par

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Sou

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and

near

the

sou

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n pa

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Ten

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Sour

ce:

Eco

nom

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for

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stor

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Ind

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ia,

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tral

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k of

Ind

ones

ia,

Dja

kart

a, 1

968.

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introduce to Indonesia’s fishing industry new technologies in catching and processing and also new management methods.22 Fourth, there will be conflicts between local fishermen and the foreign fishermen in established shrimp fishing areas, for example, and these conflicts will have to be mediated. Fifth, foreign fishermen are less likely to be concerned about the possibility of overfishing, and steps will have to be taken to ensure that this does not occur. Sixth, the export-orientation of most foreign fishing companies means, cet. par., that the activities of these companies may make only a small contribution to the creation, in Indonesia, of the docking, processing, and storage facilities required to modernise the domestic industry.

Foreign private investment in the fishing industry has brought some benefits, and could bring more, hut it has also raised the possibility of some quite considerable difficulties in the future. But what are the best ways to develop the domestic fishing industry? In the author’s view every effort should be made to emulate what the foreign fishermen are now doing. This means that a fishcries policy should be devised that will encourage the domestic industry to exploit in the most economic way all the fisheries resources in Indonesian waters.23 A new fisheries policy of this sort would emphasise the production of fish for sale in both domestic and export markets; it would require the introduction of measures to encourage the adoption of modern fish catching methods, and also modern methods of transporting, processing, and marketing fish within Indonesia. To achieve this latter goal will require the development of capital from private as well as public sources to build or obtain the necessary equipment and facilities. It will also require the establishment of new, vertically integrated firms (whether co- operatives, as in Japan, Australia, and elsewhere, or state or privately operated), which are needed to market the increased catch efficiently.

CONCLUSION

The recent economic history of Indonesia’s fishing industry illustrates many of the problems that have long hampered

Six of the eight agreements listed in Table 12 provide for the estab- lishment of joint ventures, thus making it more likely that local fishing interests will in time be able to avail themselves of the potential advan- tages listed here.

*3This is the same basic strategy that has been successfully followed by such countries as Norway, Iceland, and Japan.

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economic development in this archipelago that is ‘rich with natural resources’. The resources are there, and have attracted thc foreign firms, with their advanced methods and better organisation, to come to fish in Indonesian waters. Indonesians have shown themselves both able and willing to make the sacrificcs needed to put the resources to use, but given the economic conditions that have prevailed, it is not surprising that the investments that have been made have been mainly of tradi- tional sorts.

The incentives needed to induce Indonesian nationals to make long-term investments in modern facilities have been mostly lacking. Such incentives are needed to turn Indonesia’s fishing industry, now technologically static and oriented to serving domestic markets, into one that will provide not only a better livelihood for the people who work in it but also increased foreign exchange earnings and greater national wealth. One must hope that the necessary incentives will be provided following the success of the government’s stabilisation program.

Sulaeman Krisnandhi

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Page 26: The Economic Development of Indonesia's Sea Fishing Industry               1

SELECTED READING L I S

Asikin Natasasmita and Harimurti Martojo, ‘Meat Production and Marketina’. Paoer IIIA. Workinc GrouD I l l (Production and Market- ing of frotein Rich Foodstuffs), N h - L I P I Work.irop an Food, Djakarta, 1968.

Bottemanne, C. J., Principles of Fisheries Development, North Holland Publishing Co., Amsterdam, 1959.

Eddiwan, Perkembangan dun Fuktu dari Koperrari Perikanan, IKPI, Djakarta, 1965.

Hardenberg, -, ’Kemungkinan Perikanan Laut Dilibat dari Sudut Bio- logis’, Alnianak Pertoninn, Djakarta, 1953.

Kartomo, Agus R., ‘Comparison of Fishing Efficiency between A. Long- lines and Rawei; B. l r a w l and Dogong; C. Various Types of Payang‘, Proceedings, 7th Indo-Pacific Fisheries Conference, FAO, Bangkok, 1958.

Krisnandhi, S. ‘Tataniaga Ikan di Indonesia’, Proceedings, Konperensi Nosionnl Ekonorni Perlunian Ke-I , Tjibogo, 1964.

Saanin, H., ‘Sistem Pemasaran Ikan dan H a d 2 Perikanan Didalam Negeri dan Keluar Negen’, Pioceedingv, Konperensi Nasional Ekonomi Pertaninn Ke-I , Tjibogo, 1964. - ‘Fisheries Products’, Paper 11, Working Group I l l (Production and

Marketing of Protein Rich Foodstuffs), NAS-LIP1 Workrhop on F w d , Djakarta, 1968.

Sinaga, R., Totaniaga Karet Rakjof, Agro-Economic Survey, Djakarta, 1969.

Szczepanik, E., ‘An Introduction to the Economic Analysis of Fisheries in the Far East’, Ekonomi dan Keuungoan Indonesia, Vol. 9, Djakarta, 1956. - ‘Fishermen’s Co-operatives in the Indo-Pacific Region’, F.A.O.

Trainiw Centre in Fisheries Cooperatives and Administrotion, Vol. 11, FAO, 1958.

Various reports from the Sea Fisheries Service and the Central Bureau of Statistics.

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