The existing structure of the domestic market is characterized by the large number of small traders working with limited capital. Traders commonly do not re-invest profits but continue to operate at the same level every day.
A large proportion of the product landed is immediately salted and dried, while the rest is either sold fresh locally or is shipped to one of the major centres for resale or export. The product will change hands many times before reaching the consumer.
Margins are applied at each exchange and these vary widely, with the higher margins applied in the large population centres. The total margin, between the producer price and the consumer price, tends not to exceed 50%, while individual margins at the wholesale level can be as low as 2%, although 4–5% is more common.
Government statistics show a total of 7 600 t of exported fresh fish including live fish, in 1984. Of this 94 percent was destined for Singapore.
Prior to export, the product is handled by the same traders and in the same distribution channels as products for the domestic market. The exporter is also involved in the domestic market, which accounts for the bulk of his volume. Generally these are small businesses that ship less than 3 t/day; there are approximately 15 in total varying in size.
The live fish trade that operates from Riau to Singapore is thoroughly integrated with the Singapore trading houses and the export agents usually acting as importers for a variety of goods from Singapore. The product is collected from the outer islands and transported in specially designed vessels to Changi Point. The agent in Singapore takes 10% of the realized price and the exporter takes an additional 4% before the proceeds are remitted to the producer.
Exporters are generally conservative in their approach toward developing new markets and reluctant to commit further investments to their business.
Seaweed production is located throughout the country, especially in the eastern provinces, although the exporters are concentrated around Surabaya and Denpasar. The product is sold to the exporters by collectors who trade in a range of preserved marine products.
The principal species harvested is E. spinosum, with small quantities of E. cottonii now being grown. Both of these are largely destined for export to processors of carrageenan, though on Lombok an estimated 80 percent of the production is used locally for human consumption in the form of pencok. It is unlikely that any prospects exist of developing new markets for this product.
Prices for export quantities range from $US 300 to 400 with E. cottonii currently at a premium price. Producer prices are between Rp 220 and Rp 2601, depending on the distance from the collection centre.
The Philippines account for over half of the world production of E. cottonii and only three companies account for 90 percent of the world production of carrageenan. As a result, this is a very concentrated and secretive market.
The choice of species for cultivation must take into account that while there is an estimated shortfall of 10 000 t of E. cottonii at present, the relative ease with which production can be increased allows for the possibility of market saturation in a very short time.
1 Exchange: $US 1.00 = rupiah (Rp) 1 126 (August 1986)
The question of setting up processing facilities involves acquisition of top technology and this can only be done through some form of joint venture. The major companies in the industry are understandably difficult to persuade, given their high level of investment in existing plants, and they would have to be offered very attractive terms to consider such a proposal. Two smaller companies from Japan and South Korea have expressed interest in joint ventures in Indonesia.
An intermediate step already taken by the Philippines is the establishment of a plant that produces semi-refined carrageenan. This can be sold to the major producers for further refining or to the final market, though this is a difficult market to enter.
The organization of the growing of seaweed needs careful consideration, especially as one is competing with the Philippines where production units are reported to be large-scale and close to transport centres. It is suggested that cooperative units, while of limited success in the fisheries sector, may be appropriate here.
There are many constraints on the development of these sectors, including the structure of existing marketing channels. The reasons for the large number of small traders are examined. The lack of capital growth in individual businesses is largely due to the limited management skills available.
The physical facilities of the distribution system are also seen as a constraint insofar as the poor conditions observed in many centres detract from the value of the product.
Location of production sites and the need to rationalize this by product group are critical factors which will affect the economic viability of the business.
A specific constraint with respect to green mussel production is marked consumer resistance to the product in the domestic market, demonstrated in recent years. Overproduction by other countries is reported to have depressed prices for the processed product in the international market.
The general strategy proposed centres around the need to attract private sector interest to this new industry which, on the basis of the development plan projections, will be able to produce over $US 10 million of product in raw material value alone by 1988 and considerably more in export revenue.
The establishment of a task force that comprises a range of skills is required in order to handle the work programme proposed. Prototype business profiles should be prepared by sector, e.g., finfish - export, and promoted to the private sector. Any interest should be followed up with assistance in preparing specific case-by-case profiles with each company and thoroughly investigating the feasibility of the investment.
Emphasis is put on the need to encourage vertical integration of production and marketing through the use of producer contracts, where the company undertaking the marketing has decided not to actually go into production.
The strategy at present is almost entirely oriented toward export markets and there is a clear need for the development of a central information resource on these markets.
With respect to the specific problem of marketing green mussels, a number of options are considered, including development of a vacuum-packed product for the local market and testing of a possible export market for frozen meat.
The implementation of the strategy requires the establishment of the post of investment/business/marketing development officer, or equivalent thereof, preferably within the Directorate for Enterprise of the Directorate General of Fisheries (DGF). It is around this post that the task force referred to above would be formed. The skills required include investment proposal formulation, economic appraisal, export market development and joint venture negotiation.
Technical assistance from FAO should be available for export market and product development.
The Singapore export market is traditionally the main destination for the product and it accounted for 94% of all fresh marine fish exported from Indonesia in 1984. The market for high value finfish is estimated at around 20 000 t and it is growing. Limited supplies are often the main problem faced by traders. Seasonal variations and customary festive periods can create windows in the market which allow prices to reach great heights; during the Chinese New Year, live grouper will reach over $US 50/kg. The prospects for growth are good and access to the markets is easy.
Hong Kong is identified as the priority market for attention. Practically all of the species in the project are classified as high value in this market with price levels of live fish exceeding those in Singapore. Growth has been sustained at a high rate in recent years and is forecast to remain so. Once again, seasonal variations create substantial rises in price, as do certain festive occasions.
The other markets which should be researched are the USA (Hawaii and California), Australia and Japan. This should be done initially by gaining access to reports already completed on these markets and through information from the commercial section of the Indonesian Embassy in those countries.
A number of studies have been undertaken in the past which have been concerned with the marketing of fish in Indonesia (Appendix 7). At present, a pilot fish marketing project is in operation in East Java and involves extensive research into distribution and consumption of fish in that province. Also, in 1985 the economics faculty of the University of Indonesia produced a report on the marketing of fish in the Jabotabek area (DKI Jakarta, Bogor, Tangerang, and Bekasi).
The general opinion after a broad survey of the domestic fish marketing scene is not at all encouraging. The business is characterized by a large number of small traders operating with minimal levels of working capital and often no fixed assets. The trading arrangements between these traders in their different geographic and economic locations in the market are usually informal and at times completely ad hoc. While the limited levels of capital clearly present a major constraint to the development of the business, it is easy to see why small traders feel more comfortable remaining as such and accordingly remove the profits of each day's trading at the end of the day, rather than re-investing it in the business.
The typical middle man, may advance money to the fisherman and also purchase the day's catch which he despatches on consignment to a trader in the main market.
Depending on the location of the landing site and the immediate point of sale by the fisherman, there are four principal destinations for the product:
Sale locally to be salted/dried for possible re-sale elsewhere. The portion of landings handled in this way can be as high as 60 percent as reported in Maringai, Lampung.
Sale locally for fresh consumption. The portion of catch sold in this way depends on concentration of the population relative to the volume of landings.
Sale for transfer and re-sale in deficit areas, notably Jakarta, Surabaya and Medan.
Sale for transfer and re-sale in export centres, again notably Jakarta, Surabaya and Medan.
While this description may seem to simplify what can be a fairly complex series of trading and transport arrangements, it does hold true for the majority of the landings in the provinces visited. It should be noted however, that it is very common for the fish to change hands many more times than would be evident from the description. This may be illustrated in the case of product landed in rural East Java which may be purchased by a local trader, direct from the boat or via the auction, then transported to Surabaya to another trader who consigns the fish to a buyer in Jakarta, who in turn may either sell it locally to a retailer or export the product to Singapore. Here it will pass through at least two more exchanges before reaching the consumer.
While this distribution channel may seem impossibly cumbersome, the product can be transferred through the channels and reach the Jakarta market within 24 h, and the Singapore market within 36 h. In general, it is quite common for fish to change hands at least three time when it is moved from outlying areas to deficit areas.
Because of this, it is worth considering the margins which are applied at each stage. Taking the final price to the consumer at the retail markets as the total, research shows that the mark-up over the landed price will rarely exceed 50 percent and is more commonly much lower. Obviously, the percentage will vary considerably from surplus port areas to deficit major population centres. This is well demonstrated by the following examples. It should be noted that this information is based largely on the price records supplied by the Dinas Perikanan in the respective provinces.
| Centre | Species | Landed Price Rp/kg | Retail Price Rp/kg | % Margin |
| Ambon | Tenggiri | 600 | 700 | 14.3 |
| Denpasar | Tenggiri | 2 800 | 3 000 | 6.6 |
| Jakarta | Tenggiri | 580 | 1 585 | 63.4 |
| Ambon | Tongkol | 600 | 700 | 14.3 |
| Denpasar | Tongkol | 900 | 1 000 | 10.0 |
| Jakarta | Tongkol | 350 | 700 | 50.0 |
Note: The above prices were collected during September 1986
Unfortunately, it was not possible to show similar comparisons using the project species, as these were not recorded during the same period in a sufficient number of provinces. A sample of prices for these species is, however, included in Appendix 3.
The distinction between Jakarta and the other areas is strikingly clear and arises from three major factors. First, there is usually a shortage of supply to the market; any over-supply situations which may occur are very quickly dealt with by the key traders at the Jakarta Fishing Port, Muara Baru. Second, it is clear that there will be an increased number of people handling the product compared with the product on sale for local consumption in the other centres and each of the people in the chain apply their mark-up. Finally, in part as a result of the supply shortage, the individual margins themselves tend to be higher, possibly reflecting the higher overall costs of operating in Jakarta.
The range of individual margins is quite wide and tends to increase through the distribution chain with the retailer taking the largest share. Main wholesalers handling relatively high volumes of product will work on margins of between 4% and 8%.
Official statistics for 1984 show total exports of 7 600 t of fresh/chilled marine fish which includes live fish. The total value of these exports was $US 3.5 million. It is likely that this is somewhat underestimated though it is difficult to estimate the real total. The figures do not reflect the real value of the exports as these are notional fob prices and have little to do with the realized price in the export market. In 1984, Singapore accounted for 94% of the export volume, including all of the grouper recorded, 7.4 t and virtually all of the pomfret, 919 t (759 kg were sent to Hong Kong).
Exports of cockles reached 74 t and most of these were sent to Malaysia with the exception of 2 t of salted/dried product, which was sent to Japan.
The channels through which the export products move are the same as those for domestic product. At a certain point however, the export product will be separated from the rest and packed with far greater care. In a case observed in East Java, the product was brought into Surabaya and sorted, with the inferior product sent to the local market and the higher quality product re-packed and sent by train to Jakarta. On arrival in Jakarta, the same process is undertaken again with the top quality species in good condition, air freighted to Singapore.
The particular species suitable for export are specified in section 4 and they correspond to those selected for the project.
The traders in the market generally operate on a small-scale and are relatively few in number. Given the total figures quoted for export and the fact that these companies claimed to be sending no more than 3 t/day, it can be deduced that the total number of nationally full-time exporters of fresh fish is probably not more than 15, of which six are located in Jakarta, five in Medan and the remainder in Riau and Surabaya. This does not include an undertermined number of part-time exporters who would not account for more than 10% of the volume. While these larger exporters send consignments every day, their main volume of business is in the domestic market. In the case of the Medan trade, the export consignments are packed in the stalls of the wholesale market in the morning, while other business is carried on. In Jakarta, there are designated export-packing areas at the Muara Angke which are used by five or six companies.
The live fish trade, which is successfully managed out of Batam and Tanjung Pinang in the Riau province, differs from the fresh trade in that the close proximity to Singapore markedly affects business. The major advantage is the ability to be able to consign live fish in specially designed boats, which are only three hours sailing time from Changi Point. Prices are commonly quoted in Singapore dollars, though the recent devaluation has caused buyers to revert to the rupiah. The business is heavily influenced by Singapore trading houses, and a very complex set of relationships and credit arrangements tie the Riau exporters to the Singapore partners. This includes the arrangement whereby an exporter of fish will also trade as an importer of a variety of goods.
The business appears to be well managed and though insufficient information is available on the volume of trade, the monthly total between the two centres is approximately 50 t. The major constraint to increasing volume was the limited availability of fry, according to trade sources.
Trade margins in the export business vary considerably and depend upon the relationship with the producer and other dealers further along the line from the exporter. Two of the exporters claimed to be working on net margins of up to 5% on product which was sent to them on consignment. This means that they would remit the full amount sent back from Singapore less expenses and their 5%. Other traders conceded that the margin could be greater. While it is known that some exporters take the full risk by purchasing the product in advance and taking all of the profit. The Singapore agent generally charges 10% of the realized price.
Again the question of margins and the actual return to the producer can be difficult to determine. It does not appear that the traders are dealing unfairly with their suppliers, though there are undoubtedly occasions when this will occur.
The planning for export market development does not seem to go beyond the Singapore market, in spite of the fact that some traders are aware that their high value product is being trans-shipped to the higher priced markets in Hong Kong. The shortage of supply is in part the cause of this and there is little point in developing new markets without dependable supplies. Even so, there is a reluctance to develop the higher priced market and to consider any real investment increase in the business, with few exceptions. This is further discussed in section 2.5.
This section for Eucheuma seaweed describes both the existing structure of the domestic market and its position in the world market. It also includes suggestions on the possible development of the industry in Indonesia.
The market is characterized by a large number of small producers who sell predominantly to small-scale collectors, who themselves are trading in other miscellaneous marine products. The collectors in turn, sell to a limited number of exporters, some of whom have direct formal links with processing companies that purchase the dried product. The exporters are heavily concentrated around Surabaya and Denpasar, with a limited number operating from other centres, such as Ujung Pandang. Production is fairly widespread and often located in the more remote areas of NTB, NTT, Maluku and Irian Jaya. Given the durability of the dried product, there is no problem in transporting shipments to distant centres for the purpose of freight consolidation. There are not more than six companies of any significant size in this market, of which Copenhagen Pectin (CPF), is the largest. There is also a recently established cooperative based in Denpasar, which has handled some 200 t since 1985.
In the fisheries sector, the producer is quite often financed to some degree by the collector, which markedly affects the price he receives for his crop. A recent attempt by a Surabaya-based company to use credit on a larger scale in Lombok to have some assurance of supply, was unsuccessful. The main problem appears to have been the popularity of the product for human consumption in the form of pencok, a boiled preparation wrapped in banana leaf which can produce a higher return to the farmer. It is estimated that some 80% of all seaweed production in Lombok is destined for human consumption.
The principal species harvested both cultured and wild, is E. spinosum, while E. cottonii remains a minority species. It is the policy of one company's representative, CPF, to develop E. cottonii production to the extent that it would account for 75% of the Bali crop, and stock was imported from the Philippines in 1984 to achieve this. Current production has reached 200 t/ year and is targeted to reach 3 000 t for Bali alone. Other sites are being developed in NTB and NTT.
Most of the exporters have strong reservations about the quality of the product they are buying and this is reflected in the prices obtained. The problems are related to every aspect of the process from initial planting to washing and drying. Frequent complaints are made about the early harvesting of E. spinosum in particular, and the high moisture content and high percentage of extraneous materials in the finished product. Quite often the exporter has to wash, re-dry and filter the product again, all of which results in extra costs and an inevitable reduction in the producer price.
Total export figures are difficult to calculate given the fact that the species are not broken down in the data. It is likely that the current figure for Eucheuma is approximately 2 000 t, of which 300 t may be E. cottonii and the remainder E. spinosum. Recorded exports for all seaweed species in 1984 were 3 000 t, of which half was destined to Singapore for onward shipment to either the USA or Denmark, and 140 t to Japan.
It is difficult to quote prices with great confidence as the limited number of exporters and overseas buyers produces a somewhat secretive market. There is also some variation contingent upon quality; the Indonesian product suffering badly as a result in past years. The quoted cif US and Europe prices for E. spinosum range from $US 300 to $US 350/t and those for E. cottonii from $US 350 to $US 400/t, the latter prices offered by a firm in South Korea.
The producer and collector prices are even more varied and this probably reflects different credit arrangements. At this level there is as yet, no detectable distinction between prices for E. spinosum and E. cottonii, though this is anticipated in the future. Producer prices for dried product are around Rp 250–260/t in the Bali/NTB area and fall by about 10% in Sulawesi and Maluku. The collector prices vary between Rp 300 and Rp 360/t in the former area, falling by around 10% in the other areas.
The structure of the market was researched in 1982 by the INFOFISH project in collaboration with the Asian Development Bank (ADB) and the resulting report is found in the references (Appendix 7).
The manufacture of carrageenan is highly concentrated with three companies supplying 90% of the world production, the two largest are located in the USA and Denmark, the third is in France. The details of these companies are presented in Appendix 5.
The dominant force in the production of carrageenan-producing Eucheuma is the Philippines, which is estimated to be currently producing over 30 000 t/year, some of which is for semi-refining in the country. This figure probably represents more than half of the world's supply and is almost entirely composed of E. cottonii. It must be noted that these estimates have been prepared following consultation with industry representatives in Indonesia, no authoritative, publicly available study has been done on the market since 1982.
The development of the business depends upon the price of seaweed gums relative to each other and competing materials, the availability of raw materials and the continuing development of new end-uses. This last point involves very high levels of technology and new developments are reported to be proceeding at an accelerated pace.
These options include the choice of species for cultivation in the short term, the question of what long term end-use this crop will be put to and how the maximum return can be derived for the national economy. The choice of species for cultivation is by no means straightforward, though it will appear relatively so when compared with the greater question of downstream processing.
The key questions which face producers in Indonesia revolve around the choice between production of E. spinosum or E. cottonii. Industry sources suggest that there is a shortfall of some 10 000 t of E. cottonii at the present time, though it is not clear how long this will remain the case. Certainly the offer prices for E. cottonii reflect this and at least two overseas buyers are reported to be trying hard to obtain supplies from Indonesia, with forward contracts being offered at up to $US 400/t.
A source of major concern is that market saturation can be quite easily achieved given the relatively simple and rapid way in which the product can be cultivated. The fact that the Philippines is so heavily involved with E. cottonii also implies that any other country must compete directly with the Philippines in order to gain a market share. The advantages of production in the Philippines include more proximate and larger-scale production centres than elsewhere, combined with reported lower freight rates to the market.
Processing facilities were established in the Philippines some years ago. These two plants were expected at one point to gradually develop the capability of complete processing of carrageenan, though they have never been able to acquire a sufficiently high level of technology to do so and were last reported to be producing only the semi-refined product.
The problem of developing or otherwise acquiring technology is not the only problem facing an aspiring processor. Penetration of the market is extremely difficult, and consistency of quality in this highly demanding market is essential, though it is no guarantee of access.
Given the high levels of technology and the concomitant high levels of investment in existing plants that the major producers have incurred, any offers of joint ventures must be extremely attractive. Two of the smaller producers in Japan and South Korea have expressed some interest in establishing joint venture operations in Indonesia, though there is no confirmation of this. Clearly a major incentive to any company considering such a move would be an assurance of consistent quality and volume of supply. These exigencies have significant bearing upon the manner in which the product is cultivated, harvested and handled and tend to support arguments for large-scale production operations with grower contracts, rather than small-scale subsistence operations.
These matters should be addressed at the outset rather than dealt with after more growers are established. It would be appropriate to undertake some detailed research into the Philippines experience at this point. The Government should discuss the situation with the representatives of the major producers in the country before talking with the companies themselves.
A model which may be of interest has operated in the Pacific region over the past four years. Essentially this involved the governments of two countries setting up two separate joint ventures with a small producer in New Zealand; the development costs partly underwritten by a development agency. At this stage, the project has hardly moved beyond the establishment of cultivation in one of the countries, though in the other the plan is to start primary treatment processing in 1987. It is not known how far processing will go, although it is probable that eventually semi-refined carrageenan will be produced.
Under the present circumstances and for the foreseeable future, it is likely that the most promising option will be the establishment of a joint venture for semi-refining. If such a plant were established, it would allow two choices in the marketing of semi-refined carrageenan. The first and simplest choice would be to sell to the major producers who would buy for further processing. The alternative would be to market the product directly to the end-users, such as the pet food industry who do not require a clear gel. This is an extremely difficult market to penetrate and become established in; consistency of quality is critical. Given that the product is a key agent in another company's finished product which will probably be widely distributed, it is easy to see how vital the assurance of quality becomes.
The organization of production of the raw material needs careful consideration at an early stage. The advantage of the Philippines include large-scale production areas which are accessible to export and processing centres. In the next section, cooperative production and marketing units are discussed. It is suggested that while cooperatives in the fisheries sector have at best a mixed rate of success, they may prove to be more effective in the seaweed sector where there are fewer buyers at all levels.
This section describes many of the difficulties facing the project in its attempt to develop the marketing of the various product groups. Consideration of these constraints, as well as the opportunities identified elsewhere in the report, have led to the formulation of the strategy described in the next section.
The major constraint is the structure of the marketing channels in both domestic and export marketing. The large number of small traders at all levels of the business contribute to many problems in planning the effective and profitable distribution of significant volumes of product.
It is worth considering the reasons for this situation and the possible advantages derived from them before describing the problems themselves. The major advantage derived in the national context is the wide distribution of economic benefits from the fishing industry. At each stage of the handling of product, from the landing site to the consumer, some financial benefit is conferred to someone. As the product may change hands from three to seven times before the consumer purchases it, the number of people who profit from the business is large though on a relatively small scale.
The other benefit of the structure is that remote landing sites will be supported by small marginal traders, whereas business of any scale would find this unprofitable.
The reasons behind the evolution of this structure are undoubtedly more complex than they appear to be, though they probably have to do with the combination of both limited management expertise and availability of capital, the latter being in part a result of the former.
Typically, traders at each level of the distribution channel operate on the basis of a complete turnover of their working capital every 24 h. With few exceptions, the profit is removed from the business immediately to meet other expenses and the trader goes back into the market with the same amount of capital. Clearly, there are some traders who do re-invest and accumulate assets, notably boats and facilities for handling, though even these more entrepreneurially-oriented traders tend to reach a cut-off point beyond which they no longer invest in the business. Some diversify into other areas of trade, while others simply improve their personal lifestyle. A few move into export, though here there also appears to be a cut-off point beyond which no further investment is made in developing markets, outside of the traditional Singapore and Penang ones.
It is not only a lack of management expertise which causes this situation. One needs to understand the problems of trading in the market before considering the question. Traders rely on a fairly high level of trust in order to stay in business. This is due to the system of extending credit throughout the business which almost always leaves traders highly exposed. While the individual sums are very small, it should instead be considered in terms of a percentage of the trader's capital. Typically, where product is moving from an outlying landing site to a major market, there is considerable risk involved for the initial purchaser of the product; he has probably advanced the largest part of the catch value to the fisherman to enable him to go out to fish again immediately. From the time of purchase onwards, he has no control over the price the fish will return to him, unless he is able to find a dealer who is prepared to offer an advance payment, in which case that dealer becomes exposed himself and so on down the line. At each level therefore, traders are operating on the capital from the previous day's trading.
Out of necessity, the traders have developed particular contacts and a degree of trust in those contacts to the extent that, where there is no reliable telephone service as is often the case, they are prepared to ship sight-unseen with no idea of the state of the market, but trusting that their trading partner will do their best for them and remit the proceeds promptly.
Under these circumstances, it is easy to understand why traders are reluctant to expand their businesses and risk greater investment. The system does not encourage this and the burden of supervising and managing a wider network of contacts based largely on trust, is beyond the capabilities of the majority.
It may be asked why, with many large and diverse businesses developed in Indonesia, nobody has sought to apply the same management skills to the fish trade. The answer is not clear, though probably the competition from traders who operate with negligible overheads, has proven too great for the large companies.
The other reason for the evolution of the trade in this form, and a reason why companies are reluctant to invest in the business, is because the marine capture fishery is seasonal. Traders who have put some of their profits aside for the down-time simply sit and wait it out. Few companies are prepared to see capital sitting idle while still incurring overhead costs when it could be employed more consistently in another industry.
There are other reasons to explain the structure of the business and the failure of it to develop along more efficient lines. It is hoped that the foregoing explains the difficulties faced and their probable causes.
One of the purposes of a distribution system is to enhance the value of the product, thus attracting a higher price from the consumer than the costs of production. Simply transporting product from the point of production to the point of final sale is not in itself sufficient to achieve this. The possibilities for enhancing the value of a fresh product, which deteriorates in quality from the moment of capture, are more limited than for other types of product. However, the principle still holds true, though it is slightly amended to read, “to limit as far as possible any deterioration in value”. In marine products, the value is enhanced in different markets by a variety of processing and packaging inputs. Even the form of transport is critical insofar as air freighted product has greater value over product shipped by surface transport, all other things being equal.
This discussion centres on the manner in which product is handled and the often adverse affect this has on the quality of the final product. The Government has made an effort to improve the standard of the landing sites and markets; the final quality of the product is largely determined by the state in which it is landed. Many of the buildings, facilities and handling practices observed during the field visits needed to be improved. There are exceptions to this, including Muara Baru which boasts impressive handling facilities. It is interesting to note that in one of the most poorly equipped markets in Medan, some of the best quality fish was being prepared and packed for export.
Most of the landing sites visited were not equipped with ice-making facilities. However, there is a very large and expanding private sector engaged in producing ice not only for the fishing industry. There is a problem with the great distances over which ice often has to be transported, though this is usually fairly well organized by either a cooperative or private trader.
The retail markets observed in many centres maintained a low standard of presentation with few exceptions. An increasing number of supermarket chains have begun to retail fresh fish. The contrast in the manner of presentation is marked, as are the price differentials, which were generally 30% and more.
Although the vast majority of consumers do not yet use supermarkets, the rate of growth in this sector is quite dynamic and this is encouraging from a marketing perspective for high value perishable products.
The objective of seeking the highest possible return for the farmed fish would be best achieved by other means than transporting to the nearest landing site for onward distribution to retail markets.
The location of the production sites will present difficulties in terms of access to market centres. This should be considered in terms of the viability of small volume production units in remote areas. There is a good network of surface and air transport available throughout the country and high value product from remote areas does move to major domestic and export markets. Planning should take into account the advantages of freight consolidation at designated centres where handling and storage facilities are available.
The subject of fish collection vessels was discussed, though it is not clear whether serious consideration is being given to such a project by the Government. Similar services do operate in the Riau province, collecting live and fresh product, from the outer islands and shipping it to Singapore. The vessels are operated by the private sector and by the state enterprise, pt Karya Mina. It is clear that these services operate in response to effective demand and are comercially viable. This is not the case in other provinces, and it is doubtful that the increased volume of production generated through the Seafarming Development Project will have any effect on the economic viability of such services. Experience of Government-operated fish collection vessels in other countries has been disappointing.
Given the variety of products offered in the project area and the wide range of designated production centres, the question of rationalization of production should be considered. This will be a major determining factor in private sector investment decision-making. The individual producers may not take this into consideration when deciding what to grow, but it is suggested that the DGF and the provincial Dinas Perikanan consider this when advising producers. It is less important for the cultivation of seaweed which is more easily transported to processing centres, but for the other highly perishable products it will markedly affect the economic viability of production.
There is the difficulty of producers perceiving the concentration of production centres as a way of making the market more competitive and thus lowering prices. This matter, more than any other, will depend upon the type of business structure which is promoted; it is discussed in the next section.
The question of financing the development of this business presents a number of possible difficulties. As mentioned earlier, the prospects are not considered good for marketing using the existing system. While there exists a number of financial sources available to the small-scale producer, with credit limits set at Rp 10 million, it is not clear what financing would be available to a large investor intending to achieve a high level of vertical integration. This is discussed in the next section, but should be noted as a possible constraint. The benefits of making institutional financing available to small-scale producers are unquestionable, however, the advantages of vertical integration through grower contracts which include provision of working capital or materials, or a combination of the two, are also well demonstrated in other sectors.
The question of consumer resistance to green mussels is discussed further on in this report. Despite favourable results from many product tests, consumers in Jakarta remain strongly prejudiced against the product. With the current projected production of an additional 24 000 t by the end of 1988, the Government is presented with a major problem. Possible options are considered in the following section.
While the use of cooperatives as a means for development is widespread and has some priority in Government policy, there are many difficulties arising from this. A specific study of the effectiveness of cooperatives in the fisheries sector was not made though some discussions on the subject were possible. There are many problems in the cooperative sector and while there are a few good examples of effective and dynamic cooperatives, they are a small minority. Experience of other countries with cooperatives in the fish marketing business is mixed, though generally disappointing. In a market with many buyers relative to the number of producers, cooperatives have a poor record; where there are few buyers this is less the case. Consideration is given to the merits of cooperative development in the seaweed sector in a later section. A new producer cooperative for seaweed has been established in Bali and a PUSKUD has been engaged in marketing seaweed for more than a year. Both seem to be operating well and a closer study could yield some useful information for application elsewhere.
The question of production costs cannot be properly discussed at this time as the project is still involved in key areas, particularly feedstuffs and fry. As soon as possible however, these costs will need to be calculated and set against the lowest likely prices in the market, to provide the worst possible scenario for evaluation.
