csp strategic

⏐Draft Report⏐

CSP’s Strategy 2010-2014: Building Synergy for Sustainable Cocoa Industry in Indonesia

Dwi R. Muhtaman

February, 2010

CSP Strategy 2010-‐2014 DRAFT March 13, 2010

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P R E F A C E A N D A C K N O W L E D G E M E N T .......... 3

AC R O N Y M S ⏐ A B B R E V I AT I O N S............................................................... 5

C S P P A R T N E R S............................................................................................... 6

1 Introduction........................................................................................................ 8 1.1. Background.................................................................................................................................................. 8 1.2. Building Sustainability Dialogue: A CSP Initiative ..................................................................... 8 2 Indonesia’s Cocoa Industry Challenges .............................................................. 11 2.1. Why Cocoa Matters.................................................................................................................................11 3.1. CSP’s Values ..............................................................................................................................................13 3.2. CSP’s Vision................................................................................................................................................14 3.3. CSP’s Mission.............................................................................................................................................14 3.4. CSP’s Main Activities ..............................................................................................................................15 3.5. CSP’s Positioning and Comparative Advantage .........................................................................16 4 CSP’s Strategic Agenda...................................................................................... 20 4.1. Internal governance and management ..........................................................................................20 4.2. Social marketing and communication............................................................................................21 4.3. Farmers empowerment........................................................................................................................21 4.4. Trade procedure and policy ...............................................................................................................22 4.5. Sustainable management of cocoa production...........................................................................23 4.6. Funding Strategy ....................................................................................................................................25 4.7. CSP’s Organizational Structure..........................................................................................................29

TABLE 1. COCOA AREAS AND PRODUCTION IN INDONESIA 2003-‐2009 ............................................... 11 TABLE 2. VOLUME AND VALUE OF COCOA EXPORT AND IMPORT 2003-‐2007 .................................. 12 TABLE 3. CSP STAKEHOLDER MAP WITH DIFFERENT STAKE AND INFLUENCE............................... 17 TABLE 4. CSP DOMAIN AND THEMES OF ACTIVITIES TO ACHIEVE MISSION ..................................... 24 TABLE 5. FUNDING MODEL AND SOURCES.......................................................................................................... 28

FIGURE 1. CSP ORGANIZATIONAL STRUCTURE................................................................................................. 31 FIGURE 2. CSP FORUM STRUCTURE ........................................................................................................................ 31


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P R E F A C E A N D A C K N O W L E D G E M E N T

When we enjoy a bar of chocolate, we may not know how far the chocolate comes from farms to the market and finally nicely arrives in the hands of millions of consumers. Farmers may not realize how important the cocoa farms they have been managed for such a long period of time. Along the road, a cocoa value chain, from farms to end consumers there are lots of issues in which Cocoa Sustainable partnership (CSP) comes to the existence. For the last three years CSP struggling to build a “common space” where all interested parties with the development of cocoa can communicate, share and learn each other. Build synergy. CSP has been facilitating cocoa stakeholders to work together, share common concerns and mobilize a collective action. It’s not an easy task for CSP. There are some successful stories. There are some lessons learned. There are some issues to address for improvement and best serve cocoa stakeholders. This document is intended to share what CSP stakeholders thought about CSP in the next few years, up to 2014: CSP’s Strategy. CSP’s Strategy was in principle developed by CSP members and stakeholders through a process of interviews, secondary document review, focus group discussion and workshops. Consultant function as facilitator who develop framework, picking the points and compile it as it is now. At the initial stage, consultant identifies issues around cocoa and CSP to understand where CSP stands and the current state of the art of CSP. By using model of analyses develop by McKinsey. Information gathered during stakeholder interviews is analysed using The McKinsey Capacity Assessment Grid framework. There are seven elements (Aspiration, strategy, organizational skills, human resources, systems and infrastructure, organizational structure, culture) of organizational capacity and their components are assessed in CSP. This framework only applied to understand the CSP as an entity. Strategic Plan is develop as more participatory approach involving CSP stakeholders. CSP’s Strategy document is a collective, collaborative work contributed by CSP stakeholders. The document would have not been possible without their thoughts, energy and priceless time they were dedicated throughout the process of the document development: interviews, workshops. I greatly thank them for their enthusiasm. Thank you to these participants for their contribution: Andi Sulaiman Husain, Asosiasi Petani Kakao Indonesia/APKAI (Indonesian Cocoa Farmer Association), Chair of South Sulawesi Regional Office; Ade Rosmana, plant disease scientist; Burhanuddin Mustafa, head of Dinas Perkebunan, Sulawesi Selatan; Djafar Baco dan Sahardi Mulia, Principle Scientist at BPTP (Balai Pengkajian Teknologi Pertanian/Assessment Institute for Agriculture Technology), Makassar, South Sulawesi Office; H.M.Dakhri Sanusi, SE, Secretary, DPD Asosiasi Kakao Indonesia (ASKINDO)/Indonesia Cocoa Association (INCA), Sulawesi Selatan Regional Office; Hasrun Hafid, Regional Commodity Advisor, AMARTA (Agribusiness Market and Support Activity); Mulyadi Honya, Owner, PT Maju Bersama Cocoa Industries and PT Dalle Macoracoa (DMC); Nasaruddin, agronomist, Cocoa Research Group (CRG), Agricultural Faculty, Universitas Hasanuddin, Sulawesi


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Selatan; Noel Janetski, President Director of Mars, PT Effem; Silviana, scientist; Salengke, scientist, Cocoa Research Group (CRG), Agricultural Faculty, Universitas Hasanuddin, Sulawesi Selatan; Sindra Wijaya, General Secretary of AIKI, Asosiasi Industri Kakao Indonesia (The Indonesian Cocoa Industry Association); Sikstus Gusli, UNHAS, Pusat Penelitian dan Pengembangan, Universitas Hasanuddin, Makassar; Simon Badcock, Regional Program and Commodities Director, AMARTA (Agribusiness Market and Support Activity); Syahrial Samsu, Head of Food Material and Chemistry Office, Dinas Perindustrian dan Perdagangan, Sulawesi Selatan; Yusa R Ali, SE, Chair of ASKINDO Sulawesi Selatan Regional Office; Zeth Lapomi, Cocoa Program Coordinator, AMARTA (Agribusiness Market and Support Activity). My appreciation also to the following individual who contribute during the development of CSP’s Strategy: A. Ardin Tjatjo, Disbun; A. Ridwan, Armajaro; A. Sitti Asmayanti, Mars Simbioscience; A.Tantu Syamsul, Dinas Koperasi dan UKM; Ali Aman, Disperindag; Andi Faik, Wakil Ketua II DPD ASKINDO Sulawesi Selatan; Andre, Armajaro; Burhan, SADI; Darmawan, Unhas; Halim Abdul Razak, ASKINDO; Herman Agam, Ketua DPD ASKINDO Sulawesi Tengah; Imansyah Rukka, Petani Center; Jackie Pomeroy, SADI; Kartika Fausiah, BPPT; Latief E. Setiono, PT. MCI; M. Zainal, Disperindag; Muh. Nur Taqwim, Petani Center; Muslimin, ASKINDO Sulawesi Tengah; La Odi Mandong, Executive Secretary DPD ASKINDO Sulawesi Selatan; Peni, Veco; Phillips Chung, ADM; R. Syakib, IFC; Rauf, BSP Wasiat; Saleh Rahim, AIKI; Sari Nurlan, Mars; Sohinder Dingry Sonny, wakil Ketua I DPD ASKINDO Sulawesi Selatan; Sudirman Kati, PT. PP Bajabang Indonesia; Undang Fadjar, PT. MCI; Wahyuni Baso, IFC; Yusa R. Ali, DPP ASKINDO Sulawesi Selatan; Zainal H. Langu, ASKINDO/Cargill; Zulhefi Sikumbang (Sekjen DPP ASKINDO; Abdul, Dinas Koperasi dan UKM

I convey my appreciation also to CSP secretariat team Arni Zakaria, Elisabeth Wairatta and others under Pak Rijal Idrus leadership. My thank you to IFC team who support this CSP’s Strategy development, Ernest E. Bethe III, Luqyan Tamanni, Lilik Eko Pramono, Andi Wahyuni Sofiyanti Baso, Dyan Shinto Ekopuri, Helmi Abdul Muis and Edmayeni Sesamie. Special thank to Dyah Indrapati Maro for helping prepare and accompany me during the stakeholder workshop. Also thank for Andi Emil Arsya and Nurliah (Ocha) for taking notes during the workshop.

I hope CSP’s Strategy can be a guide for members and stakeholders to work together to achieve CSP’s mission. Jakarta, Februari 2010


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AC R O N Y M S ⏐ A B B R E V I AT I O N S ACIAR Australian Center for International Agricultural Research AIKI Asosiasi Industri Kakao Indonesia AMARTA Agribusiness Market and Support Activity APIKCI Asosiasi Pengusaha Industri Kakao dan Coklat Indonesia (Indonesian

Cocoa and Chocolate Industry Association) APKAI Asosiasi Petani Kakao Indonesia ASKINDO Asosiasi Kakao Indonesia (Cocoa Association of Indonesia) BDSP Business Development Service Providers BPTP Balai Pengkajian Teknologi Pertanian CAA Cocoa Association of Asia CDSA Community Development for Sustainable Agriculture CPB Cocoa pod borer CSP Cocoa Sustainable Partnership FIATI farmer empowerment, information and technology innovation ICCRI Indonesian Coffee and Cocoa Research Institute IFC International Finance Corporation MT Metric ton NGOs Non Governmental Organization Paras Pembangunan Pertanian Sultra RSCE Roundtable on Sustainable Cocoa Economy SCORE Sulawesi Cocoa Research and Development SICOS Sulawesi Cocoa Society SME Small and Medium Enterprises SUCCESS Sustainable Cocoa Enterprise Solutions for Smallholders USAID United States Agency for International Development VSD Vascular Streak Dieback WASIAT Wahana Sukses Pertanian Terpandang WCF World Cocoa Foundation


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C S P P A R T N E R S Name Contact address 1 Indonesian

Coffee & Cocoa Research Center (ICCRI)

ICCRI Jl. P.B. Sudirman no 90 Jember, Jawa Timur Phone: +62 331 757 130 Fax: +62 331 757 131 Email: [email protected] www.iccri.net

2 Dinas Perkebunan of South Sulawesi

Office of Dinas Perkebunan of South Sulawesi Jl. Perkebunan No. 7 Makassar, South Sulawesi Selatan Phone: +62 411 449918 – 449167 Fax: +62 411 443865 http://www.deptan.go.id/daerah_new/sulsel/disbun/

3 BPTP of South Sulawesi

BPTP South Sulawesi Jl. Perintis Kemerdekaan Km. 17,5 Sudiang Makassar, South Sulawesi Phone: +62 411 556 449 Fax: +62 411 554 522 http://sulsel.litbang.deptan.go.id/

4 Dinas Perindustrian & Perdagangan of South Sulawesi

Office of Disperindag of South Sulawesi Jl. Ujung Pandang No. 3, Makasar -‐ Indonesia Phone: +62 411-‐323525 , 324315 , 323727 Fax: +62 411 -‐ 324367 www.disperindagsulsel.go.id

5 Dinas Koperasi & UKM of South Sulawesi

Office of Dinas Koperasi & UKM of South Sulawesi Jl. A.P. Pettarani Makassar, South Sulawesi Phone: +62 411 853 991, Fax : +62 411 www.sulsel.go.id

6 GPK Sulbar

Secretariat of GPK West Sulawesi Komplek Kantor Gubernur Sulawesi Barat Jl. Akhmad Yani no. 01 Phone: +62 411 5266465 Fax: +62 411 580 486

7 Dinas Perkebunan of West Sulawesi

8 Asosiasi Kakao Indonesia – ASKINDO

Secretariat of ASKINDO AEKI Building, 3th Floor Jl. R.P. Soeroso no. 20 Jakarta 10330 Phone : +62 21 392 5053 Fax: +62 21 392 5024 Email: [email protected] www.askindo.org

9 APKAI

10 UNHAS

11 ACIAR

ACIAR Office in Makassar Graha Pettarani, 4th Floor Jl. A.P. Pettarani no. 45 Makassar, South Sulawesi Phone: +62 411 425 284 Fax: +62 411 425 266 www.aciar.gov.au

12 International Finance Corporation

IFC Office in Makassar Graha Pettarani, 5th Floor Jl. A.P. Pettarani no. 45 Makassar, South Sulawesi Phone: +62 411 425 280 Fax: +62 411 425 269 www.ifc.org

13 Swisscontact

Local Economic Development – LED NTT Kantor Bappeda Sikka, Jl. Mawar No. 24, Maumere, Nusa Tenggara Timur Phone/Fax: +62 382 23107 E-‐mail: [email protected] Kontak: Etih Suryatin/ Project Manager

14 VECO Indonesia

VECO Indonesia Jl. Kertha Dalem No. 7, Sidakarya Denpasar 80224 Bali Phone : + 62 361 7808264 Fac : + 62 361 723217 Email : admin@veco-‐indonesia.net


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www.vredeseilanden.be 15 PT. Mars

Symbioscience

PT. Mars Symbioscience Indonesia Kawasan Industri Makassar Jl. Kima 10, Kav. A6 Makassar, South Sulawesi Phone: +62 411 515 702 Fax: +62 411 515 704 www.symbioscience.com

16 ARMAJARO

Armajaro Coffee JL. Soekarno-‐Hatta Km12 Way Gubak Panjang Bandar Lampung Indonesia 35244 Tel: +62 721 342 351 Armajaro Cocoa C/O Armajaro Kuala Lumpur Tel: +603 20720709 Fax: +603 20720698; http://www.armajaro.com/

17 Mercy Corps

Jl. Kemang Selatan I/3, Bangka, Jakarta Selatan 12730 INDONESIA; Telp: (62-‐21) 719-‐4948, Fax: (62-‐21) 7179-‐0703


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1 Introduction Cocoa production reached its best quantity in 1998/1999

just before VSD disease attacked cocoa farms. Soon after that in 2000 many organizations started to come helping farmers in Pinrang

(Haji Iwan, cocoa trader, Pinrang)

1.1. Background

Many parties have been working to improve cocoa plantation productivities and cocoa bean quality. They realize that the potential and strength of Indonesian cocoa position in the global cocoa industry has encountered many problems that need concerted efforts to overcome. Research institutions from Government-‐based organization (ICCRI, BPTP) to international (the Australian Center for International Agricultural Research (ACIAR), universities (Universitas Hasanuddin), International donors (AusAid, International Finance Corporation/IFC), USAID) and associations (ASKINDO, AIKI, APIKCI, APKAI), NGOs (AMARTA Program, SICOS (Sulawesi Cocoa Society), SCORE (Sulawesi Cocoa Research and Development), Paras (Pembangunan Pertanian Sultra), CDSA (Community Development for Sustainable Agriculture), WASIAT (Wahana Sukses Pertanian Terpandang) have been working individually. There is lack of coordination and communication among them. Shared learning if any has been very limited. Five years ago many people had different ideas about handling cocoa issues in Sulawesi Selatan (Susel). Many specific technical issues such as diseases, cocoa maintenance (pruning etc.) were the areas of activities for individual organization. But no organization addressed cocoa issues in holistic approach. At the same time there were some organizations such as Mars, IFC, BPTP and ACIAR, and programs like farmer empowerment, information and technology innovation (FEATI) and others starting to develop intervention: Identification of problems, develop solution and develop means/technology and to transfer the technology to solve farmers problem. They each began to have a similar thoughts and approach, with the realization that they have to strengthen each other and collaborate.

There was a need to organize the players and bridge and link all the players to understand the real problem and communicate and develop mechanism to enable people focus on the same direction. Five organizations i.e. IFC, Mars, ASKINDO, Dinas Perkebunan and Hasanuddin University took the lead to facilitate the establishment of the Cocoa Sustainability Partnership (CSP) in 2006.

After three years of existence, it is time to reflect before moving forward. There are many challenges ahead and there have been dynamic changes around the environment of where CSP started building a stage for cocoa improvement contribution.

1.2. Building Sustainability Dialogue: A CSP Initiative Since the attacked of virus VSD in 1998/1999 many organizations started to pay serious attention on the cocoa farming. Initially since 1960 cocoa farming was very limited and problems were not well identified. Not many people were interested to look at cocoa. But for the last 10-‐15 years, the world cocoa community has been started to pay much more attention to cocoa farming and industry. This is mainly because there was a worry


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that the world cocoa supply will be disrupted by the low production. VSD attacked struck many parties to start working more systemic to prevent further loss.

Cocoa now gets much high attention and many organizations work to solve cocoa problems. Historically, they worked individually, with no collaboration and no sharing of information. In fact, the cocoa issues have been becoming complex issues, which was impossible to solve by individual institutions. There was tendency among organizations to blame one another. In addition, cocoa is s strategic commodity. Thousands of farmers involved and may family dependent on it for their livelihood. If anything happen, therefore, many people will be affected.

To realize that condition, ASKINDO, Unhas and Mars commenced to build a forum for sharing and communicating among cocoa players/stakeholders, the Cocoa Sustainability Partnership (CSP) or Forum Kemitraan Kakao Berkelanjutan. On January 23rd 2006, several cocoa stakeholders met in Makassar. IFC though its PENSA program also took part, and then became a major financial contributor to CSP. As a result of the meeting, it was agreed to establish a coordination forum for cocoa development wherein its membership was open to government and the private sector. The forum was founded as a response to many field activities that aimed to improve the condition of cocoa estates but had not maximized collaboration, integration and knowledge sharing in order to solve industry problems.1

CSP functioned and was designed as a communication forum. Most of the stakeholders believe that CSP is important to facilitate cocoa stakeholders’ communication and share knowledge and experiences. There is no such organization or forum that involves many stakeholders and apply a holistic approach. For some members CSP should be supported and improved its function, roles and the way it works. Partnership, solidarity and commitment are keys to succeed CSP.

Cocoa stakeholders established CSP because of the original needs of cocoa stakeholders in Sulsel in particular. Some organizations interested in cocoa initially were much focused on the physical development of cocoa plantations. Less attention was given to farmers, and physical development in cocoa often fails because of a failure to see the importance of farmers. There is a need to improve human (farmers) capacity and capability through training, technical assistance, share of knowledge and skill among farmers and other stakeholders. Therefore, CSP was initiated.

CSP is an independent forum for information sharing, shared learning and media to discuss issues related to cocoa development. Also the CSP program should not be an alliance with any individual member’s organization. CSP is a place to discuss differences and come up with consensual position. Therefore, CSP should not limit itself to periodical meetings. Members should be called for meeting if there are urgent issues that need to be discussed immediately in order not be controversial to the public. Incidental meetings are needed when necessary. CSP’s mandate is to develop a comprehensive approach, not represent a single organization/member.

As a multi-‐stakeholders organization CSP should be open to all organizations or individuals who have interests in cocoa and are willing to contribute to achieve CSP’s mission. All different cocoa associations and other interested parties should be

1 The meeting was attended by Dr. Ir. Subyanti Marwoto, Dr. Har Adi Basri from Dirjen P2HP, Dr. Ir. Soetanto Abdullah from ICCRI, Prof. Dr. Ir. Sikstus Gusli, M.Sc from UNHAS, Dr. Ir. Sahardi Mulia from BPTP, Ir. Masnama Tadjo from Disbun Sul-‐Sel, H. Halim Abd. Razak, SE, Msi from ASKINDO, Noel Janetski from Mars Inc, and Bruce Wise from International Finance Corporation (IFC). CSP News, Volume I-‐2007 and CSP website: www.cspindonesia.org


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welcome to participate in CSP. Currently members are limited. Government is very supportive to CSP.

CSP has to be consistent and achieve synergy in achieving its mission. CSP current governance is a loose membership, voluntary based which is difficult to sustain. Financial contribution to run CSP function is limited. There is a need to develop a new mechanism or organizational form that allows CSP to generate and manage funding from members or funding agencies. Continuous financial support is needed to support CSP activities for the sake of Indonesian cocoa future.

There is a need to expand members and encourage members to commit to and trust CSP. Therefore governance system should be improved. The yayasan format is a step stone for better governance. In the future, it may have a different type of organization. But at this moment, yayasan was thought to be an appropriate form of organization because there would be strong controlling system. With the yayasan format, CSP is expected to get more direct access to finance. Prior to the yayasan, CSP could not accept fund for its activities. As a yayasan for a legal entity, CSP can accommodate and channel funds from funding agencies. Now it depends on CSP secretariat to develop a strategy to get funded by implementing the CSP Strategy document as a tool to move forward. CSP should be supported and improved its function, roles and the way it works. Partnership, solidarity and commitment are keys to succeed CSP.

In the future CSP may develop an appropriate holistic program covering farmers’ empowerment, post harvest management, access to finance, research and development and technology transfer. The targets are:

• Improvement of farmers prosperity, better income • Cocoa production increase, technology and skill better • Area productivity increase and multiuse of land increase • Better education for farmers family • Proud to be cocoa farmers

Periodical meetings should be continued. Such meetings can keep CSP alive and functioning. CSP is something that needs to nurture together and need a kind of sacrifice, because CSP is basically a long-‐term investment for cocoa stakeholders.

The original idea to establish CSP is still valid, positive and good. It is very useful. However, internal management, member relationship and others should be improved. CSP members need to agree on collective commitment and interests instead of individual commitment and interests. Ultimately, CSP needs to change . . . and change is on the way.


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2 Indonesia’s Cocoa Industry Challenges 2.1. Why Cocoa Matters

Smallholders dominate cocoa production in Indonesia. More than a million farmers involved in cocoa growing and production of cocoa bean. This is a beneficial because it absorbs rural employment. Smallholders are more efficient. Some people believe that cocoa plantation is not efficient if big scale companies manage it. Since it cocoa is dominated by smallholders, institutions are still very weak. For example, farmers have limited access to cocoa market price, they have less understanding about quality standards and limited skill to do appropriate maintenance and post harvest processing.

Every year, Indonesian cocoa production is increasing. In 2003, cocoa production was about 698,816 metric tons (MT) and in 2009 was expected to be almost 900,000 MT. The production decline was only happened in 2007 compared from previous year. With such amount of cocoa bean production Indonesia is still the third largest producer of cocoa, behind Cote d'Ivoire and Ghana. The majority of the farms are located on the island of Sulawesi. Most of the farms are smallholder-‐farming system with very labor intensive and simple farm management. There are approximately 1.4 million families working on cocoa plantations with small-‐scale farms of 2 hectare or less in Jawa or outside Jawa2. The Directorate General of Estate Crop, Ministry of Agriculture states that there are over 1.5 million hectare cocoa plantation throughout Indonesia with more than 92 percent smallholders (See Table 1).

Table 1. Cocoa Areas and Production in Indonesia 2003-2009

AREA (hectare) Production (Ton)

Smallholder Government Private Total Smallholder Government private Total 2003 861,099 49,913 53,211 964,223 634,877 32,075 31,864 698,816 2004 1,003,252 38,668 49,040 109,0960 636,783 25,830 29,091 691,704 2005 1,081,102 38,295 47,649 1,167,046 693,701 25,494 29,633 748,828 2006 1,219,633 48,930 52,257 1,320,820 702,207 33,795 33,384 769,386 2007 1,272,781 57,343 49,155 1,379,279 671,370 34,643 33,993 740,006 2008 1,364,408 57,395 51,456 1,473,259 721,413 36,226 35,122 792,761 2009 1,476,753 61,831 54,398 1,592,982 773,858 38,138 37,879 849,875 Source: Directorate General of Estate Crop, Ministry of Agriculture of Government of Indonesia. Collected from http://ditjenbun.deptan.go.id/cigraph/index.php/viewstat/komoditiutama/4-‐Kakao

About 80 percent of bean production is exported. In 2003, Indonesia exported almost 400,000 MT bean and increased in 2007 to more than 500,000 MT or about 70 percent from production at the same year (See Table 2). According to a USAID report, Indonesia’s primary competitive advantage in global cocoa trade lies in its ability to supply large quantities of beans. Cocoa yields in Indonesia range from 400 to 800 kg/hectare, with the potential to increase yields as high as 1 to 1.5 MT/ha (2004). In 2 See Program Gerakan Nasional Percepatan Revitalisasi Kakao Nasional (GERNAS): Masukan strategis dari Forum Kemitraan Kakao Berkelanjutan (Cocoa Sustainability Partnership). Edited by Jeff Neilson. Asosiasi Kako Indonesia, CSP, Australia-‐Indonesia Partnership, ACIAR


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2004 cocoa yields in West Africa and other major producing countries, on the other hand, are much lower and only average 300 kg/ha or less3.

Table 2. Volume and Value of Cocoa Export and Import 2003-2007

Export Import Volume (Ton) Value (000 USD) Volume (Ton) Value (000 USD) 2003 355,726 621,022 39,226 76,205 2004 366,855 546,560 46,974 77,023 2005 463,632 664,338 52,353 82,326 2006 609,035 852,778 47,939 74,185 2007 503,522 924,157 43,528 82,786 Source: Directorate General of Estate Crop, Ministry of Agriculture of Government of Indonesia. Collected from http://ditjenbun.deptan.go.id/cigraph/index.php/viewstat/exportimport/1-‐Kakao How to improve productivity is one of the challenges of Indonesian cocoa production. In addition, quality is another critical concern that needs to be addressed. Most Indonesian cocoa beans are not fermented. Processing industry encounters quality raw material supply. Unfermented beans are considered low quality, not suitable to produce good quality cocoa butter, powder or liquor. Ten out of 15 local processing companies are no longer operational, due to raw material problems among other thing4. For local processing industries, quality is important. Although it is acknowledged that the marketing structure of the value chain (and global demand for low quality/low price beans) does not provide adequate incentives to improve quality. Without incentives for exporters, intermediaries, or farmers to differentiate their beans and invest in quality improvements they continue to be driven by volume-‐based transactions5.

3 Henry Panlibuton and Maggie Meyer, June 2004. Value Chain Assessment: Indonesia Cocoa, Microreport #2. USAID 4 See daily business newspaper, Kontan 9 Des 2009 5 Henry Panlibuton and Maggie Meyer


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3 The Cocoa Sustainability Partnership’s Mission CSP is still valid, positive and good. It is very useful. But they way CSP is managed should be improved.

CSP need to change.

“The future ain’t what it used to be. -Yogi Berra, U.S. baseball player and manager

Entering its fourth year since its founding in 2006, it is necessary for CSP to revisit its Mission Statement and develop a more comprehensive strategic plan to answer the issues of the cocoa industry, national as well as global.

Strategy development started with a series of stakeholders interview and workshops involving cocoa stakeholders in Indonesia including farmers, NGOs, governments, local traders, exporters, processing companies, research centers and universities. The strategy process resulted in the following articulation of CSP’s mission, including its values, vision, mission, and strategic activities .

3.1. CSP’s Values

CSP achieves its mission guided by values. These values were drawn out of the participants’ discussion, interviews. Stakeholders believe CSP is and should be driven by those particular values. Should the motivation of CSP members decrease, it must have been these values are not being exercised enough in CSP activities.

The following values and associated behaviours will guide those who work at CSP and be part of CSP members:

Collaboration and partnership (kolaborasi dan kemitraan)

• CSP was initiated by collaboration and partnership and it is true at present and future.

• We (members) believe through collaboration and partnership, CSP will be able to achieve its vision/mission as a collective dreams.

Solidarity/togetherness (kebersamaan)

• As multi-‐stakeholder organization and forum, CSP exist only if the members and participants continually and consistently strengthen solidarity, provide mutual support/contribution to enable and empower CSP to function as expected.

Commitment

• CSP has been established and managed through the hard efforts of pioneer members and it takes valuable member resource contributions. The new CSP strategy will strengthen members attachment and commitment to CSP.

• We will dedicate resources to enable CSP function as expected.

Awareness and equality (kesadaran/kesetaraan)

• We believe as members or participants of CSP, we are aware of the importance of cocoa best practices and sustainability principles.


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• Engagement with CSP is based on equal treatment, no discrimination in any form. We acknowledge and respect diversity in terms of race, gender, culture, religion and different needs.

• We promote equity, empowerment, and independence of thought and open participation.

Sustainability

• We believe that sustainability is a core not only of the cocoa practices but also apply to the way of CSP is managed and developed.

3.2. CSP’s Vision

CSP vision is achievement of a sustainable and competitive national cocoa industry (terwujudnya industri perkakaoan nasional yang berkelanjutan

dan berdaya saing) Sustainability is a very important concept and practice in the natural resources management, including in the cocoa industry. It covers three major principles: Economic viability, environmental management and social responsibility. However, sustainability is not enough. The national cocoa industry should be competitive in the global market. Sustainable and competitiveness become two important keywords. The vision statement conveys the message that CSP’s dreams and long-‐term focus lies in sustainable and competitive cocoa industry development. CSP’s focus is a holistic approach throughout cocoa value chains.

3.3. CSP’s Mission

To have its vision achieved in 2014, CSP stated its mission as follows:

a. Developing coordination and communication among stakeholders to maintain a sustainable cocoa program (Membangun koordinasi dan komunikasi antar pemangku kepentingan untuk menjalankan program kakao yang berkelanjutan.)

b. Identifying and prioritizing problems in cocoa and supporting research for sustainable cocoa (Mengidentifikasi permasalahan melakukan prioritas dan mendorong penelitian untuk pembangunan perkakaoan nasional yang berkelanjutan)

c. Empowering cocoa farmers and their institutions along with other cocoa stakeholders (Memberdayakan petani kakao dan kelembagaannya bersama-sama dengan pemangku kepentingan perkakaoan lainnya)

d. Endorsing healthy (fair) and transparent trading procedures and policies that support sustainable cocoa (Mendorong tata niaga yang sehat dan transparan serta kebijakan yang mendukung keberlanjutan perkakaoan nasional )

e. Guiding the certification process on sustainable cocoa and the implementation of good on-‐farm and best practices for the benefit of all stakeholders (Mengawal proses sertifikasi kako berkelanjutan dan implementasinya dalam praktik pertanian yang benar agar bermanfaat bagi semua pihak)


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3.4. CSP’s Main Activities

To pursue its mission, CSP works following a strategic plan. The main activities for each mission have been discussed during CSP workshop resulting in the following theme of activities:

1. Developing coordination and communication among stakeholders to maintain the sustainable cocoa program

The key activities are:

a. Holding regular meetings

b. Websites and bi-‐monthly bulletin

c. Provision on calendars, brochures etc

d. Exhibitions (eco-‐products exhibition, sustainable development events, AgriNext Expo)

2. Identifying and prioritizing problems in cocoa and supporting research for sustainable cocoa

Through activities:

a. Supporting researches on cocoa and other aspect of sustainable cocoa.

3. Empowering cocoa farmers and its institution along with other cocoa stakeholders.

Through activities:

a. Farmers capacity buildings

b. Transfer technology

c. Facilitating the funding for farmers

d. Market information for farmers

e. Empowering cocoa farmer cooperation

4. Endorsing a healthy and transparent trading procedures and policies that support sustainable cocoa

5. Guiding the certification process on sustainable cocoa and the implementation of good on-‐farm and best practices for the benefit of all stakeholders

Through activities:

a. Developing guidance on all aspects of cocoa certification

b. Socializing the guidance to all stakeholders

c. Ensuring the implementation of the guidance


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d. Monitoring an evaluating the benefit of cocoa certification for all stakeholders

e. Evaluating & revising the guidance on cocoa certification based on field study.

Beside the CSP Mission Statement, the group also addressed how important it is to have a more solid organizational structure despite what is already in place. It is also important to have a further discussion on the scope of work of CSP, especially on whether or not it should have its own activities rather than claiming its stakeholder’s activities as its own. It is also important to develop more open and transparent communication among stakeholders. This transparent relation will only could happen if all stakeholders have the same understanding on CSP.

All stakehodelders met agree that CSP is vital for the sustainability of cocoa in Indonesia. They all see it as a forum where they can have shared information on technology, on-‐farm best practice and everything else about cocoa. They also feel empowered by joining CSP for they have a lot of colleague from all cocoa stakeholders.

3.5. CSP’s Positioning and Comparative Advantage CSP will focus its core function as multi-‐stakeholders forum. The forum will be managed by strong, credible secretariat. In addition the CSP secretariat is an entity of which under the legal status of Republic of Indonesia is deemed as Yayasan Sekretariat Kakao Berkelanjutan. The Yayasan is an independent entity governs by official structure as outlined by Law of Yayasan in Indonesia (Undang-Undang Republik Indonesia Nomor 16 Tahun 2001 Tentang Y A Y A S A N). The Yayasan is responsible to implement the strategic plan and to develop its own programs as far as they are in line with the CSP mission.

CSP areas of activities are based on its strengths and expertise of members. CSP will strive to maintain and build upon the unique qualities of services to members and other stakeholders, strengths of members’ expertise and reputation that distinguish it from other multi-‐stakeholder organisations and give it its competitive edge.

CSP’s positioning and comparative advantage derive from: • Brand name: CSP’s ‘brand’ is associated with cocoa knowledge and skill, well known in a cocoa industry, the ability to reach and convene diverse actors and stakeholders • Networking: CSP’s most important asset is its wide networking ranging from farmers, universities, donors, research institutions, governments, association, NGOs, traders and cocoa processing companies • Partnerships: as one of the important value, CSP has access to the skills and networks of diverse partners operating at local, national, regional and global levels. • Sustainability focus and holistic approach: at the very beginning CSP very concern on sustainability issues and holistic approach in cocoa industry. This element is become a strong comparative advantage for CSP and a strategic positioning as one of multistakeholder organization of its kind operating at local, national, regional and global levels. • New mandate, national relevance: CSP’s new mandate toward cocoa sustainability and competitiveness has a strong legitimacy to function its role. At the national level with the Government of Indonesia’s Gernas program, CSP finds its national relevancy and will play a significant roles in the future


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The following section describes how CSP will maintain and enhance these elements of comparative advantage, as well as other elements of its operations necessary to live up to its values and achieve its missions.

Hub of Cocoa Knowledge, Expertise and Skill

Prior to its existence, many cocoa stakeholders worked individually. There was no coordination and sharing of knowledge and expertise among those who ultimately formed CSP nor with the broader industry. Meanwhile, they faced common problems and concerns. Communication and shared learning among them are limited although their resources and expertise may complementary. CSP was established to facilitate and exchange of knowledge, resources and expertise among stakeholders of cocoa industry. CSP is as a hub of cocoa knowledge, expertise and skills in Indonesia which in the future will contribute to the global cocoa industry.

Forum of Diverse Actors and Stakeholders

Currently there are 16 members of CSP. Some are active members. They are coming from research institution (ICCRI), Hasanuddin University, Government offices (BPPT, Dinas Perkebunan, Dinas Perdagangan, Dinas Industri), NGOs, donors, cocoa association (ASKINDO). Members are diverse. It is acknowledge that in terms of stakeholders, CSP has very broad range of stakeholders. There are some cocoa stakeholders who have not been involved due to variety reason. In the future CSP will expand the stakeholder to reach as broad as possible in terms of region and interests.

Table 3. CSP Stakeholder Map with Different Stake and Influence

Low Influence High Influence

Low-Stake 1

• Commodity traders6 • APKAI • APIKCI • Banks (BRI/BNI)

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• Consumers • Mercy Corps • IFC • World Bank • SMEs-‐BDSP (SICOS, WASIAT)7 • Researchers • Dinas Offices at Kabupaten level

6 A commodity trader refer to those who trade the cocoa commodity through commodity market where raw or primary products are exchanged. These raw commodities are traded on regulated commodity exchanges, in which they are bought and sold in standardized contracts. One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-‐established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agriculture products such as iron ore, crude oil, coal, ethanol, salt, sugar, coffee bean, soybeans, cocoa bean etc. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining. commodity exchanges include:

▪ Chicago Board of Trade (CBOT)

▪ Euronext.liffe (LIFFE)


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High Stake 2

• Dinas Offices at Provinciaal level

• Farmer labours8 • Dekaindo

4 • ASKINDO • AIKI • International traders (Armajaro,

Mars etc)9 • Local Collectors/Traders10 • Local exporters11 • End users (Mars, Petra,

Cadburry, Nestle) • Supplier saprodi (agricultural

material supports)

▪ Kuala Lumpur Futures Exchange (KLSE)

▪ Multi Commodity Exchange (MCX)

7 SMEs-‐BDSP defined based on Ministry of SME and Cooperatives (Law 9 of 1995) and Bank of Indonesia. Ownership: Owned by Indonesian Citizens, Independent and unaffiliated with medium or large enterprises; employees: micro less than 10, small less than 50 and medium less than 100; Net Assets (excl. land and building): Small enterprise ≤ Rp 200.000.000 Medium enterprise > Rp 200.000.000; Annual Sales: Small enterprise ≤ Rp 1.000.000.000 Medium enterprise < Rp 10.000.000.000; Form of Entity: Individual businesses in the form of registered (formal) or unregistered business entities, including cooperatives. See Dyan Shinto Ekopuri, Fararatri Widyadari, Luqyan Tamani. SMALL ENTERPRISE DEVELOPMENT POLICIES IN INDONESIA: AN OVERVIEW. The International Finance Corporation (IFC)-‐Indonesia Team Submitted for: The International Training Course on Creating an Enabling Environment for Small Enterprise Development: How to Formulate and Implement Policies to Improve and Reform the Business Environment for Small Enterprises. ILO Training Centre, Turin, 15-‐26 October 2007

8 Farmer labours refers to those who works as workers at the cocoa farms. They are paid workers. 9 Once cocoa beans are exported from Indonesia they become part of the global trade in cocoa which includes multinational traders, processors and manufacturers. Multinational traders sell cocoa beans to processors and manufacturers around the world. Multinational processors, including Cargill, are major producers of processed cocoa products (cocoa liquor, butter and cake). Multinational manufacturers, such as Hershey’s, are dedicated chocolate producers and are generally located close to their final consumer markets. There are also integrated multinational processors and manufacturers who are involved in multiple functions of processing and manufacturing of final products. One of the largest, Mars, has significant presence and representation in Indonesia.

10 Local collectors/traders refer to those who trading cocoa at the local level from villages up to district level and sell the cocoa to another bigger traders/buyers at the provincial level. Local collectors are usually cocoa farmers themselves or rural entrepreneurs with a motorbike (or sometimes a truck) who purchase cocoa beans directly from farmers. The scale of these purchases is small and turnover is rapid. Local traders purchase cocoa beans from local collectors or, to a lesser extent, directly from farmers, and are usually engaged in a variety of other businesses (e.g., general merchants, vehicle hire, etc.). These traders sell most of their cocoa beans to local exporters although a smaller amount flows to local processors. Collectors and traders do not need licenses or permits to operate so competition is fierce with few barriers to entry. 11 Local exporters buy from collectors and traders who deliver beans to their storage facilities. Many of these local exporters have found it increasingly difficult to compete with the large-‐scale international exporters and have begun to sell to them rather than continue to export independently.


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Table 3 shows that CSP has a wide range of stakeholders with different stakes and influence on the cocoa industry. The stakeholder map is intended to portrait the current situation. The stakeholders are certainly assets for CSP development in achieving its mission as collective concerns.

Partnership

Partnership is a key and the spirit of CSP. CSP existence is driven by partnership. Partnership spirit will allow CSP to be a forum for many stakeholders and interests. CSP believes that to solve a common problem partnership is a key. Through the spirit, members and stakeholders can share resources and build collective action.

National relevance

One of the monumental achievements of CSP is the contribution to the national policy, which then give birth to the National Cocoa Movement (Gernas). Now is the momentum for CSP to continue its roles in sustainable cocoa production and build capacity to contribute more for the cocoa industry. CSP is proven to be nationally relevance.

Approximately 80 percent of Indonesian cocoa beans are sold by the five main multinational affiliate exporters in Sulawesi: EDF & Man, Olam, Cargill, ADM and Continaf (these firms have offices worldwide engaged in international commodity trading). These large-‐scale exporters purchase bulk beans from traders who deliver to their warehouses, sort and grade for quality, and sell to buyers (primarily in the U.S., Malaysia, Singapore and Brazil) for processing.


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4 CSP’s Strategic Agenda CSP develops strategic agenda is based on several steps. First, through secondary review of available data and information from a variety of sources and processes related with the cocoa industry, CSP management and performance and stakeholder expectation/aspirations/dreams. Second, interview with cocoa stakeholders, and third, carry out participatory workshops.

Based on that processes, it is concluded that strategic agenda of CSP consists of five domains as follows:

1. Internal governance and management 2. Social marketing and communication 3. Farmers empowerment 4. Trade procedure and policy 5. Sustainable management of cocoa production

The five domains are detailed below. The description of each domain includes the following information: Background, Goals Statement, and Impact Pathways. Table 4. CSP Domain and Themes of Activities to Achieve Missions.

4.1. Internal governance and management Background CSP has been developing a significant foundation to run the secretariat as well as a forum. It has sufficient infrastructure and some resources. Although in stakeholders view it is not enough to take a new mandate. There are some improvements that are needed. A normal and balance organization should have in place at least six components: Purpose, strategy, structure+process, metrics+rewards, people+interaction, culture. The strategy document addresses only purpose, strategy and partial strcture+process. Others need to develop further as part of the CSP plan of activities. As an independent entity, CSP will develop a governance system that clarifies its line of authority and command, accountability, roles and responsibility of employees and members. Under the Yayasan Law and notary of Yayasan Sekretariat Kakao Berkelanjutan, the formal structure of CSP is composed of Badan Pembina (Board of Trustees), Badan Pengawas (Board of Supervisory), Badan Pengurus (Board of Executive) and Board of Executive can appoint a Badan Pelaksana (Executive Director or Secretary General). This is a default format that CSP needs to follow. Under the consultation with all Boards, Executive will develop rule of the game, clear procedure, roles and responsibility and other internal management requirements. Goals Statement The goal of internal governance and management is to improve CSP accountability to public, members and other stakeholders of cocoa industry. It also intended to improve effectiveness and efficiency use of resources to achieve CSP’s Mission.


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Impact Pathways CSP will consult its members, stakeholders, Boards to develop an appropriate internal system could improve independency and accountability. Members should feel that CSP is part of theirs and as strategic collective vehicle for achieving better and sustain cocoa industry.

4.2. Social marketing and communication Background CSP enjoys the popularity among cocoa industry stakeholders, particularly in Sulawesi provinces. In other provinces of Indonesia its brand name is still rarely heard. CSP is designed as a national organization covering throughout Indonesia since almost all major islands have cocoa farmers/plantation. CSP will improve and expand its present in other region. At the national level, CSP should actively build a communication with other important cocoa stakeholders which are currently not yet engaged with CSP, such as AIKI and APIKCI. At the regional and global level, CSP will also increase its role such as in events organized by Cocoa Association of Asia (CAA), World Cocoa Foundation (WCF) and at the Roundtable on Sustainable Cocoa Economy (RSCE). As the third largest cocoa producing country, Indonesia and CSP need more proactive roles in involving in such dialogues and partnership. Goals Statement As a forum and as a hub of cocoa knowledge and expertise, CSP will be able to influential and respected entity in cocoa industry. Public and stakeholders recognize its roles and enjoy the benefits out of CSP existence. Impact Pathways Members and stakeholders are more informed about the cocoa industry from ground to the policy, from local to the global. CSP will improve the communication and relationship among stakeholders, better understanding and respect each other’s. Improve partnership and collaboration.

4.3. Farmers empowerment Background More than 90 percent of the cocoa plantation in Indonesia is a smallholder farms. More than a million people are involved in and depend on cocoa farming. The quality and quantity of the bean production, therefore, are very dependent on the knowledge and skill of cocoa farmers. Farmers’ prosperity is also pretty much in line with the level of benefits getting from their farms. There have been lots of issues surrounding the farmers’ condition such as limited application of current knowledge and technology of cocoa cultivation and maintenance, farmers’ institutions, access to finance and market. Compared to paddy field or coffee, cocoa is relatively a new commodity for farmers in Indonesia. Consequently, the level of knowledge, skill and cocoa cultivation culture is still limited. Local/indigenous knowledge has not yet sufficiently developed. Meanwhile there have been a new knowledge and technology developed by universities,


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research centers and others. A USAID report revealed that cocoa Indonesia is threatened by inconsistent and poor quality production. Widespread pest infestation, especially from the cocoa pod borer (CPB), is a primary cause of poor cocoa bean quality. In order to address the problems of CPB infestation, various public and private sector initiatives have been undertaken to conduct research, train and improve the traditional practices of smallholder cocoa farmers in Indonesia.12 Goals Statement CSP goal in farmer’s empowerment is to improve farmer’s capability and capacity in cocoa farming. Ultimately, the effort will improve farmers prosperity and pride as cocoa farmer. This goal will be pursued in collaboration with members/stakeholders. Impact Pathways At the farmer level, the program designed for this domain will influence the farmer’s perception, behavior and the capability in improving cocoa production, which ultimately will affect their household income. CSP will encourage members and stakeholders to invest more in on-‐farm level by providing technical and non-‐technical assistance. CSP will facilitate the transfer of appropriate technology and apply social/participatory approaches to work with farmers.

4.4. Trade procedure and policy Background Indonesia in producing cocoa enjoys its competitive advantages as cocoa producer that includes low cost, high production capacity (availability of supply) and open trading/marketing system (business environment). Despite some efforts, adoption of improved production and post-‐harvest skills by cocoa farmers has been limited. There is limitation of incentive along value chain given to famers to improve its farming practices. With multiple levels of local and international cocoa bean buyers fiercely competing on price, a smallholder cocoa farmer in Indonesia has many selling options and market channels for his/her production. Further the report identified that within such a market-‐based environment that differentiates little for quality, Indonesian cocoa bean smallholders have little incentive to upgrade or adopt more labor-‐intensive (and costly) production and post-‐harvest practices. Similarly, cocoa bean collectors and traders have few incentives to invest in upgrading their supply channels. In contrast, processors and/or manufacturers have clear incentives to establish closer, more directed supplier relationships in order to improve the quality and consistency of their raw materials. However, these incentives are not yet strong enough for them to transform their procurement operations, especially when faced with opposition from local traders. Lead firms must be convinced that moving procurement closer to their suppliers is worthwhile from a cost-‐benefit perspective. In addition, cocoa bean price alone may not provide sufficient incentive to promote process upgrading. Smallholder

12 USAID. Indonesia Cocoa Bean Value Chain Case Study, microreport #65, June 206


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farmers must also have the capacity (skills and knowledge) to access and adopt improved practices and be able to respond to opportunities to increase their returns. Value chain often viewed as it is not transparent and fair for farmers. Traders do not inform sufficiently to farmers about price and quality. Farmers do not have enough information and knowledge on quality requirement which practices many affect price. There is a need to direct the value chain into more transparent and fair.

Goals Statement CSP goal on this domain is to influence cocoa players along the value chains to improve its transparency in terms of bean quality and price to the farmers. Develop incentive for farmers to improve post harvest processing in order to get better bean quality. Provide policy inputs for governments in order to improve the value chain efficiency. Impact Pathways CSP will work with government and other relevant stakeholders to discuss, study and advocate policies particularly related with cocoa trading aspect including the efforts to improve fair and transparent value chains. CSP’s main impact pathway will be through direct and indirect engagement with policy makers and processes by influencing institutions such as Ministry of Trade and Ministry of Agriculture.

4.5. Sustainable management of cocoa production Background Sustainability as buzzword has been around for some decades. In other sectors there have been sustainability standard set by its stakeholders. To mention a few, there are sustainable forestry standards set by Forest Stewardship Council (FSC), sustainable marine products standards set Marine Stewardship Council (MSC), sustainable oil palm standards set by Roundtable on Sustainable Palm Oil (RSPO), sustainable soy production standards developed by Roundtable on Responsible Soy (RRS), sustainable biofuel production standards initiated by Roundtable on Sustainable Biofuels (RSB), and just started to come into the stage is standard on sustainable cocoa production developed by Roundtable on Sustainable Cocoa Economy (RSCE). To comply with sustainability standards often need some resources. Farmers face big challenges to comply. But to achieve/comply with sustainability standards is inevitable. All parties and stakeholders have to work together to enable cocoa farmers—the dominant cocoa producers—to comply. Goals Statement CSP goal is to facilitate and encourage members/stakeholders to help farmers comply with sustainability standards. Once there is a clear pathway of cocoa certification in Indonesia, CSP facilitates farmers toward certification. CSP will also ensure that the cocoa sustainability standards applied in Indonesia is in line with Indonesian context and develop through wide multi-‐stakeholder consultation processes. Impact Pathways CSP with the activities under this domain will take a leadership and influence the process to develop the cocoa sustainability standards. CSP will involve in the current development of RSCE and facilitate the Indonesian processes. The implementation of


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the standard will significantly improve cocoa bean quality and improve its accessibility of premium market. Sustainability will also improve the collaboration among stakeholders. CSP will target to develop guideline for farmers, increase farmers’ knowledge and skill and improve access to market.

Table 4. CSP Domain and Themes of Activities to Achieve Mission

Domains Themes of Activities Missions Hierarchy of authority, accountability and responsibility of Board of Trustees and Board of Executives Membership management to enhance members commitment, roles and responsibility and benefits Performance management/standard to ensure the achievement of CSP over period of time

1. Internal governance and management

Activity and financial planning to ensure CSP sustainability

Supporting to all missions

2. Social marketing and communication

Printed media and internet based (web, mailing list, social media) to disseminate and social market CSP

1. Developing coordination and communication among stakeholders to maintain the sustainable cocoa program

Expo/public expose Regular meetings


3. Farmer empowerment

Farmers capacity building to increase farmers knowledge and skill (technology transfer, access to funding)

3. Empowering cocoa farmers and its institution along with other cocoa stakeholders.

Market access to improve fairness, transparent and accessible

Farmers Institution to enable them act collectively to address collective problem and concerns (cooperative)


4. Trade procedure and policy

Policies and institutions to enhance coordination, productivity, sustainability and profitability

4. Endorsing a healthy and transparent trading procedures and policies that support sustainable cocoa


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Research for sustainable cocoa

2. Identifying and prioritizing problems in cocoa and supporting research for sustainable cocoa

Guidance development for cocoa certification Socialization of cocoa certification Implementation, monitoring and evaluation of the guidance

5. Sustainable management of cocoa production

Certification assessment for sustainable management cocoa production


4.6. Funding Strategy

Money is a constant topic of conversation among nonprofit leaders: How much do we need? Where can we find it?

Why isn’t there more of it?

Non Profit Funding Model By William Landes Foster, Peter Kim, & Barbara Christiansen,

Social Innovation, Spring 2009

Imagination more important than knowledge Robert Einsten

When the organizational strategy is set, now the tough aspect is how to get the financial support? In tough economic times, it is not easy to answer. Unfortunately, questions about financial support for nonprofit organizations become more frequent and pressing. As nonprofit organization CSP has different character compared to profit organization. Nonprofit organization has beneficiaries who are not necessarily a customers like in business world. When a for-‐profit business finds a way to create value for a customer, it has generally found its source of revenue; the customer pays for the value. With rare exceptions, that is not true in the nonprofit sector.13 When a nonprofit finds a way to create value for a beneficiary (for example, facilitating cocoa farmers groups or saving an endangered species), it has not identified its economic engine. Itherefore it is logical when a writer about nonprofit organization puts it this way: all nonprofits being in two “businesses”—one related to their program activities and the other related to raising charitable “subsidies.” Nevertheless, CSP will find a way to financial sources. It is true money may not everything. Yet, CSP has to create imaginative and innovative ideas that can translate its whole strategy into practice and attrack funding agencies. As a guidance for funding, below is funding model that can be adopted by CSP14. 13 William Landes Foster, Peter Kim, & Barbara Christiansen. Non Profit Funding Model. Social Innovation, Spring 2009 14 William Landes Foster, Peter Kim, & Barbara Christiansen.


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1. MEMBER MOTIVATOR

There are some nonprofits that rely on individual donations and use a funding model called Member Motivator. These individuals (who are members of the nonprofit) donate money because the issue is integral to their everyday life and is something from which they draw a collective benefit. Nonprofits using the Member Motivator funding model do not create the rationale for group activity, but instead connect with members (and donors) by offering or supporting the activities that they already seek. CSP may apply this model although not across the board to all members. CSP identifies minimum members contribution and encourage those who has ability to contribute more. Financial contribution should not determine certain rights. Nonprofit leaders considering the Member Motivator funding model should ask themselves the following questions:

• Will our members feel that the actions of the organization are directly benefiting them, even if the benefit is shared collectively?

• Do we have the ability to involve and manage our members in fundraising activities?

• Can we commit to staying in tune with, and faithful to, our core membership, even if it means turning down funding opportunities and not pursuing activities that fail to resonate with our members?

2. BIG BETTOR There are a few nonprofits that rely on major grants from a few individuals or foundations to fund their operations. This model called the Big Bettor. Often, the primary donor is also a founder, who wants to tackle an issue that is deeply personal to him or her. Although Big Bettors often launch with significant financial backing already secured, allowing them to grow large quickly, there are other instances when an existing organization gets the support of a major donor who decides to fund a new and important approach to solving a problem. CSP started with this funding model. In the future it can approach other funding agencies through matching fund. Nonprofit leaders considering the Big Bettor funding model should ask themselves the following questions:

• Can we create a tangible and lasting solution to a major problem in a foreseeable time frame?

• Can we clearly articulate how we will use large-‐scale funding to achieve our goals?

• Are any of the wealthiest individuals or foundations interested in our issue and approach?

3. PUBLIC PROVIDER Many nonprofits work with government agencies to provide essential social services, such as housing, human services, agriculture, environment and education, for which the government has previously defined and allocated funding. Nonprofits that provide these services use a funding model we call Public Provider. In some cases, the government outsources the service delivery function but establishes specific requirements for nonprofits to receive funding, such as reimbursement formulae or a request for proposal (RFP) process. As Public Providers grow, they often seek other funding sources to augment their funding base. CSP has opportunity to participate in Gernas Kakao and approach Ministry of Agriculture and Ministry of Trade to get support. This model similar with Policy Innovator model.


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Nonprofit leaders considering the Public Provider funding model should ask themselves the following questions:

• Is our organization a natural match with one or more large, preexisting government programs?

• Can we demonstrate that our organization will do a better job than our competitors?

• Are we willing to take the time to secure contract renewals on a regular basis?

4. POLICY INNOVATOR Some nonprofits rely on government money and use a funding model we call Policy Innovator. These nonprofits have developed novel methods to address social issues, agricultural issues, polic issues that are not clearly compatible with existing government funding programs. They have convinced government funders to support these alternate methods, usually by presenting their solutions as more effective and less expensive than existing programs. Based what has been done, CSP and members can approach and convince government about CSP proposed program. Nonprofit leaders considering the Policy Innovator funding model should ask themselves the following questions:

• Do we provide an innovative approach that surpasses the status quo (in impact and cost) and is compelling enough to attract government funders, which tend to gravitate toward traditional solutions?

• Can we provide government funders with evidence that our program works? • Are we willing and able to cultivate strong relationships with government

decision makers who will advocate change? • At this time are there sufficient pressures on government to overturn the status

quo?

5. MARKET MAKER

Some nonprofits, provide a service that straddles an altruistic donor and a pay or motivated by market forces. Even though there is money available to pay for the service, it would be unseemly or unlawful for a for-‐profit to do so. Nonprofits that provide these services use a funding model we call Market Maker. Helping companies or farmers to get certified is one example where Market Makers operate. There is a demand for certified or at least particularlly character of cocoa bean by market. These nonprofits generate the majority of their revenues from fees or donations that are directly linked to their activities. CSP can generates funding from the approach. Nonprofit leaders considering the Market Maker funding model should ask themselves the following questions:

• Is there a group of funders with a financial interest in supporting our work? • Are there legal or ethical reasons why it would be more appropriate for a

nonprofit to deliver the services? • Do we already have a trusted program and brand name?

6. LOCAL NATIONALIZER

There are a number of nonprofits that have grown large by creating a national network of locally based operations. These nonprofits use a funding model called Local Nationalizers. These organizations focus on issues, such as poor schools or agricultural best practices, produce marketing that are important to local communities across the country, where government alone can’t solve the problem. Most of the money for programs is raised locally, often from individual or corporate donations and special


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events. Very little of the money comes from government agencies or fees. Although cocoa-‐related focus activities, CSP can mobilize member across the nations to support local farmers and solving their problems. Funding agencies may interested to support. Nonprofit leaders considering the Local Nationalizer funding model should ask themselves the following questions:

• Does our cause address an issue that local leaders consider a high priority, and is this issue compelling in communities across the country?

• Does expanding our organization into other communities fulfill our mission? • Can we replicate our model in other communities? • Are we committed to identifying and empowering high-‐performing leaders to

run local branches of our organization in other communities?

All those models can implemented by CSP and most likely the funding strategy will mix among those models. Below is the summary that highlights possible funding sources.

Table 5. Funding Model and Sources

Funding Model Strategy Fund sources

Member Motivator • Develop management, defining benefits, rights and responsibilities

• Set concencus on protocol of members’ financial contribution

Members

Big Bettor • Develop ideas (proposals) in line with donors area of support

• Convince the relevancy of CSP at the local, national and global interests

USAID AUSAID ACIAR FORD FOUNDATION EU WORLD COCOA FOUNDATION OXFAM IFAD

Public Provider • Review the existing government program

• Monitor the local government budget development

• Develop relevant project proposal that match government priority

• Building strategic alliances with government institution

Government

Policy Innovator • Develop innovative program • Develop public expose and

public profile • Intensify government

communication/ relation

Government

Market Maker • Build partnership with cocoa buyers and traders

• Show the relevancy and expertise

Buyers group Individual company


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Local Nationalizer • Increase public profile • Expand coverage and networks • Show the relevancy and

expertise

Individual Corporate donations Local government

4.7. CSP’s Organizational Structure

CSP’s Strategy (values, vision, missions and Plan of Activities) mentioned above needs an appropriate organizational structure that fits with its function. Organizational structure below is developed based on the current legal structure combined with what has been in practice as well as for its future mandate.

The structure composed of three important units: Legislative unit (Board of Trustees/Badan Pembina, Board of Supervision/Badan Pengawas; Executive unit (Board of Executive/Badan Pengurus, and Executive Director/Secretary General/Badan Pelaksana); Members/Stakeholders unit (CSP Forum). CSP Forum is designed in such a way that provide the Forum an independent from its legal structure of Yayasan. Yayasan will issues a decree that provides CSP Forum an independent body and govern by its own governance system defined by members.

Under the Yayasan Law Government of Indonesia a Yayasan has to have the default structure composed of Board of Trustees/Badan Pembina, Board of Supervision/Badan Pengawas; Board of Executive/Badan Pengurus, and Executive Director/Badan Pelaksana). BoT authorizes (take consideration of the General Assembly decision) to set the global strategic policy for organization and appoint BoS and BoE. BoS has special authority to supervise BoD.

To run day-‐to-‐day activities, BoE appoints and establishes an executive unit. In this case Executive Director of CSP Secretariat is elected/recruited by and under responsibility of BoD. Executive Director responsible to ensure the secretariat is manages well and executes the program approved by BoE (See Figure 1).

In addition, ED is responsible to ensure the management of CSP forum as special unit that bring all members and stakeholders to discuss and make relevant decisions on particular issues.

CSP Forum is a strategic unit where members and stakeholders periodically organize meetings. The forum has its own governance system as shown in Figure 2. The main membership meeting is taken place in General Assembly (GA). GA makes strategic decisions regarding program, policy, and election of Board of Executive who responsible for the Secretariat management and implementation of what has been decided by members in GA. Election of Board of Executive and other decision made by GA and will directly determine Board of Executive and approve the result.


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Board of Trustees

Board of Supervision

Forum CSP

Board of Executive

Supporting Unit

CSP Program

Executive Director/Secretary

General

1. Internal governance and management

2. Social marketing and communication

3. Farmers empowerment 4. Trade procedure and policy 5. Sustainable management of

cocoa production

1. Technology Transfer and Research

2. Farmer empowerment and Cocoa Sustainable Production


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Figure 1. CSP Organizational Structure

Figure 2. CSP Forum Structure

Members

General Assembly

Executive Board

Secretary General

Working Group on Technology Transfer and Research Working Group on Farmers

Empowerment and Sustainable Cocoa Production

csp strategic

Documents