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A. Pratiwi et al.
Literature Review
Company–Community Partnership
Partnership between community and companies has been hailed as one of the key
mechanisms toward sustainable development in a global scale at the Earth Summit in
Johannesburg in 2002 (Vermeulen et al. 2003). Involvement of the private sectors in
the natural resources management and governance has garnered both optimism and
skepticism. The proponents suggest that partnership with companies may encourage
more opportunities for local actors to exploit their comparative advantages while
at the same time obtain technology transfer and more effective market access
(Vermeulen and Mayers 2006). Conversely, critics widespread that partnership may
replace instead of complementing the roles initially carried out by the government,
thus may overlook the bigger issues such as climate change and poverty alleviation.
For instance, Bitzer et al. (2008) found that partnerships are unable to turn the coffee
chain into a sustainable chain due to imbalance in actor involvement.
In Indonesia, most of coffee growers are smallholder farmers who generate
majority of the country’s output, overpowering big state plantation. The general
coffee supply chain is shown in Fig. 5.1. The ever-increasing global coffee demand
necessitates multinational companies (MNCs) to procure coffee beans directly
from the farmers. Traditionally, firms’ linkages with smallholders have been solely
through procurement from farmer groups. This system is quite common as a means
of reducing the transaction costs of dealing with many smallholders individually
(Chowdhury et al. 2005). In 1994, multinational companies (MNCs) through the
domestic roasters as their subsidiaries started to provide access to markets for the
coffee farmers community in Lampung through the establishment of the cooperatives,
which features to include the ROSCA
1 function, within the farmers group.
In an effort to establish the partnership agreement, company officers work with
extension official to locate farmers group producing the better yields, which imply
that either the farmers group selected for partnership performed relatively better
than the others or the members are influential enough to gain access for the whole
group via extension official. However, other farmer groups having intention to join
the partnership may apply for the certification to the company representatives, which
will then conduct a series of inspection upon the quality of coffee production and yield
to determine the access to the partnership. The partnership is agreed on group basis,
and not on individual levels.
2 The partnership agreement primarily gives its members
the rights to directly sell the coffee beans to the MNCs or domestic roasters with
premium price. However, the farmers should adhere to the several mandatory quality
1 Rotating Savings and Credits Association, a peer-to-peer lending/banking system by the group
of individuals who agreed to meet for a defined period (usually every month) to save and borrow
together, also known as Arisan.
2 This means the treatment group is assigned at farmers group level, but analysis is done at individual
level. As a result, there may be a group effects heterogeneity that affected the treatment assignment
that may not be accounted for in the analysis.
A. Pratiwi et al.
Literature Review
Company–Community Partnership
Partnership between community and companies has been hailed as one of the key
mechanisms toward sustainable development in a global scale at the Earth Summit in
Johannesburg in 2002 (Vermeulen et al. 2003). Involvement of the private sectors in
the natural resources management and governance has garnered both optimism and
skepticism. The proponents suggest that partnership with companies may encourage
more opportunities for local actors to exploit their comparative advantages while
at the same time obtain technology transfer and more effective market access
(Vermeulen and Mayers 2006). Conversely, critics widespread that partnership may
replace instead of complementing the roles initially carried out by the government,
thus may overlook the bigger issues such as climate change and poverty alleviation.
For instance, Bitzer et al. (2008) found that partnerships are unable to turn the coffee
chain into a sustainable chain due to imbalance in actor involvement.
In Indonesia, most of coffee growers are smallholder farmers who generate
majority of the country’s output, overpowering big state plantation. The general
coffee supply chain is shown in Fig. 5.1. The ever-increasing global coffee demand
necessitates multinational companies (MNCs) to procure coffee beans directly
from the farmers. Traditionally, firms’ linkages with smallholders have been solely
through procurement from farmer groups. This system is quite common as a means
of reducing the transaction costs of dealing with many smallholders individually
(Chowdhury et al. 2005). In 1994, multinational companies (MNCs) through the
domestic roasters as their subsidiaries started to provide access to markets for the
coffee farmers community in Lampung through the establishment of the cooperatives,
which features to include the ROSCA
1 function, within the farmers group.
In an effort to establish the partnership agreement, company officers work with
extension official to locate farmers group producing the better yields, which imply
that either the farmers group selected for partnership performed relatively better
than the others or the members are influential enough to gain access for the whole
group via extension official. However, other farmer groups having intention to join
the partnership may apply for the certification to the company representatives, which
will then conduct a series of inspection upon the quality of coffee production and yield
to determine the access to the partnership. The partnership is agreed on group basis,
and not on individual levels.
2 The partnership agreement primarily gives its members
the rights to directly sell the coffee beans to the MNCs or domestic roasters with
premium price. However, the farmers should adhere to the several mandatory quality
1 Rotating Savings and Credits Association, a peer-to-peer lending/banking system by the group
of individuals who agreed to meet for a defined period (usually every month) to save and borrow
together, also known as Arisan.
2 This means the treatment group is assigned at farmers group level, but analysis is done at individual
level. As a result, there may be a group effects heterogeneity that affected the treatment assignment
that may not be accounted for in the analysis.