development of palm sugar on the degraded land west kutai english

GLOBAL GREEN GROWTH INSTITUTE MAY 2014

Business Plan Development of Palm Sugar on the Degraded Land, West Kutai

Writers: Alfan Subekti Abdul Fatah Fariyanti Eddy Mangopo Angi Copyright of Global Green Growth Institute Indonesia Country Office May 2014

One of the key green growth activities identified by the Governor is to seek sustainable use of degraded land across the province through community enterprises. In particular, there are a number of small pieces of degraded land (between 1 and 500 hectares). As part of the MoU, the Governor has asked GGGI to explore the options that are available to establish sustainable, community enterprises on these pieces of small-scale, degraded lands as part of the provinceâ&#x20AC;&#x2122;s green growth strategy. The objective of this work is to inform the East Kalimantan Government and other key stakeholders of the options for promoting sustainable SMEs on small-scale, degraded lands across the province. An area of degraded land of 39,608.9 ha has been located in Mook Manoor Bulatn subdistrict of West Kutai. Village Gunung Rampah has a total area of 378 ha and is occupied by 626 people, with a population density of 1.66 people/ha. The total area of sub-district Mook Manaar Bulatn is 88,538 ha with population of 8,960 people living in 15 villages. Generally, land cover in the sub districts are dominated by bush and young secondary forest. The location of demonstration plot is located in Gunung Rampah village, which used to be a rubber plantation a few decades ago and dominated by bush, particularly Alangalang grass (Imperata cylindrica). Based on the soil map unit, the demonstration plot in Gunung Rampah village is categorized in Hapludults Dystrudepts soil classification and classified as Teweh (TWH) land system with sub relief tectonic plain. This soil is poor of phosphate and nutrients. The Aren (Arenga pinnata (Wurmb) Merr) plantation and processing palm sugar project will be demonstrated in Gunung Rampah village, Mook Manaar Bulatn sub district, West Kutai which will cover 100 ha of farmersâ&#x20AC;&#x2122; land and categorized as degraded lands. The lands are nonâ&#x20AC;&#x201C;forest area and classified as APL based on the district spatial plan. The main product of this business plan is divided into two main categories including producing/ selling palm sugar and derivate of Aren trees such as fruits, sticks broom, fiber for roofs, and Aren flavor. The palm sugar will be uniquely packaged to sell in the market. Meanwhile, process of producing the palm sugar will apply what farmers have been practicing to date, with some improvement in several processing stages. Process of converting Aren trees into palm sugar conducted by local farmers is not a complex process. For farmers, this commodity has been recognized for decades and provides multi economically benefits. The goal of this project is mainly to generate a local income by utilizing the degraded or marginal unused lands in in Mook Manaar Bulatn particularly in village of Gunung Rampah village, Mook Manaar Bulatn sub-district, with environmental treatments, including using a number of environmental friendly procedures to minimize CO2 emissions and promote healthy ecosystems, to produce healthy and sustainable farming products. This business plan has several unique aspects, include: (1) the organic palm sugar will be uniquely packaged, (2) the products include palm sugar and other products, (3) the business will use planted palm sugar, rather than the existing natural plants, (4) the business will use dwarf breeds that are shorter and grow faster, (5) best management practices will deliver significantly more palm sugar per hectare than current palm sugar plantations in West Kutai, (6) Laban wood will be planted on a nearby piece of degraded to produce charcoal brickets to be used during the palm sugar processing, thus reducing the use of firewood.

Demand for palm sugar in many sub districts of West Kutai seems almost as big as white sugar, and especially for organic palm sugar. The products produced by farmers are always accepted at the markets, and this indicates that the demand of palm sugar is greater than what farmers have been currently supplying. Data from the Mook Manaar Bulatn sub district in Figure (2013) that The productivity level of Aren in Mook Manaar Bulatn sub district with total plantation of 130.31 ha and produced 6,910 kg with the productivity 189.21 kg/ha. NPV shows a positive value and meaning that the aren project is feasible to be implemented. Meanwhile IRR reaches 37% and it is above the interest rate (19.00%/years). While the ARR value of 345% is a percentage value that is higher than the expected profit (expected profit rate is 10%). Payback period shows that investment for the aren project will be totally returned to the bank after 6 years (PP is 6,03). Total government fund for this project is estimated about IDR 956,933,183 that mostly provided for fixed assets. It is expected that the fund could be provided in program 2015 through Bappeda West Kutai and supported by Bappeda East Kalimantan. Estimated, number of required manpower from plantation to production is 132 people (from land preparation to the products processing) from each Aren farmer with one additional supervisor. Management and organization for palm sugar project will include: 1.

To establish a community-based organization (CBO) for palm sugar farmers with a specific business unit for marketing and compiling the products. Farmers group under a legal entity of community based organization (KSM). Capacity building and institutional strengthening will be provided by local government to the farmers through KSM; 2. Business unit of Aren that will play a role to collect all products from the farmers and market them to the buyers; 3. Credit unit that will provide soft loan to the farmers. Related to the management and organization functions above, all farmers involve as member of the organization must sign agreement related to their rights and obligations. It will be written in the agreement of business development for organic rice between farmer and those three units of organization. One of project mission is to reduce the greenhouse gas emission that can be achieved through using environmentally materials in planting Aren. Organic fertilizers from local livestock or composted manure will reduce the release of ammonia and N2O to the air and soil. By planting more than 15,000 Aren trees the potential of carbon stock on the land will about 7,170,000 kgC.

Executive Summary ........................................................................................................................... 2 Table of Contents............................................................................................................................... 4 List of Table .................................................................................................................................... 5 List of Figures ................................................................................................................................. 5 List of Appendixes .........................................................................................................................6 I.

Introduction ............................................................................................................................... 7 Selected Site Location and Details .................................................................................... 7 I.1.1.

Location and size of the site.......................................................................................... 7

I.1.2.

Reasons for selecting the site ....................................................................................... 7 Current Status (Ecological, Economic, Social and Legal) ................................................9

II.

I.2.1.

Ecological status ............................................................................................................9

I.2.2.

Social and Economic status ..........................................................................................12

I.2.3.

Legal status .................................................................................................................. 13

Overview of Sustainable SME ................................................................................................. 14 II.1.

Products and/or Services ................................................................................................. 14

II.2.

Mission Statement, Goals and Objectives ...................................................................... 15 ............................................................................................................................................. 15 ............................................................................................................................................ 15

II.2.1.

Mission Statement ................................................................................................... 15

II.2.2.

Goal and Objective ................................................................................................... 15

II.3. III.

Relevance to East Kalimantan ......................................................................................... 16 Market Assessment ............................................................................................................. 18

III.1.

External Analysis of Market Conditions.......................................................................... 18

III.2.

Potential Customers ........................................................................................................ 19

IV.

Finance ................................................................................................................................. 20 Financial Projections ........................................................................................................ 20 Financial Planning ............................................................................................................ 22 Assumptions..................................................................................................................... 23 Risks and its Solutions ..................................................................................................... 23

Strategic Implementation ....................................................................................................... 24 Operations........................................................................................................................ 24 V.1.1.

Initiation & Preparation Step .................................................................................. 24

V.1.2.

Plantation and Maintenance ................................................................................... 25

Resources and Equipment .............................................................................................. 27

Management and Organization ...................................................................................... 29 V.3.1.

Existing Management and Organization in Mook Manaar Bulatn ........................ 29

V.3.2.

Farmers group organization.................................................................................... 29

V.3.3.

Business Unit ............................................................................................................ 30

V.3.4.

Financial (Credit) Unit .............................................................................................. 30

SWOT Analysis.................................................................................................................. 31

VI.

V.4.1.

Strengths .................................................................................................................. 31

V.4.2.

Weaknesses.............................................................................................................. 32

V.4.3.

Opportunities ........................................................................................................... 32

V.4.4.

Threats ...................................................................................................................... 32

V.4.5.

Business Development Strategies .......................................................................... 33

Green Growth Benefits ........................................................................................................ 35 Greenhouse Gas Emission Reduction ............................................................................. 35 Sustained Economic Growth ........................................................................................... 35 Healthy and Productive Ecosystems............................................................................... 35 Inclusive and Equitable Growth ...................................................................................... 36 Social, Economic and Environmental Resilience ............................................................ 36

Appendix .......................................................................................................................................... 37

Table 1. Soil type in Mook Manaar Bulatn (ha) ............................................................................... 10 Table 2. Overview of Village .............................................................................................................12 Table 3. Fixed assets investment .................................................................................................... 20 Table 4. Operational Cost .................................................................................................................21 Table 5. Finance projection for the aren project ............................................................................ 22 Table 6. Analyses of NPV, IRR, Payback Periods, ARR, and PI....................................................... 22 Table 7. Main activities in the project and time period .................................................................. 24 Table 8. Figure of resources and equipment.................................................................................. 28 Table 9. Table of SWOT ................................................................................................................... 33 Table 10. Strategies on SWOT ......................................................................................................... 34

Figure 1. Location of Demonstration Plot of Palm Sugar Plantation ..............................................8 Figure 2. Current condition of demonstration plot for Aren plantation ....................................... 10 Figure 3. Target of achievement ..................................................................................................... 16 Figure 4. Processing Nira to produce palm sugar .......................................................................... 26 Figure 5. Basic organization for Organic Rice and Aren Demonstration Project ......................... 30 Figure 6. Organization and its unit within the CBO........................................................................ 31

Appendix 1. Financial Analysis of Aren plantation in Gunung Rempah......................................... 37 Appendix 2. Fixed Assets Investment Analysis .............................................................................. 39 Appendix 3. Break Event Point Analysis ........................................................................................ 40 Appendix 4. Soil Type of West Kutai...............................................................................................44 Appendix 5. Land System Map of Manoor Bulatn ......................................................................... 45

One of the key green growth activities identified by the Governor is to seek sustainable use of degraded land across the province through community enterprises. In particular, there are a number of small pieces of degraded land (between 1 and 500 ha), mainly due to landclearing for mining, forest/peat land fires (1997/1998 fires covered over 5 million ha) and over-exploitation (fish farming, slash and burn based cultivation). These lands can provide community based enterprise a starting point for green business development. As part of the MoU, the Governor has asked GGGI to explore the options that are available to establish sustainable, community enterprises on these pieces of small-scale, degraded lands as part of the provinceâ&#x20AC;&#x2122;s green growth strategy. The objective of this piece of work is to inform the East Kalimantan Government and other key stakeholders of the options for promoting sustainable SMEs on small-scale, degraded lands across the province. The goal of these enterprises will be to contribute towards establishing sustainable local, land-based economies while managing healthy and resilient ecosystems. A successful enterprise will be based on the sustainable production of a crop, a variety of crops or a combination of products and services, which could include environmental services.

The demonstration project will be allocated in Gunung Rampah village, Mook Manaar Bulatn sud district, West Kutai with total area 100 ha. Gunung Rampah village is one of 15 villages within sub district of Mook Manaar Bulatn which has a total area of 378 ha and is occupied by 626 people, with a population density of 1.66 people/ha. Meanwhile total area of sub-district Mook Manaar Bulatn is 88,538 ha with total population of 8,960 people living in 15 villages.

The reasons to select Mook Manaar Bulatn as the main area for demonstrating plantation of Aren and producing palm sugar include:

Access is an important criterion for developing the demonstration plot because it is mostly related to the market network and supply of agriculture production infrastructure and facilities. Mook Manaar Bulatn can be accessed by boat or car either from Sendawar/Barong Tongkok, Melak or even from Tenggarong and Samarinda. Distance from Melak is about 10-32 km. Sendawar is the capital town of West Kutai district, that comprise several sub districts (including Barong Tongkok and Melak). Barong Tongkok and Melak are important trade towns near the Mook Manar Bulatn where most of agriculture products are marketed in these towns. Tenggarong, Samarinda and Balikpapan are being important in this business because those are main towns in the province which abundantly occupants.

Mook Manaar Bulatn is dominated with lowland areas. Soil type of this area is dominated by Podsolik and Alluvial with medium soil fertility level. Some areas are suitable for rice cultivation but in some areas, Aren trees grow wildly. In Gunung Rampah village where the demonstration plot will be located, the land system type is Teweh (TWH) 1 where naturally, this land system having low level of land chemical fertility, but good for both physical and biological fertilities, and appropriate for developing oil palm, sugar palm, rubber, cocoa, etc.

At least 76.11% of Gunung Rampah inhabitants are working at agriculture sector. The remaining is working as labor, state officers or others. Since 1960s the local community in Mook Manaar Bulatn particularly in a few villages including village Sakaq Tada, Sakak Lotoq, Karangan, Gunung Rampah and Gemuruh experiences with planting of Aren trees and producing the palm sugar. Their experiences have been inherit to their children or grandchildren until now.

The potential of market either in West Kutai or outside of district is widely opened. Markets in Samarinda and other capital towns in East Kalimantan are still big. Access from Mook Manaar Bulatn or even from Gunung Rampah to those main towns above is accessible. It takes about eight hours travel by road or about 15-18 hours by boat from Samarinda. The farmers or traders may transport their products by boat through Mahakam River or even by car. Currently, many traders from Samarinda, Tenggarong and Banjarmasin who bring the products from palm sugar trees. They will sell either in Samarinda, Balikpapan, Tenggarong or even to Banjarbaru, Martapura or Banjarmasin in South Kalimantan.

The government of East Kalimantan has appointed West Kutai district as a district to develop food security program in East Kalimantan. Meanwhile government of West Kutai has appointed Mook Manaar Bulatn as a main center development of palm sugar production in West Kutai. It gives a strong argument to integrate and synchronize the government program and new initiative to develop a demonstration plot in Mook Manaar Bulatn in Aren plantation to produce palm sugar.

This section provides further information on the selected site, including:

Sub-district of Mook Manaar Bulatn located in the northern part of the Mahakam River, it is between 115o45’00” and 116o01’05" EL, and between 0o13’ SL- 0o18’ SL. In Mook Manaar 1

Bulatn there are 7 villages (of 15 villages) located at the valley or river bank and the rest villages are at plain area. There are 5 villages located at outside forest area, and other 10 villages are near or around the forest area. Generally, land cover in the sub districts are dominated by young secondary forest and bush. In many areas, village forest, community plantation forest (primary and secondary forest changed to forest plantation), and tree crop plantation (secondary forest, community plantation and bush changed to rubber) can be found easily. The location of demonstration plot is located in Gunung Rampah village, which used to be a rubber plantation a few decades ago. The land cover is dominated by bush. The village is located at 34 meter above sea level with flat topography.

After reviewing the soil map unit, the demonstration plot in Gunung Rampah village is categorized in Hapludults Dystrudepts soil classification, and sub relief tectonic plain. This soil is poor of phosphate and nutrients. Refer to the land system map produced by BAPEDA West Kutai2, demonstration plot in Gunung Rampah is classified as Teweh land system as described on sub chapter related to the soil fertility. Under this classification, most of suitable area for agriculture development in Mook Manaar Bulatn including in Gunung Rampah village need improvement through fertilizing and addition of organic materials.

SPT 1

SPT 2 16.265

SPT 3

SPT 4

SPT 5

SPT 6

SPT 7

Total

3.124

65.798

10.129

95.316

From ground survey, seems the location of demonstration plot was burnt a few years ago. It proved by remaining stumpages and species of Imperata cylindrica3 which distributes wildly. However, flat topography and no other saplings and trees in the demonstration area will make easy in preparing the lands before plantation.

Average of land area per household for farming area in Mook Manaar Bulatn is 2.65 ha, (85.36% increase compared to 2003 which only 1.47 ha). Related to the conflict on this site, there is no land conflict among farmers and other parties. The social status of Mook Manoor Bulatn and Gunung Rampah village is described in the table 2. The health infrastructure in Gunung Rampah is relatively good. There is a health service center (Puskesmas) with a doctor and a traditional midwife, but no paramedics. Community has also used their own toilet (9 of 15 villages in the sub district still use shared toilet (jamban bersama) or public toilet (jamban umum). The education sector shows that there is a stated primary school but no kindy garten, a stated junior high school building with only 118 students consist of 58 males and 60 females (there are only three JHS buildings in this sub district) but no senior high school there. Meanwhile, the poverty number in Gunung Rampah village is relatively small with only 18 households or about 6.27% or total sub district poverty data from 15 villages.

Category of Information

Sub districts

Demonstration Village (Gunung Rampah)

Total Population Male and Female Ratio Agriculture household Ethnic

8,594 people M: 4729 F: 4231 >90% DayakBenuaq, Timor, Bugis 88,538 ha

626 people M: 324 F: 302 76.11% DayakTunjung

Total Area

Java,

378 ha

Most of the people in Gunung Rampah are the farmers who work at rice field. Meanwhile the Aren field is spreading in Karangan, Sakaq Tada and Gemuruh. However, the local people of Gunung Rampah are also involved in some plantation or processing the palm sugar from their neighbor villages. Thatâ&#x20AC;&#x2122;s why it is probably the specific expertise (of making the palm sugar) owned by the people of Gunung Rampah. 3

It is similar with a number of villages near Gunung Rampah such as Sakaq Tada, Karangan or Gemuruh. Agriculture4 (dry rice field and rain rice field) is the most livelihood of local community. Size of local rain rice field is ± 150 ha with average productivity of 3,000 – 3,250 kg/ha. Meanwhile dry rice field (highland) is ± 50 ha with average productivity of 1,000 – 1,500 kg/ha. Beside, rubber is also another common commodity in sub district of Mook Manoor Bulatn, including in the Gunung Rampah village, with total plantation is ± 28 ha and average production of 500 kg/Ha. Meanwhile, total area for aren plantation in Gunung Rampah village is 78 ha with production of 6,500 kg/ha. This production contributes to sub district palm sugar production of Mook Manaar Bulatn. At specific site of Gunung Rampah, the information related to the economic status is very limited. Most of the households in this village are the farmers5 (77%). The economic infrastructure is very limited, no market or store, only small shops selling daily basic needs. It means that most of the income overviews in Gunung Rampah are generated through agriculture. Most of farmers cultivate upland paddy and various vegetables for domestic consumption. Meanwhile, rubber and palm sugar or brown sugar from Aren are the main cash incomes of the farmers in this village. So far, the economic growth has been largely based on the non-regenerative extraction of natural resources (timber, coal, gold, wildlife, etc.). It is the district government’s responsibility to minimize the environmental and social trade-offs and to achieve a more balanced and sustainable development of the district.

Mostly lands in Mook Manaar Bulatn have been permitted to third parties including forest companies. Total degraded land in Manaar Bulatn sub district is about 39,608.9 ha excluding the degraded lands within the forest area. About 30-40% of the area belongs to the local community and utilized as cultivating fields or crops plantation. Demonstration plot for Aren plantation in Gunung Rampah is located outside of forest area (non-forest area6) within the degraded lands in Mook Manaar Bulan. The land ownership of demonstration plot is belong to the farmers which a part of them are proved by certificate. There is no conflict of land ownership for the demonstration plot because the land is belong to the farmers (in a group). Although it was used for dry rice field a few years ago, team has interviewed the farmers/ owners related to the demonstration plan. Most of them are agree to involve in the Aren plantation project. Besides, the land is not overlapped with other third party’s permits including rubber plantation, oil palm or coal mining companies.

The main product of this business plan is divided into two main categories including producing/ selling palm sugar and derivate of Aren (Arenga pinnata (Wurmb) Merr.) trees such as fruits, sticks broom, fiber for roofs, and Aren flavor. The palm sugar will be uniquely packaged by combining use of old sugar palm leave and plastic to sell in the market, as well as its packaging products to be sold consist two or three options. Meanwhile, process of producing the palm sugar will apply what farmers have been practicing to date, with some improvement in several processing stages. Process of converting Aren trees into palm sugar conducted by mostly local farmers has been part of their daily activity. For farmers, this commodity has been recognized for decades and provides multi economically benefits. To complement the information related to the derivate products from Aren trees, below is a short description: The fruits (kolang kaling), this fruit of the sugar palm tree is soft and a bit rubbery, and adds to the flavor of many sweet snacks and drinks. It can also be made into candies of different flavors and colors. The fruit sap, can be further processed for making some derivatives products such as palm sugar, low alcohol drinking (tuak or legen), Aren liquid (sirup aren) can be used for cooking and traditional medicines (due to having low index Glycemic (GI), Aren vinegar (cuka aren), can be used for cooking, health, and cosmetic, even it can be used in gardening as herbicide Bio ethanol (green energy), mainly produced by the sugar fermentation process, sugar required to produce ethanol come from fuel or energy crops. Ethanol is a high octane fuel and has replaced lead as an octane enhancer in petrol. The most common blend is 10% ethanol and 90% petrol (E10). The fiber (ijuk) as raw material for making roof, broom or filler for building construction, the trunk and the midrib could be used for many home industry products are the products from Aren trees. When Aren trees reach their maturity, some communities cut them down for lumber and never replant the trees. Urban expansion has also resulted in fewer palm sugar trees in recent times. The organic term refers to the source of sugar sap from the Aren tree will be derived from organic culture and the process of palm sugar will not involve any chemical substances. Most of the process of land preparation and the crop maintaining will use organic fertilizers. The project will plant Aren trees to complement the existing planted trees in Gunung Rampah village by using species of Aren Genjah/ dwarf breeds that are shorter and grow faster. Historically, this genjah variety is from East Kutai District and has been formally released by agricultural ministry as national Aren dwarf breed. If the product is compared to other products at the local West Kutai District, the Manaar Bulatnâ&#x20AC;&#x2122;s palm sugar will have different material during processing, where the cooking process will use the charcoal briquette made from Laban wood (Vitex pinnata). Therefore, this business plan will plant Laban tree on a nearby piece of degraded land to produce charcoal

briquettes to use during the palm sugar processing. It will reduce to use of firewood. Since the briquette will be made and produced by the farmers themselves, the use of fire woods as they normally practiced will be lesser (even none) gradually. The price will be offered slightly higher than normal palm sugar by considering the costs of input and processing for producing a product. Resuming all of above, this business plan has several unique aspects, include: (1) the organic palm sugar will be uniquely packaged, (2) the products include palm sugar and other products, (3) the business will use planted palm sugar, rather than the existing natural plants, (4) the business will use dwarf breeds (Aren Genjah) that are shorter and grow faster, (5) best management practices will deliver significantly more palm sugar per hectare than current palm sugar plantations in West Kutai, (6) Laban trees will be planted on a nearby piece of degraded to produce charcoal briquettes to be used during the palm sugar processing, thus reducing the use of firewood.

The Aren plantation and processing palm sugar project will be demonstrated in village of Gunung Rampah, sub district of Mook Manaar Bulatn, West Kutai district, Province of East Kalimantan, which will cover nearly 100 hectares of farmersâ&#x20AC;&#x2122; land which categorized as degraded lands. Government of West Kutai and some other key financial stakeholders in their programs will develop the Aren plantation, palm sugar processing and its derivate products. The partnership will commit to introduce and develop a demonstration plot for the Aren plantation demonstration plot, palm sugar processing and its derivate products particularly at the marginal or degraded lands with environmentally treatments and supportive facilities and develop market linkages as well as farmers institutional strengthening. The business will be expected to achieve a better income generation for local farmers and improving the marginal/ degraded lands in Mook Manaar Bulatn.

Development of the Aren plantation and palm sugar processing including its derivate products is mainly to generate a local income by utilizing the degraded or marginal unused lands in Mook Manaar Bulatn particularly in village of Gunung Rampah with environmental treatments to produce healthy and sustainable farming products. Meanwhile, the objectives include: To utilize the degraded or marginal lands in Mook Manaar Bulatn; To introduce the organic palm sugar plantation and environmental farming materials; To improve social and economy of local community; To initiate the sustainable and environmentally agriculture based small medium enterprise.

It is expected the local community will start to gain additional income from Aren

From year 10th, the market will be enlarged and the products will become a district flagship commodity. Additional income from project will be continuously earned.

Monitoring, Evaluation & preparing 2nd rotation

Since year 6th, the community will gather additional income from leaves, fruits, or even Nira for palm sugar.

Enlarging the market and network

Year 5th, all plantation (Aren & Leban) have been planted

Plantation, Maintenance and Harvesting

Preparing the lands & Institutional

This project will be expected to plant 100 ha with total 15,000 palm sugar trees. The project development (plantation to processing) will provide jobs for more than 125 people7 who involved in the demonstration in the village or sub district of Mook Manaar Bulatn.

Year 15th, all felled trees will be used to produce flavor/ sago and preparing the 2nd rotation of new plantation It is expected the farmers are independently able to develop plantation with own resources.

During 20 years of the plantation, the goal and achievements are drawn on the Figure above.

During the year of 2009, Indonesia has fully met the needs of self-sufficiency in white crystal sugar for consumption. But since then, the central government faces big efforts to maintain that achievement. In 2013, total production of sugar reached only 2.5 million ton, compared to 5.8 million ton sugar demanded by industry and household needs (Ministry of Agriculture, 2013). Programs toward increasing the production (open the sugar plantations, new sugar factories and sugarcane-based industries) and extending the planting area (of sugarcane) seem likely unable to meet the self-sufficiency target in 2014. So far East Kalimantan province is not as one of sugar producer in Indonesia. Beside of the soil type, watering infrastructure is also one of disadvantage why sugar cane plantation is not growing well in East Kalimantan. Substituted sugar canes, Aren trees from family of palmae are good growing in all parts of East Kalimantan. From Aren trees, palm sugar is produced in industry or household. In the last few years, East Kalimantan government develops a program to plan the Aren trees aggressively. In 2011, there are 1,253 ha of Aren area in this province with production of 287,000 kg (Ministry of Agriculture, 2012). Recently, the Ministry of Agriculture has formally appointed one Aren variety from East Kutai District as national germ plasma (plasma nutfah) for Aren dwarf breeds. Apart of that, in West Kutai, the district government has put priority for four tree crop commodities. They are rubber, cocoa, oil palm, and sugar palm. Among them, the progress of Aren is very limited in term of area coverage and production. Total area of Aren in Mook Manaar Bulatn in 2012 is 167 ha with 18,000 kg8. The district government through the 7 8

Plantation, Animal Husbandry and Fishery Service Agency (Dinas Perkebunan, Peternakan dan Perikanan–Disbuntanakan) and the Industry, Trade, and Cooperative Service Agency (Dinas Perindustrian, Perdagangan, dan Koperasi– Disperindagkop) have been planning to intensify the domestication of Aren trees, the maintaining of the existing trees, and increasing the efficiency of palm sugar processing. In fact, the Aren has potential to develop since it is tropical native tree and thus well suited and adaptable to West Kutai climate and soil. Moreover, this commodity grows naturally and spreads widely from low land to hilly landscape. Apart of that, this trees is relatively not much affected by pests and diseases. The spirit of East Kalimantan green by reducing emission and rehabilitate marginal lands through a program of “one man five trees” for East Kalimantan’s people is enormously in line with the mission and objective to demonstrate the organic Aren plantation in Mook Manaar Bulatn. It is expected that environmentally organic Aren development, including the Laban ‘fuel wood’ plantation, will contribute to the reduction of ammonia emission from fertilizer and fossil fuel used for agriculture machines and increase the local income.

The price of palm sugar in Samarinda/Balikpapan is IDR 25,000/kg and in Sub district Mook Manaar Bulatn is IDR 12,500/kg through the middle man after deducting their loan (debt bondage). Farmers are potentially to get price IDR 15,000-20,000/kg if the community organization and its business unit are built. Demand for palm sugar in many sub districts of West Kutai seems almost as big as white sugar, and especially for organic palm sugar. The products produced by farmers are always accepted at the markets, and this indicates that the demand of palm sugar is greater than what farmers have been currently supplying. Therefore, it is a good market opportunity for them to enlarge the supply volume to the markets to meet both the demands from the locals and also from outside the area of West Kutai. In current local market situation, there is an increasing trend that consumer will take organic sound product into consideration. High risk of long term impact of using inorganic product on human health has become public concern in many occasions. The clean, healthy, and green program at local or family environment has been widely socialized by the government. Recently, the provincial government has also introduced the safety food labeling for several daily foods (including various fresh vegetables and fruits). Overall, the trend of keeping the healthy environment must be used to market the organic product. And this moment seems to able to drive the market of organic palm sugar, both local and outside the district. Data from the field survey revealed that on average, farmers in Manaar Bulatn having 100–150 Aren trees per hectare with average production of 4,968 kg or the productivity ranges from 33.12-49.68 kg/tree/year. In theory as comparison, according to R&D of Banten Province, a (well grown) Aren tree could produce ± 900-1,600 litres/year, and a liter of sap can be converted becomes 0.15–0.17 kg palm sugar, and thus, the productivity is ranging from 135–272 kg/tree/year. Therefore, the productivity level of Aren in Mook Manaar Bulatn sub district is much lower with total plantation of 130.31 ha with production of 6,91o kg on 2013. However, there is still an opportunity to increase the palm sugar production by making use the strengths of this business plan. Nevertheless, farmers have some threats to implement this program. For example, using the ’new’ dwarf breeds will face with new up keeping mechanism or new unknown pests or diseases. To increase the organic palm sugar production, farmer producers still need more technical supports in term of increasing the production of sugar sap as raw material, increasing the efficiency of palm sugar processing, technical supports on market information and other marketing strategies, including the improvement of negotiation skills, practical management and leadership among the management committees in order to ensure that they are adequately qualified in the competitive market. Local palm sugar products in West Kutai District are commonly found at central markets of sub districts, such as in Melak, Barong Tongkok, Sekolaq Darat, Linggang Bigung, and Tering. At those markets, the palm sugars are usually sold in simple wrapping using dried leaves (few are sold in bare product) and this could support the visualization for organic products. Many consumers prefer such ‘natural’ product wrapping and make them believe that the products

were really produced by the villagers traditionally without involving many external man-made tools or machineries. But, this Manaar Bulatn organic palm sugar will be sold with organic wrapping paper. The product size and wrapping design will consider public preference. Therefore, there are several market segments for this product, such as well-educated community, big restaurants, individual households, etc.

Potential buyers of Aren products can be divided into four products including palm sugar, fiber and sticks, kolang kaling and flavor. Palm sugars will be widely supplied not only to the capital town of West Kutai, but also to Samarinda as the biggest market in the province. The current middle men in Melak and Manaar Bulatn sell their sugars also to Tenggarong or even to Balikpapan. Fibers and sticks are only sold locally (Melak or Barong Tongkok sub districts). Meanwhile kolang-kaling will depend on the quantity of products. Mostly, it would be sold near the sub district. Transporting to Samarinda or Balikpapan will need more time and high risk to the quality of kolang kaling. The market chains of palm sugar in West Kutai District involve several actors, such as input suppliers, farmer producers, wholesalers, local retailers, and individual consumers. Each of them demands different quantity of the product. Some retailers come to the individual farmer once or twice a week and usually pay in cash. Since the farmers (as single actor to produce the product) have limited mature Aren trees and family labors to produce the palm sugar, all farmersâ&#x20AC;&#x2122; production is taken away for further selling by the retailer (in this case, all palm sugars produced by farmers are sold out). This could indicate the demand is increased, including potential markets outside West Kutai.

The final product of this business is palm sugar, Aren fruit (kolang-kaling), Aren leaf stick (lidi), fiber (ijuk) and sago palm flavor (tepung sagu aren) under quantity unit of kilogram and bundle and monetary unit of Rupiah. The palm sugar projection uses financial aspect analysis for 100 ha plantation with a number of farmers as workers. From land preparation until harvesting season will be started in the fifth year. The project is calculated to be a 20 year project with 15 years for harvesting seasons during project period.

Category of Cost

Fixed assets investment Building Hoe Sickle Sprayer Ladder Boots shoe Glove Sap filter Tapping knife Hammer Saw Axe Rope Wooden hammer Chopping knife Fire stove (2 fire points) Frying pan Mixer Print cast Plastic container Plastic bucket Total Fixed investment

Assets

Total cost 20 years (IDR)

Assumption

60,000,000 55,359,784 13,839,946 41,519,838 31,419,915 83,039,676 27,679,892 83,039,676 16,607,935 41,519,838 44,096,278 55,359,784 55,359,784 27,679,892 55,359,784 31,419,915 94,259,746 44,287,827 31,419,915 44,287,827 19,375,925

Economic value 5 years (4 x 5 yr x 1 unit) Per 5 ha done by 1 person (10 unit/yr) Per 5 ha done by 1 person (10 unit/yr) Per 17 ha done by 1 person (5 unit/yr) Per 10 ha done by 1 person (10 unit/2 yr) Per 5 ha done by 1 person (10 unit/yr) Per 5 ha done by 1 person (10 unit/yr) Per tapping 40 bunches per day (30 unit/yr) Per 5 ha done by 1 person (10 unit/yr) Per 10 ha done by 1 person (10 unit/yr) Per 20 ha done by 1 person (10 unit/yr) Per 5 ha done by 1 person (10 unit/3 yr) Per 10 ha done by 1 person (10 unit/yr) Per 5 ha done by 1 person (10 unit/yr) Per 5 ha done by 1 person (10 unit/yr) 1 x production 8 frying pans (4 units/2 yr) 1 x production 8 frying pans (8 units/2 yr) 1 x production 8 frying pans (8 units/yr) 1 x production 200 print casts/2 yr) Per 10 ha done by 1 person (20 units/yr) Per 10 ha done by 1 person (20 units/yr)

956,933,183

Fixed assets investment during this project that runs for 20 years is IDR 956,933,183 with detail description as above. Meanwhile for operational cost, Table 4 below will describe more comprehensive.

ITEM

QUANTITY/UNIT

TOTAL COST

Sugar Palm Seedlings

25.010

trees

625.250.000

Organic Fertilizer "G1 WIJAYA"

1,875

packs

225.000.000

Brown Liquid "G1 WIJAYA"

800

bottle

28.000.000

Pesticide Liquid "G1 WIJAYA"

100.000.000

time

118.500.000

Charcoal briquettes

11,520

1.787.134.950

Land clearing

people

20.000.000

Determining plant spacing

people

20.000.000

Holing

people

20.000.000

Planting

people

20.000.000

Replanting during planting period

people

2.000.000

Fertilizing

people

20.000.000

Controlling of pests or diseases

people

10.000.000

Weeding (harvesting the palm leaf stick and fiber)

people

553.597.845

Harvesting young fruit

people

788.694.959

Tapping the sugar sap

people

11.168.593.438

Chopping the unproductive sugar palm trees (sago palm flour) Processing sugar palm sap

people

20.000.000

people

8.935.674.750

Processing sugar palm fruit

people

788.694.959

Processing palm leaf stick

people

946.433.951

Processing palm fiber

people

946.433.951

Processing sago palm flour

people

10.000.000

Supervisor

people

2.657.269.646

Freight in (SBY - KUBAR) - CONTAINER

TOTAL

29.812.278.449

Total fixed assets investment is IDR 956,933,183 and cash financing for operational cost during 20 years is IDR 29,812,278,449 per 100 Ha or IDR 298,122,784 per ha. The operational cost includes seed, fertilizer and as well as labor. So overall, the Aren project during 20 years project requires an investment fund of IDR 30,769,211,632 or IDR 307,692,116 per ha. Break event point analysis shows that the project will reach Break Even Point IDR 1,181,945,419 for 100 ha.

Category of Cost

Total cost 20 years (IDR)

Total cost per ha (IDR)

Fixed assets investment Operational Total required fund

956,933,183 29,812,278,449 30,769,211,632

9,569,332 298,122,784 307,692,116

The investment feasibility may be analyzed with Net Present Value (NPV), Internal Rate of Return (IRR), Payback Periods, Average Rate of Return (ARR) and Profitability Index (PI) as shown on table below:

Category

Value

Status

Net Present Value (NPV) Internal Rate of Return (IRR) Payback periods (PP) Profitability Index (PI) Average Rate of Return

IDR 12,073,242,232 37 % 6,03 34,73% 345%

Feasible Profitable Debt able Profitable Profitable

NPV shows a positive value and meaning that the Aren project is feasible to be implemented. Meanwhile IRR reaches 37% and it is above the interest rate (19.00%/years). While the ARR value of 345 % is a percentage value that is higher than the expected profit (expected profit rate is 10%). Payback period shows that investment for the aren project will be totally returned to the bank after 6 years (PP is 6,03).

This aren project in West Kutai may be funded by multiple parties or partnership including PNPM, Credit Union, BPD, and BRI by providing a soft loan to the farmer institutions. However, the role of local district and provincial government is still highly expected to provide other additional financial support to the farmers. The support from local government is highly required because the financial institutions above have a limited ceiling to provide a soft loan. Meanwhile, the project requires an enormous financial support. The calculation and analysis show that financial institutions only provide operating funds for each year, and the remaining will be provided by local governments. Total government fund for this project is estimated about IDR 956,933,183 that mostly provided for fixed assets. It could be provided through program 2015 through Bappeda West Kutai and supported by Bappeda East Kalimantan. Ratio analysis shows that the project can be operated with 73,46% debts from third party from total investment and with margin of debt ratio is 4,691.09%. The debt may cover all working capital in 20 years of project. Meanwhile, the governmentâ&#x20AC;&#x2122;s support fund is expected 26.54% (equity ratio) and margin-to-equity ratio of 12,985.54%. Comparison between the values of debt and equity capital amounted to 2,76 : 1 (debt to equity of 276.81%). Possible financial risk in this project is when the local government unable to provide main initial investment particularly to provide fixed assets. Under this circumstance, the project

should be demonstrated with manual technology or conventionally. However, the support from financial institutions is absolutely required. Without their support, it is impossible to implement this project due to enormous funds required for this project.

The financial projections were made with several assumptions. The average rate of growth of income per year is 2%, The average annual inflation growth of 9.7%, The average loan interest rate of 19% (annual rate system), The average level of 6.25% (annual rate system). Expected Profit rate is 10% A number of notes in this project: Fertilizing with organic fertilizer â&#x20AC;&#x153;G1 Wijayaâ&#x20AC;? is only applied for the first year of seedling growth period. This organic fertilizer will return the soil fertility, so that it will not be reapplied for the next year. Fertilizing will be applied twice per year with 2.5 months interval, by putting at 4 points around tree with 0.5 meter distance from the tree. The local government of West Kutai is expected to finance the involvement of NGO which will help local farmers in producing wood briquette and pellet from Leban woods.

There are some risks in the organic cassava project including: The project is much depending on government intervention (36.53%) from initial investment. If the government is unable to provide their intervention, the financial institutions should be involved to provide supports through splitting the credit from a few financial institutions. Investment funds before the production may be covered through demonstrate intercropping near the Aren trees. The aren trees may be intercropped with hot chili, soybean, corn, and other crops. The results or profit from intercropping may cover the maintenance of Aren trees before production.

Business development of palm sugar production in Mook Manaar Bulatn is basically intensifying the existing business at household scale. Natural Aren is abundant in this sub district. Producing palm sugar is an additional income for local community in Mook Manaar Bulatn beside planting paddy, rubber and other fruit trees or hunting, fishing, rattan harvesting and logging. Process of the palm sugar production is principally including initiation and preparation, plantation and maintenance, and monitoring & evaluation. Meanwhile the technical steps of the palm sugar plantation and processing is drawn on the table below:

Land preparation

Provide materials & tools Preparing ‘project team’ Preparing a ‘manual book’ Installing the charcoal briquettes Planting sugar palm Maintaining Planting Laban crop Making briquettes Harvesting& its post harvesting Marketing Preparation phase

X X X

Implementation

Monitoring/ evaluation

X X

X X X

VIII

VII

Socialization and training

Preparation

Reproductive (year)

Vegetative (year)

Main activities

III

Phase

X X X X

X X

Remark

Implementation

Evaluation of concept

X X

It will include two main steps: Preparation before planting aren seed including preparation of fields, providing the organic fertilizer, determining space and planting hole, and providing the aren seeds. Related to production of palm sugar, it requires managing the nira9 sap to be palm sugar. Therefore, big stove and wood (waste) briquettes are required. Stove can be

bought in the market and wood (waste) briquettes can be produced from Leban wood (Vitexpinnata). Preparation to plant Leban is similar with aren plantation.

Plantation process of aren seeds is as following: First step is making land boundaries accordingly to the large of area by putting the boundary markers/poles. Then, it will be followed by land slashing and clearing with manual system (without burning as preparing rice fields). Land slashing/clearing will use parang or chopper to cut small trees or high grasses along the planting alley. After that, land will be kept fallow for a couple of weeks, and then it is ready for planting. The planting distance is determined on the prepared land. The planting distance is 8 x 10 meter by considering the canopy of Aren tree is wide. The planting holes are made on the distance of 8x10 meter. All seedlings aged 1-2 years will be transferred to plantation area with size of hole about 50x50cm and 30-50cm depth (depends on the soil texture and structure). After providing the planting holes, then the seedlings are put into the hole. Before planting seedlings into the hole, put the organic fertilizer (dung) into the hole. Maintenance after planting the seedlings will be carried out by following steps: fertilizing, pruning or cutting the old midrib. The weeding will be done 2-3 times a year. Replanting will be done to replace the dead seedlings plants, or imperfect grow seedlings/plants with the purpose to fill the blank planting holes due to the above. Fertilizing is very important to increase the quality and quantity of Aren production. It could be done from age 0 â&#x20AC;&#x201C; 32 months with a various organic or composted fertilizers. Insect and disease attack - such as rat, grasshopper, and disease attacking bud, roots, and caterpillar leaves (Artona Catoxantha), Aryctes Rhinoceros (beetle), Sexava Nubila (grasshopper) and leave spot - will influence the plant/seedlings growth. It should be controlled by using insecticide and herbicide. It would be best to use organic insecticide and herbicide. Uncontrolled weeds growth will increase the competition in water consumption, nutrients, lights or CO2. Weeds can also be a source of insects and diseases distributing to Aren plants. Weeds controlling will be done manually by using hoe or similar equipment to repeal, cut and

bury all weeds (not to be burned). Weeding frequency and intensity may be reduced by planting cover crops.

V.1.2.10.1. Harvesting young fruits Young Aren fruits harvested from the Aren trees will result what local people called as Kolang Kaling10. Before harvesting the fruits, it should be checked whether the fruitsâ&#x20AC;&#x2122; maturity is sufficient or not. It is done by splitting fruits to see the seed. If the skin of seed is thin, soft, the color is yellow and the color of endosperm is white, a bit of transparent and soft, it indicates the fruits are ready to be harvested and processed to be Kolang-Kaling. V.1.2.10.2. Tapping Nira for Palm Sugar To select Aren trees with a high Nira production will be indicated by very fertile trees with dense green leaves. Nira will be commonly tapped from male flower cluster (langasari). However it could be tapped from female flower cluster (caruluk) although the production of Nira from this cluster will be lesser and not as good as male.

Characteristics of male flowers ready to be tapped include falling pollen of male flower, oily sap from hurt bunch. Tapping Nira can be done 2 times per day (morning and afternoon). Morning tapping can be taken in the afternoon by placing the new LODONG11 to be taken the day after.

V.1.2.10.3. Felling the Aren trees to be processed as Aren Flavour (sago) Aren tree with a high production of nira will produce high sago as well. The aren tree with high sago production then is commonly known by local people as Kawung Aci. It is indicated with fertile growth with a very dense, long and yellow leaves. The stem of aren is cut 0.5 â&#x20AC;&#x201C; 2 meter to easily transport it. The core stem part is taken then mix to water and milled for producing sago. V.1.2.10.4. Utilization of palm fibers and stick from Aren Fibers can be taken from Aren trees with age more than 5 years. Meanwhile the sticks can be taken from the old leaves. Fibers can be harvested by using sickle or sharp machete. Leban (Vitex pinnata) is a very common tree in young secondary forests, growing up to 20 meters. It grows well usually in secondary forests or riverbanks and along roads including in marginal land area. Laban wood is some of hard wood that is used for firewood and charcoal by many local residents. Its density is about 930 kg per cubic meter. This Laban wood charcoal (or Gopasa for trading name) has low ash and smoke, long burning time and calorific value at 7500 kcal/kg or above. In general, steps of land preparation, planting, and maintenance of Leban are similar with aren plantation. The difference is only under processes of fertilizing and harvesting. Essentially, leban does not need fertilizer, unless the soil is very hard and dry and indicate highly degraded and infertile soil. Leban is a kind of fast-growing species and can be harvested for firewood averagely at two-three years old. In this project, about 10 Ha of degraded area near the Arenplantation will be planted with Leban using dense planting distance 2x2 m (about 2,500 trees/Ha). To produce the wood briquette, the trees are cut in 2 â&#x20AC;&#x201C; 3 meter long. Pieces of wood stacked and burned. Wood that has been burned into charcoal then chopped and pressed using machine, and formed into small pieces cubes. The project will involve one NGO which has a rich and wide experience to develop briquette from Leban wood. The NGO will transfer their knowledge and experiences to local farmers of Aren in producing the briquette from Leban.

Based on the initial calculation, the required resources and equipment for the planting of aren trees and producing palm sugar will include as following:

No.

Step of Work

Manpower (people)

Duration of work (day/ month)

Cost (IDR)/ha

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16 17.

Land preparation and clearing Preparing planting distance Making planting holes Plantation Replanting Fertilizing Insect and disease controlling Weeding Young Aren fruits harvesting Tapping Nira Producing Aren flavor (sago) Processing palm sugar Processing Kolang-Kaling Processing sticks Processing fibers Processing Aren flavor (sago) Supervisor

10 10 10 10 2 10 5 5 10 10 10 8 10 5 5 5 2

10 10 10 10 5 10 10 10 10 180 10 180 10 24 24 10 30

200.000 200.000 200.000 200.000 20.000 200.000 100.000 100.000 200.000 3.600.000 200.000 2.880.000 200.000 240.000 240.000 100.000 480.000

Number of required manpower from plantation to production is 132 people (from land preparation to the products processing) from each Aren farmer with one additional supervisor. From above number, it can be squeezed more efficiency by dividing the workers into three main categories including 10 people will help in maintaining the Aren trees up to harvesting, 6 people will help harvesting, and 4 people will help processing the Aren fruits and palm sugar. However, on behalf of expansion local employment the project may taking decision either using workers as small as possible or providing more opportunities for local workers. Meanwhile the total cost for each activity will be adjusted with number of manpower and period of work. Generally for above activities, the manpower will be paid in daily basis except supervisor will be paid under monthly basis. This project will also require one supervisor who controls the labor from land preparation/ clearing to Aren maintenance including harvesting and processing the products. The labor should come from local villages and have experiences with planting and maintaining Aren trees. It is necessarily to conduct a series of training for the farmers who will involve in this project.

Based on the field survey, there are a number of community organizations in Mook Manaar Bulatn including farmers group, cooperative and PNPM12 as the driving organization for agriculture activities. The farmers group has function not only to accommodate and facilitate the rice farmers or crops cultivation but also as a group of Aren farmers. Farmers in Mook Manaar Bulatn only plant the paddy once in a year. To support their income, the farmers maintain and tap the nira from Aren trees and processing for palm sugars. There is a cooperative in Mook Manaar Bulatn, the Murung Putih (Sakaq Tada). This cooperative is only a formality and does not play their role in the operation. The cooperative Murung Putih is supposed to do their role to provide soft loan for the members, accommodate to sell all agricultural products including rice, crops, and palm sugar or its derivate such as fibers and sticks. However, the cooperative only provides a small soft loan with a very low rate of return. Due to weak of cooperative functions, farmers sell their palm sugars to the middle men in village that will transport and sell all sugars to Samarinda. By the middle man, the farmers will be provided a soft loan (debt bondage) to produce palm sugars under circumstance that the farmers have to sell their sugars to the middle man. Meanwhile, there are no cooperative or other financial institutions in Gunung Rampah. Based on the problems above, three functions of organizational management need to be developed in supporting the palm sugar business including:

The farmers group in Mook Manaar Bulatn has been developed under supervision and facilitation of the Plantation, Animal Husbandry and Fishery Service Agency, the Industry, Trade, and Cooperative Service Agency, and Food Security and Agriculture Extension Office of West Kutai. The farmers (paddy & crops) group can be strengthened as the Aren farmers group. The farmers group that is still not legitimated and informal may be strengthened, upgraded and legitimated into what then called as Community Based Organization (CBOKelompok Swadaya Masyarakat). The CBO is principally a big group of all farmer groups in Mook Manaar Bulatn that will improve the business of organic rice and palm sugar to generate their income.

Mission Structure Legal •Knownly as CBO •Group of farmers

•Led by scholar •Support ed by stakeholders

•Loan support •Capacity •Market network •Income

The Aren project may duplicate the lessons learned and experiences in developing the Rattan craftsmen and farmers group in West Kutai. The farmers group will be sublimated into CBO. CBO will develop a business unit for marketing and compiling the products. And local government district will support and facilitate to develop a financial unit within CBO to provide a micro credit for the farmers. In this cycle, one and another are a unit and inseparable. Local district government should support the capacity building and institutional strengthening including supporting the fund for the business of palm sugar. Capacity building may be provided through KSM.

One of important functions of CBO is compiling the palm sugars from the farmers and finding market network as wide as possible with a good price for the farmers. It will help the farmers released from debt bondage (ijon) practices from the middle men as occurred nowadays. One division of CBO will develop a business unit with legal entity as limited company13, or Koperasi Serba Usaha (business cooperative). This business unit will compile all palm sugars from the farmers to avoid monopolistic practices from the middle men.

The soft credit/ loan to the farmers will be provided to avoid the debt bondage at village level. The local government through Community Empowerment Agency and the Industry, Trade, and Cooperative Service Agency are providing the soft loan/ credit the farmers (person and group) beside the banks in West Kutai including BRI and Mandiri. However, the farmers are likely and easily accessing the soft loan from local government rather than the bank because of the simple and easy processes or requirements and low of interest rate.

Farmers group

Community Based Organization (CBO)

Business Unit (UD, CV, PT, KSU)

Financial Unit (CU, BPR, PNPM)

Related to the management and organization functions above, all farmers involve as member of the organization must sign agreement related to their rights and obligations. It will be written in the agreement of business development for Aren plantation between farmer and those three units of organization.

Related to the business plan of palm sugar in Mook Manaar Bulatn, analyses of SWOT are indicated as following:

Almost every village in Mook Manaar Bulatn plants Aren trees in their lands. Based on the research14 in village Saka Tada, the aren plantation and palm sugar processing have been started in 1960s. It is a supplementary activity after planting or maintaining rice field, crops or fruit trees. Since 1960s, the local people in Mook Manaar Bulatn have been known as a producer of palm sugar and aren. Farmers group that is initially as a group of crops/ paddy farmers nowadays has been growing as a group of Aren farmers as well. It could be intensified and strengthened by intensively involving extension workers from Agriculture Extension Agency in Mook Manaar Bulatn. 14

Basic problems with post harvesting is the marketing/ selling of the products. A business unit is highly required to trade all Aren products and its derivates (palm sugar, fibers, sticks, and Aren flavor/sago). The markets of Aren products in West Kutai and Samarinda are a widely open and potential. It is indicated by intervention of middle men in Mook Manaar Bulatn who provide a debt bondage to the farmers for a monopolistic trade. Strength for this project is that the local government through Community Empowerment Agency and the Industry, Trade, and Cooperative Service Agency are providing the soft loan/ credit the farmers (person and group). It could be proposed and accessed by farmers through Bank Rakyat Indonesia (BRI) or Bank Mandiri.

Analyses of weaknesses for this project may be resumed as following: Low productivity of local Aren trees in Mook Manaar Bulatn due to lack of maintenance including fertilizing and weeding. It is because of knowledge and skills of local farmers are still weak. Most of Aren trees in Mook Manaar Bulatn grow wildly without maintenance and very dense. Height of trees may reach 3-5 meters that will be difficult for farmers in harvesting nira. The farmers group does not function as it should be. There are no supervision, discussion or information exchange in the group. The group is only developed to adopt and access the local government projects. After receiving the projects/ grant, then the farmers group will be dismissed. Post harvesting management is very weak particularly for marketing. Weak institutional and local knowledge lead the farmers into unprofitable circumstance or even a bit trapped them in a cycle of debt bondage. Another weakness faced by local farmers in processing the palm sugar is the availability of firewood. The firewood from pruning or other wastes are limited and increasingly difficult.

Potential of palm sugar in West Kutai and Samarinda including Tenggarong and Balikpapan is a big enough. The potential of products is not only limited on palm sugar but also including kolang-kaling, fibers, sticks, and flavor/ sago. Local governmentâ&#x20AC;&#x2122;s supports in providing a better variety of Aren seedlings, capacity building and institutional strengthening particularly for financial support Demand for palm sugar is high enough. It will help local farmers to develop their business from home industry level into a bigger scale of industry. In the future, palm sugar from Mook Manaar Bulatn may become a flagship product for West Kutai.

Price of palm sugar at village is very low. Debt bondage system (ijon) applied by middle men that trap the farmers into an adverse situation

Internal Strengths (S) 1. 2.

Externals

3. 4.

5. 6.

Local Aren trees are in abundance in Mook Manaar Bulatn Experience in producing and processing palm sugar Farmer groups are available Aren trees produce nira for palm sugar, kolang-kaling, fibers, sticks, and flavor/ sago Potential land for planting aren trees is available Technology to process the product from Aren trees is available Local government supports the project

Weaknesses (W) 1. 2. 3. 4. 5. 6. 7.

Productivity of local species is low Lack of maintenance including fertilizing, weeding, and pruning Lack of information on marketing and financing Palm sugar package does not increase the selling price Palm sugar is produced at home industry scale Weak of organizational management Weak of post harvesting processing low capacity, knowledge and skill in cultivating and processing

Based on the SWOT analyses above, strategies to business development of palm sugar in Mook Manaar Bulatn will be: Develop the community based organization (KSM) as a base of farmer groups in Mook Manaar Bulatn who will work in Aren project. The aim is to strengthen the communication and support each other related to the cultivation, institutional, marketing and financing. Improving the knowledge and skill in organizational management Improving the knowledge and skill of Aren farmers related to improving Aren trees productivity including to produce derivate of aren trees including kolang-kaling, fibers, sticks and sago Providing information network particularly related to a new variety of Aren Genjah that will be planted in this project.

Opportunities (O)

Strategy S-O:

Strategy W-O:

Market potential outside of West Kutai is big Demand for palm sugar always increased every year Local government support to technicality and capital.

Increasing production of palm sugar from home industry scale to the industry scale Business development for Aren derivates such as kolang-kaling, fibers, sticks, and flavor/ sago

Improving capacity and skill in cultivation for improving the productivity of Aren trees Strong partnership and cooperation with local government

Threats (T):

Strategy S-T:

Strategy W-T:

Potential of disease or insects Monopoly of middle men through debt bondage High interest rate of loan from middle men

Developing the Community based organization Improving skill and knowledge of the farmers in management of farmers organization

Supports from local government to introduce and provide the supervision on planting a new variety of Aren seedlings Improving skill and knowledge of the farmers in financial management and marketing

Build a credit/ financial unit that will be facilitated by local government through various schemes including credit union, cooperative, and rural bank. Strengthen the partnership with local government of West Kutai in term of technicalities and financing of the project Build a credit/ financial unit that will be facilitated by local government through various schemes including credit union, cooperative, and rural bank. Increase and improve the business level from home industry to be a real industry for a better profit to community Product expansion besides palm sugar including fibers, sago, sticks and kolang-kaling. Strengthening the knowledge and skill of Aren farmers in financial and marketing management

It highlights the importance of a low carbon growth to contribute to global and national efforts to mitigate climate change and minimize future adverse impacts on local and international society. Countries with higher GHG emissions intensity have greater opportunities for cost-effective emissions reduction and more urgent need for assistance. The mission to reduce the greenhouse gas emission can be achieved through using environmentally materials in planting Aren. Organic fertilizers from local livestock or composted manure will reduce the release of ammonia and N2O to the air and soil. As well as in using biofuel from oil palm products near the villages for all agriculture machineries. By using reference from a research conducted by PT Sinar Mas15, total carbon in the area of demonstration plot will vary between 14,000-27,000 kg C/ha. Meanwhile with Aren trees on the land, total carbon will follow the result of research below. Research16 of potential carbon sequestration in Aren tree is (in average) 478 kg/ tree where the stem is a bigger part of carbon stock. By planting more than 15,000 trees the potential of carbon stock on the land will be 7,170,000 kg Carbon.

This aspect highlights the importance of national, provincial and district economic output (GDP), sustained in such a way that it results in broad-based social development and prosperity. The economic growth and prosperity of local community in Mook Manaar Bulatn will increase if the local farmersâ&#x20AC;&#x2122; institution and market networks are strengthened. It is because the selling price of palm sugar and its derivates is much higher if farmers are released from debt bondage practices by middle men.

This highlights growth which sustains natural capital, especially the natural stocks which supply a continuous flow of important ecosystem services. These stocks, such as the provision of clean water, provide essential contributions to economic growth and human well-being but are often omitted from decision making as they are not seen as inputs to economic production. The project will use organic fertilizer that will contribute to a better environment. A better environmental resulted from using environmentally materials in demonstrating the palm sugar plantation will reduce not only the emission but also other ineffective and inefficient 15

resources. Impact of this, the ecosystem and environment will be more healthy, productive and sustainable. Particularly for the forest/land fire in abandoned or unmanaged lands will have high risk and cause health problems.

Pillar of inclusive and equitable growth will highlight growth for the benefit of people, those in urban as well as in rural areas, the affluent as well the marginalized. This dimension is a central objective of green growth, and is highly correlated with economic growth and environmental quality. Countries with higher levels of poverty and inequality are likely to benefit more from green growth interventions. Total of poverty people in West Kutai is 11,256 people or about 22.31% of total households (West Kutai in Figures, 2013). Meanwhile, in Mook Manaar Bulatn is 862 people or about 33.96% of total households (Mook Manaar Bulatn in Figures, 2013). It is expected that project will contribute significant income generation in Mook Manaar Bulatn from Aren project. It would at least reduce the poverty at Sub district Mook Manaar Bulatn.

Social, economic and environmental resilience strongly related to the growth that builds economic, financial, social, and environmental resilience and is about the systemâ&#x20AC;&#x2122;s ability to withstand external shocks (e.g. adapting to the physical impacts of a changing climate, diversification of economic sectors, food security, currency and trade stability). Beside the social and economic resilience, the Aren developments in Mook Manaar Bulatn will also increase the environmental resilience through using composted manure and organic fertilizer. Meanwhile for firewood supply, the project will also plant Leban for raw materials of firewood. Moreover, the local knowledge and wisdom will still be maintained and sustained as a part of indigenous system to resilience the global environmental change.

ITEM

VALUE

EXPLAINS

ABILITY TO MEET CAPITAL REQUIREMENTS (IDR)

43,066,817

Maximum fund capability > provided funds

PERIODS OF WORKING CAPITAL IN YEARS

Working period of commodity project

TOTAL CREDITS

2,648,915,764

PERIODS OF CREDITS IN YEARS

Total loan from 3rd party (financial institutions) period of loan

EARNING BEFORE TAX (IDR)

125,828,876,037

net income before tax during project period

EARNING BEFORE TAX (AVERAGE - IDR)

6,291,443,802

net income average before tax during project period

EARNING AFTER TAX (TOTAL - IDR)

124,262,895,161

total net income after tax during project period

EARNING AFTER TAX (AVERAGE - IDR)

6,213,144,758

net incove average after tax during project period per year

NET PROFIT AFTER INTERESt (TOTAL - IDR)

123,313,129,189

total net income after deducted loan interest during project period

NET PROFIT AFTER INTEREST (AVERAGE IDR)

6,165,656,459

Net Present Value (NPV) (IDR)

12,073,242,232

Internal Rate Of Return (IRR)

37%

Avarage Rate Of Return (ARR)

345%

Payback periods (PP)

6.03

Profitabilitas Index (PI)

34.73

Break even point (IDR)

1,181,945,419

total net income average after deducted loan interest during project period per year present value from cash flow net from investement spending (must be positive value) Resulted percentage net income should be higher than loan interest rate average percentage of net income should be higher than expected income rate percentage payback period of investment (in year, should be below of project period) present value in the future compared with curent investment value must be above 1 Minimum selling in Rupiah in a harvesting period

Break even point (UNIT)

total minimum selling quantity in a season

OPERATING RATIO

19.65%

Total production cost should be under selling value (under 100%)

ITEM

VALUE

EXPLAINS

OPERATING MARGIN RATIO

80.35%

NET MARGIN RATIO

79.35%

Profit value before tax is above expected profit value + income tax income value after tax is above expected profit value

RATE OF ROI

657.46%

NET RATE OF ROI

649.28%

ASSETS TURN OVER

818.23%

CAPITAL WORKING TURN OVER

525.28%

MARGIN TO DEBT RATIO

4691.09%

selling value is above 100% of capital working 0

MARGIN TO EQUTY RATIO

12985.54%

DEBT RATIO

73.46%

selling value is above 100% of capital working comparison with equity ratio

EQUITY RATIO DEBT TO WORKING CAPITAL RATIO DEBT TO EQUITY

26.54% 8.89% 276.81%

comparison with debt ratio loan versus capital working loan versus own capital

profit value before tax is above 100% investment value of fixed assets profit value after tax is above investment value of fixed assets

NO.

value aspect

indikator

ABILITY TO MEET CAPITAL REQUIREMENTS (IDR)

positif value

PAYBACK PERIODS (PP)

Payback Period < payback maximum

NET PRESENT VALUE (NPV)

Net Present Value (NPV) > 0

PROFITABILITAS INDEX (PI)

Profitabilitas Index (PI) > 1

INTERNAL RATE OF RETURN (IRR)

Internal Rate Of Return (IRR) > INTEREST RATE

AVERAGE RATE OF RETURN (ARR)

Avarage Rate Of Return (ARR) > EXPECTED Minimum Accounting Rate Of Return

BREAK EVENT POINT (BEP)

RATIO ANALYSIS

analysis resume 43,066,817 6

YEAR

0.32

BULAN

HARI

explains

status

positif value

YES

6.03

YES

NPV

YES

36.609%

profit

19%

YES

344.61%

ARR

10%

YES

1,181,945,419

IDR

12,073,242,232 34.73

YES

OPERATIONAL PROFIT ON SALES (EBIT/SALES)

11%

YES

OPERATIONAL PROFIT ON COST (EBIT/COST)

384

89%

YES

10%

YES

379

90%

YES

NET PROFIT ON SALES (EAT/SALES) NET PROFIT ON COST (EAT/COST)

GULA AREN (palm sugar) 12,000 112,500 6

IDR KG FREQ tot sales

KOLANG KALING (the fruits) 10,000 12,500 1

8,100,000,000

NO.

LIDI (stick broom) 1,000 25,000 2

125,000,000

50,000,000

IJUK (the fiber) 3,000 125,000 2

TEPUNG AREN (aren flavor) 3,000 125,000 1

750,000,000

VALUE / GROWTH AGES/AVERAGE 80,000

ITEM Result in per item production Sold price per item production TOTAL SALES

5,800 1,880,000,000

375,000,000

avr 5,800 80,000 2 1,880,000,000

TOTAL 80,000 5,800 156,598,087,669

FIXED ASSETS NO.

ITEM

VALUE / GROWTH AGES

TOTAL

1 2

Building Hoe

3,000,000 1,000,000

60,000,000 55,359,784

3 4 5 6 7 8

Sickle Sprayer Ladder Gum Boat Gloves gutter for sap liquid

250,000 750,000 1,000,000 1,500,000 500,000 1,500,000

13,839,946 41,519,838 31,419,915 83,039,676 27,679,892 83,039,676

NO.

ITEM

9 10

Knife for tapping Hammer

11 12 13 14 15 16 17 18 19 20 21

VALUE / GROWTH AGES

TOTAL

300,000 750,000

16,607,935 41,519,838

Saw Axe Rope Stick wood Cleaver Stove (2 hole)

1,666,667 1,000,000 1,000,000 500,000 1,000,000 1,000,000

44,096,278 55,359,784 55,359,784 27,679,892 55,359,784 31,419,915

Crock Mixer Mold Jerry can Bucket

3,000,000 800,000 1,000,000 800,000 350,000

94,259,746 44,287,827 31,419,915 44,287,827 19,375,925

22,666,667

956,933,183

TOTAL FIXED COST

VARIABLE COSTS ITEM

VALUE / GROWTH AGES

TOTAL

SEEDS COST Aren Seeds total cost "seeds"

625,250,000 625,250,000

FERTILIZER COST Organic Fertilizer "G1 WIJAYA" Brown Liquid "G1 WIJAYA" Pestisida Liquid oganic

225,000,000 28,000,000 100,000,000

VALUE / GROWTH AGES 118,500,000 471,500,000

ITEM Freight in (SBY - KUBAR) - CONTAINER total fertilizer cost OTHER RAW COST Briket sekam padi/kayu

TOTAL 118,500,000 471,500,000 -

57,600,000

1,787,134,950

Total other cost

57,600,000

1,787,134,950

LABOUR COST Land preparation and clearing

20,000,000

Preparing planting distance

20,000,000

Making planting holes

20,000,000

Plantation

20,000,000

Replanting

2,000,000

Fertilizing

20,000,000

Insect and disease controlling

10,000,000

Weeding

10,000,000

553,597,843

Young Aren fruits harvesting

20,000,000

788,694,959

360,000,000

11,169,593,438

20,000,000

288,000,000

8,935,674,750

Processing Kolang-Kaling

20,000,000

788,694,959

Processing sticks

24,000,000

946,433,951

Tapping Nira Producing Aren flavor (sago) Processing palm sugar

VALUE / GROWTH AGES 24,000,000

946,433,951

Processing Aren flavor (sago)

10,000,000

Supervisor

48,000,000

2,657,269,646

936,000,000

26,928,393,499

1,561,250,000

29,812,278,449

ITEM Processing fibers

total labour cost

TOTAL VARIABLE COST

ITEM TOTAL SALES SALES PRICE/QUANTITY TOTAL FIXED COST TOTAL VARIABLE COST VARIABLE COST/QUANTITY

VALUE

TOTAL

VALUE

1,880,000,000

156,598,087,669

5,800

22,666,667

956,933,183

1,561,250,000

29,812,278,449

19,516

372,653

0.071111111

1,181,945,419.21

ANALYSIS BEP In MONETER (TOTAL AREA)