Page 198 - Contributed Paper Session (CPS) - Volume 7

CPS2058 Dewati W. et al.
Infrastructure for Trade Promotion and Macro Incentive are respectively in the
third and fourth most important factors. Of all the alternatives seen through
AHP, the priorities which are beneficial in increasing the competitiveness of
coffee exports in Sumatera are tariff barriers, access to finance, and technical
barriers to trade.
i.Market Access
Market access is defined as things that affect the ability of exporters to
access international markets, including trade policies of importing countries
that facilitate or hinder exporters from entering or penetrating markets and
maintaining their competitiveness in the market. Increased market access can
provide benefits such as larger economies of scale, reduced production costs,
and greater specialization.

Chart IV.1. Perception of Priority for Increasing Coffee Chart IV.2. AHP Market Access
ii. Incentive Framework
In Aceh and South Sumatera, the tax that burdens exporters the most is
10% Value Added Tax (VAT). However, those 10% VAT has already been
imposed on green beans. Therefore, the one who bear the VAT are the farmers
since both of the exporters and buyers (importers) do not want to bear the
tax. In addition to the 10% VAT, other taxes that are considered heavy are the
increase in income tax which is initially amounted to 2.5%, currently rising to
7.5%.
Unlike North Sumatera, the main priority in terms of macro incentives is the
depreciation of the rupiah against the dollar which affects coffee export
activities. If the value of the rupiah depreciates, it actually provides incentives
for farmers, exporters to increase production. In Lampung, business
regulation, administrative procedures of local governments created problems
in carrying out export activities.
iii. Factor Conditions
Coffee land productivity in Sumatra reaches 759 kg per hectare, which is
higher than the national productivity average of 721 kg per hectare. However,
the number is still far below the productivity of other competing exporting
countries such as Brazil, Vietnam, and Colombia that have reached above 900
kg per hectare. The low productivity is caused by several reasons such as
damaged and old plants, domination by smallholder plantations, human
resources and infrastructure barriers.
Accordingly, one of the main obstacles in the development of coffee in
Indonesia is the condition factor, which is related to financial access, especially
to increase land productivity. The current situation of coffee business is that

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