Page 200 - Contributed Paper Session (CPS) - Volume 7

CPS2058 Dewati W. et al.
obstacle in this case is that the production centers are situated in the
mountains resulting in high transportation costs.
iv. Trade Promotion Infrastructure
The coffee quality does not fully meet international standards. This
occurs in Aceh, North Sumatra and South Sumatra. It is inseparable from the
cultivation pattern and the application of technology which is still limited and
the limited cultivation capabilities during the process of managing the coffee
plantation land. In Lampung, the absence of foreign or domestic investment
in coffee production hampered the growth of the technology used in the
coffee industry. Currently, coffee production is still carried out in the traditional
way which might hinder the mass production while the demand for coffee
exports for both domestic and abroad are increasing.
c. Policy Priority to Increase Export Competitiveness
i. Market Access
The export share of Sumatran roasted coffee is still low at only 0.01%
of Sumatra’s coffee exports. This happens as a consequence of several
things such as 1) Roasted coffee's durability is only about 1 month, much
shorter than green beans which can reach 1 year, 2) The imposition of higher
import tariffs, 3) Market preferences that cannot be met, and 4) Uncompetitive
prices and a too long export chain. One strategy that can be done is the
development of roasted coffee market access to Asian countries. This aims
to cope with shorter roasted coffee durability. Currently, roasted coffee
exports are still intended for the United States and Japan. Next, efforts are
needed to expand the roasted coffee market access to Asian countries such as
China, Singapore, and Malaysia.

Chart IV.5 Perception of Trade Promotion Priorities Chart IV.6. Sumatran Roasted Coffee Export
Destination

ii.Incentive Framework
The main obstacle associated with macro incentives in the development of
coffee commodities is the imposition of Plantation Taxes (10% VAT). With this
policy, there is a tax obligation of Rp4.8 billion which is equivalent to 200 tons
of Robusta coffee or 81 tons of Arabica coffee. These taxes certainly can
influence coffee commodities in the way that it reduces margins at the farmer
level.

187 | I S I W S C 2 0 1 9