Sustainable agrifood value chain transformation in developing countries : Indonesia's cashew sector case : a thesis with publication presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Agribusiness, Massey University, Palmerston North, New Zealand
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2023
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Massey University
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Abstract
The value chain approach has been extensively explored to assist the development of the agrifood sector in developing countries. Agrifood value chain players in developing countries are increasingly moving into higher-value markets in order to increase their profits. The value chain lens can monitor the dynamic of the chain arrangement through governance activities and assess the value-adding source activities. In the meantime, higher value markets have imposed a new value focus on sustainable standards throughout the chain, demanding a "sustainable value chain" practice. A sustainable value chain requires the players to obtain a balanced activity in the economic, social, and environmental aspect. Many studies have sparked investigation in the sustainable value chain, however, the ability of developing countries’ value chain to transform their practices remains a contentious issue.
Three significant problems could seriously impede the transformation process. First, most agrifood value chain transformations in developing countries begin with an outdated, traditional value chain. Second, a large number of smallholders are the main players in developing countries, who are typically cut off from the majority of value chain operations in terms of governance and value addition. Third, players from developing countries primarily develop practices with economic priority for alleviating their poverty, which frequently endanger social and environmental aspects.
This study examines how to enable the sustainable agrifood value chain transformation in developing countries. Despite the fact that numerous studies have found a wide range of useful indicators, the structure of the transformation mechanism is frequently ignored. Therefore, this study focuses on synthesising indicators and finding the most effective mechanism to deal with sustainable value chain transformation. It is found that a framework that integrates sustainability, governance, and value addition dimensions has provided a strong foundation for facilitating and anticipating the sustainable value chain transformation in developing countries. Sustainability aspects must be incorporated into governance activities, in order to lead into value addition activities required by higher value markets.
The proposed framework was applied in the cashew sector of Indonesia, by employing a qualitative method followed by a quantitative method. The qualitative method was used as an initial assessment of the current value chain practices. In 2020, a total of 25 key interviews with value chain players and stakeholders in Madura Island of Indonesia were conducted. The assessment specifically focuses on the evaluation of maturity level of practises (based around traditional chain, managed chain, and best practice), using governance and the value addition dimension. The findings confirm that there was a disconnect in practices among value chain players. Smallholders followed the traditional value chain, whereas major wholesalers and exporters followed the managed value chain. It was then proposed that value chain transformation be tailored in step-by-step trajectories to align smallholder practices with other players. Before all value chain players can advance to the best procedure, the practices of smallholders must first be aligned to a managed chain level.
Following up on the findings, the enabling factors for a sustainable value chain transformation were assessed in order to fully align with higher value market demands. Smallholders’ perspective was used as the focus of attention since they are the most vulnerable player operating in the value chain and prone to sustainability. In 2021, a quantitative method was used with 159 smallholders as respondents in the study area. The results showed that farm practice milieu and information-communication are the strongest factors to enable sustainable value chain practice. It was followed by stakeholder support, certification orientation and market expansion as moderate factors in order to amplify the process of practice transformation. Meanwhile, pre-harvesting value, value-capturing, and post-harvest value are the weak factors which tend to abate transformation.
Given these factors, the final step of investigation is to examine the actors who are most compatible with higher value market demands. The heterogeneity of smallholders’ perspectives towards sustainable value chain practices was evaluated. Four clusters were discovered and prioritised as accelerators, progressors, inattentive, and conservative. Understanding the heterogeneity of smallholders allows for a more precise treatment, and prioritisation in intervention is required to accelerate alignment with higher value markets.
Overall, this study stands out in advancing the enabling mechanism for a sustainable value chain transformation through a systematic and structured process. The study lays the groundwork for future sustainable value chain studies which focus on the mechanism of transformation, using a step-by-step procedure, prioritised factors, and actors. Practitioners could independently evaluate and tailor their most effective transformation approach. Furthermore, policymakers could set the intervention into a more targeted agenda.
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Chapters two to five are published open access under a Creative Commons CC BY 4.0, or CC BY-NC 4.0, or CC BY-NC-ND 4.0, or CC BY-NC 4.0 license, respectively.
Keywords
Cashew nut industry, Sustainable agriculture, Indonesia, Madura Island