The North Sumatran Regional Economy: Growth with Unbalanced Development 9789814376815

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Occasional Paper No. 82

The North Sumatran Regional Economy

The Institute of Southeast Asian Studies was established as an autonomous organization in May 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the multi-faceted problems of stability and security, economic development, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer. The ASEAN Economic Research Unit is an integral part of the Institute, coming under the overall supervision of the Director who is also the Chairman of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political developments in ASEAN. The day-to-day operations of the Unit are the responsibility of the Co-ordinator. A Regional Advisory Committee, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit.

The North Sumatran Regional Economy Growth with Unbalanced Development

Colin Barlow Australian National University

and Thee Kian Wie Indonesian Institute of Sciences (PEP- LIP/)

ASEAN ECONOMIC RESEARCH UNIT

INSTITUTE OF SOUTHEAST ASIAN STUDIES

Cataloguing in Publication Data

Barlow, Colin The North Sumatran regional economy: growth with unbalanced development / Colin Barlow and Thee Kian Wie. (Occasional paper/ Institute of Southeast Asian Studies; no. 82) I. Sumatera Utara (lndonesia) - Economic conditions. I. Thee, Kian Wie, 1935II. Institute of Southeast Asian Studies. Ill. Title. IV. Series. 1988 OS 50 I 159 no. 82 ISBN 9971-988-92-5 ISSN 0073-9731

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the Institute of Southeast Asian Studies. ©

1988 Institute of Southeast Asian Studies

The responsibility for facts and opinions expressed in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the Institute or its supporters.

Printed and bound by Kim Hup Lee Printing Pte Ltd.

Contents

List of Tables List of Figures Acknowledgements I Introduction II Growth of the Provincial Economy III The Investment Climate IV Agriculture, Fisheries and Forestry V Manufacturing VI Tourism VII Infrastructures VIII Conclusion Bibliography The Authors

Vll lX

Xl

I 7 17

25 57 73

79 85 93

99

List of Tables I. Composition of RGDP, North Sumatra, 1975-84 2. Annual Increases of RGDP, North Sumatra, 197~84 3. Composition of Agriculture's Contribution to RGDP, North Sumatra, 1975- 84 4. Overseas Exports, North Sumatra, 1977- 84 5. Imports from Overseas, North Sumatra, 1977- 84 6. Approved Domestic and Foreign Direct Investment, North Sumatra and Indonesia, 1967/ 68- 1986/ 87 7. Realized Foreign Direct Investment by Regions, North Sumatra, 1985 8. RGDP by Region, North Sumatra, 1975- 82 9. Relative Inequality, North Sumatra, 1982 10. Planted Areas and Production of Major Tree Crops, North Sumatra, 1972- 84 II . Harvested Areas and Production of Major Food Crops, North Sumatra, 1972- 84 12. Aspects of Livestock, Fisheries, and Forestry Production, North Sumatra, 1972- 84 13. Local Agriculture, Forestry, and Fishing, North Sumatra, 1983- 85 14. Aspects of Small Farm Agriculture by Region, North Sumatra, 1983 15. Farm-Size Distribution, by Area of Land, Households Involve_d , and Ownership, North Sumatra, 1973- 83 16. Farm-Size Distribution, by Type of Farming, North Sumatra, 1983 17. Labourers and Households in Agriculture, North Sumatra, 1983 18. Tree Crop Improvement Schemes, North Sumatra, 1980-86 19. Details of Large and Medium Manufacturing Companies, North Sumatra, 1984 20. Value Added and Employment in the Manufacturing Sector, North Sumatra, 1984

8 9 10 13 14

19 20 22 23 26 30 31 32 37

38 40

43 45 58 60

21. Total Investment in the Construction of the Asahan Project 22. Details of Foreign Tourists Arriving Direct from Abroad through Polonia Airport, Medan, North Sumatra, 1980-85 23. Infrastructures by Region, North Sumatra, 1972- 84

64 74 80

List of Figures Towns, Kabupaten, Roads and Railways of North Sumatra 2. Topography and Rivers of North Sumatra 3. Indices of Major Commodity Prices and Wages, North Sumatra, 1970- 85 I.

2 3 II

Acknowledgements First and foremost , the authors wish to acknowledge the assistance and advice of Dr Ridwan Dereinda of the Balai Penelitian Perkebunan (Research Institute for Estate Crops), Sungai Putih, who throughout the period of study acted as a sounding board for impressions and ideas, providing substantial criticism and constructive suggestions as well as much help with data. They also wish to thank Ir Meneth Ginting MADE, Bupati of Karo, Dr Sutrisno Budiman, Ministry of Agriculture, 1akarta, and Dr Hal Hill and Professor Heinz Arndt, both of the Australian National University (ANU), Canberra, for similar assistance. They are beholden to Mrs Corrine Condie, ANU, Canberra, for assembling secondary material. The authors would also like to thank the many other officials and private persons who generously provided information about both public and private sector enterprises as well as the numerous farmers who were interviewed in various parts of the province. They further appreciate the helpful comments made on an earlier draft of the study, when it was presented to groups at the ANU, the University of North Sumatra, Medan, and the Regional Planning Commission, Medan. Last but not least, the authors are highly indebted to the Australian Development Assistance Bureau and the National Centre for Development Studies (ANU) for financial support; to Dr Abdul Madjid, Director of the Balai Penelitian Perkebunan, Sungai Putih, for providing gratis the services of a senior officer, driver, and vehicle for the whole period of field-work; and to ANUTECH Pty ltd of Canberra for administering the study arrangements.

I

Introduction

The provincial economy of North Sumatra is one of the biggest outside Java. It is broadly open in nature, with major trade links both to international markets and to domestic centres within Indonesia. It is dominated by agriculture, especially estate crops, but also has an important manufacturing sector with an associated growth of services. The situation of the province is in many ways favourable , with its plantation crop areas and manufacturing industries being close to the port of Belawan near Medan (Figure 1). Belawan, in tum, has direct access to the great ocean trade route of the Malacca Straits, and is also close to the burgeoning consumer markets of Malaysia and Singapore. The province has a mixed ethnic population, and the Chinese and Bataks in particular constitute dynamic entrepreneurial elements favourable to economic enterprise. The economy has grown quite strongly since 1970, with the average annual growth in regional domestic product being one of the highest in Indonesia. Growth has slowed somewhat since 1982, however, as the weakening of the world oil market has affected the Indonesian economy, and as the prices of the province's major products, rubber, palm oil and aluminium, have declined. Intensive economic penetration of the province began in the late nineteenth century, and from then to the end of the colonial period was more marked than in any other Outer Islands region. Thus, the east coast became a major focus of estate tobacco and tree-crop plantations 2 financed by Dutch and foreign capital, and large numbers of migrant labourers were brought in from China and Java in particular (Thee 1977; Szekely 1979). This development was followed , in a classic spread effect, by the vigorous growth of tree-crop smallholdings. These historical events still have a vital influence on the economic growth of the province. The geography of the province has also been a major influence, and involves the level and fertile but often swampy east coast (Figure 2), the northern part 3 of which was easily accessible to the Dutch. There is also a central spine of mountains with some very fertile but high-lying valleys, and an undulating but less fertile area abutting the west coast (Figure 2). Despite its generally good performance, however, the growth of the provincial economy has been seriously unbalanced in several respects. One of these involves the contrast within a given sector between the good progress of an advanced modem segment, and the more sluggish per-

I

2

THE NORTH SUMATRAN REGIONAL ECONOMY

FIGURE I. TOWNS, KABUPATEN, ROADS AND RAILWAYS OF NORTH SUMATRA -

· -· -

Province boundary

- - - - Kabupaten boundary - - - Main road

-+-+-+-++- Railway 20

40

60

kilometres

Aceh

INDONESIAN

OCEAN

Riau

l..,-...;-'---

r-1 I

)

West Sumatra

INTRODUCTION

FIGURE 2. TOPOGRAPHY AND RIVERS OF NORTH SUMATRA

1000m 1,00m

0

Aceh

INDONESIAN OCEAN

West Sumaua

3

4

THE NORTH SUMATRAN REGIONAL ECONOMY

formance of traditional producers. This is especially true of agriculture, where the historically conditioned phenomenon of dualism with its "sharp, deep, cleavage dividing the society into two segments" (Boeke 1930) has largely persisted. Thus, on the one hand, there is the large farm subsector which has a mainly corporate structure, uses exogenously supplied capital, management and technology, and employs a relatively small segment of the total rural work-force. On the other hand, there is the small farm subsector operating in a traditional institutional framework and mainly employing local resources and including most of the rural population. The economic progress of this traditional subsector is impeded by fragmented capital markets, and by the fact that much of it is situated in remote hinterlands with poor infrastructures. A similar but less radical contrast exists between the modem and traditional subsectors of manufacturing. Another aspect of imbalance refers to various raw material processing operations which are highly capital and management intensive, employ minimal labour, and are situated in enclaves with poor linkages to the surrounding traditional economy. A further aspect refers to the relatively advanced organization of production as opposed to marketing in some traditional subsectors. Partly as a result of these imbalances, a major share of economic growth has taken place in the modem agricultural and manufacturing sectors with their associated services, while progress elsewhere has been disappointing. While much of the answer to the problem of imbalance must lie in the adoption of modern techniques by the traditional sector, it is doubtful whether the preferred route to this should be through fashioning the traditional sector in the likeness of the enclaves. Historically, indeed, those smallholders in North Sumatra who became involved in rubber and other exportable tree crops responded to the burgeoning international markets through developing a characteristic institutional nexus of their own (Barlow 1988). This was quite separate from the estate plantation nexus, and comprised networks of tiny producing units juxtaposed with local traders, who were themselves connected to central processing and exporting factories. Such development of a separate but viable institutional framework is a11other example of the "parallelism .. coined by Lindblad (1985) in relation to western and indigenous coalmining in South Kalimantan. The recent problems of the small farm tree-crop nexus, following its outstanding earlier success, have been largely attributed to capital shortage. This has made it difficult for farmers to adopt the new high yielding varieties which are the basis of all modern improvement. It is accordingly felt that the chief response to successfully developing small farm agriculture, as well as other traditional sectors, must lie in breaking particular constraints on growth rather than in wholesale

INTRODUCTION

5

conversion to new institutional forms. Given a resolution of these constraints, the growth of a modernizing traditional sector is then likely to involve a broad use of resources more in line with provincial endowments than the highly capital and management intensive corporate ventures, whose expansion tends to exacerbate existing resource scarcities. This thrust follows Henry Bruton's prognosis that effective economic development in poorer countries should involve "an effort to set in motion an indigenous process of change within the traditional sectors themselves, rather than an attempt to replicate the West" (Bruton 1985). It must be recognized, too, that the modern sector of North Sumatra has its own internal problems, which again demand substantial adjustment if greater economic and social progress is to be secured. There are important questions to be asked, for example, about the relatively low efficiency of many corporate enterprises, particularly when they are compared with similar ventures overseas. The government at both the national and provincial levels has actually tried hard over the years to address the problems of the modem and traditional sectors. and in doing this has tended to lean towards the former. All along, however, it has had to balance eJ~penditures thought likely to produce more certain economic returns with those which have greater social impact but whose economic returns are less certain. Here, the large corporate sector is normally judged more financially remunerative, despite its problems. Thus, although the government has provided credit to enable small farmers to adopt new techniques and has also strengthened rural advisory services. it has supplied even more subsidized credit to estate farming. Again, although the government has attempted to improve roads and other infrastructures, a dominant share of these expenditures has benefited the areas around Medan where most of the modern sector is situated. Its most expensive investment in North Sumatra, the giant Asahan project covering the Lake Toba hydroelectric scheme and the Inalum (P.T. Indonesia Asahan Aluminium) smelting enterprise, has also been very much in the enclave tradition with few sp read effects to the local economy. It must be recognized, too, that government resources are very limited in relation to the huge task of stimulating further development, and will be further constrained by the recent drastic cuts in central and provincial budgets. T he a pproach in this study is to review the progress and future of the North Sumatran economy in the light of a thesis that more balanced economic growth is desirable, and will maximize the long-term economic and ocial advance of the province. Balanced growth is here conceived as that which involves a broad canvass of economically productive sectors in the province, both modern and traditional, and which thus secures a relatively even distribution of development benefits. Policies directed at

6

THE

ORTH SUMATRAN REGIONA L ECONOMY

obtaining such growth must accordingly give careful attention to factors which constrain performance in potentially profitable areas, as well as maximizing the economic use of local resources. Thus, in the review, an attempt is made to identify the key constraints preventing growth. The procedure followed is firstly to ex-amine the macro-picture, looking at the overall growth of the provincial economy during the period of the study. This "period" is defined as the time from the early 1970s up to the present. The investment climate and broad pattern of intra-regional disparities are then scrutinized. Agriculture, manufacturing, tourism and other important sectors are next examined in turn, and a deeper analysis and assessment of problems made for selected cases. The general situation of infrastructures is also investigated. For each sector, important constraints are identified, and implications for official policy suggested. Some broad conclusions on the dynamics of change, and on desirable official policies, are finally presented. The North Sumatran economy has been previously reviewed by Pasaribu and Sitorus (1969), and by Ginting and Daroesman (1982).

II Growth of the Provincial Economy The composition and growth of North Sumatra's regional woss domestic product (RGDP) over the years 1975-84 are detailed in Tables I and 2. Agriculture is still by far the dominant basic sector, followed by Manufacturing as a distant second, with the service sectors of Commerce, Hotels and Restaurants, and Transport and Communications also being very important. The RGDP at 1975 prices grew at an average annual rate of 7.9 per cent, which was well above the mean for Indonesia as a whole. The lowest growth rate of 2.9 per cent occurred in 1982, which was marked by international recession and poor commodity prices (Figure 3). The population of the province grew from 6,621,831 in 1971 to 8,360,894 in 1980 and to 9,444,097 in 1985 (Kantor Statistik 1986). This represents an average annual growth rate of 2.6 per cent for the period 1971 - 85, although the actual yearly rate dropped somewhat in the 1980s. The average annual growth of 7.0 per cent for the Agricultural sector in 1975-84 (Table 2) was largely due to advances in both the Estate 2 Tree Crop and Livestock subsectors (Table 3), while Food Crops and Fisheries, in particular, declined in relative importance. Thus, the Food Crops sector grew at an average of only 2. 1 per cent, which was below the population increase, and in 1983 its production barely increased owing to rice damage from the hama wereng (brown planthopper) plague (Kantor Statistik 1985a, p. 23). Although food crops produced on small farms still account for the single largest part of the agricultural sector in the mid-1980s, they are relatively less important than in most other provinces. While fluctuating from year to year, the share of Agriculture in RGDP has generally tended to decline. The Manufacturing sector grew at the considerable annual rate of 11.6 per cent in 1975- 84, with a big spurt in 1983 when the aluminium smelter at Kuala Tanjung (Figure I) started commercial production (Table 2). This spurt helped economic recovery from the low growth of 1982, as well as countered the influence of the poor 1983 performance with rice. The addition of aluminium smelting further raised the share of Manufacturing in RGDP, so that it was now second to Agriculture. As elsewhere in Indonesia, the growth of large and medium-sized manufacturing enterprises has been higher than that of small and cottage industries (Kantor Statistik, l985a).

7

Oo

TABLE

-1

I. COMPOSITION OF RGDP (INCLUDING OIL, AT 1975 CONSTANT PRICES). NORTH SUMATRA. 1975-84

:c t'T1

(In per cent)

z

0

Sector Agriculture Mining and Quarrying Manufacturing Construction Electricity, Gas & Water Supply Commerce, Hotels & Restaurants Transport & Communications Banks and Other Fin. Institutions Rents Government & Defence Services

Total RGDP

1975

1976

1977

1978

1979

1980

41.0 9. 1 6.3 2.9 0.4 16.2 9.1 1.5 4. 1 7.0 2.5

41.3 10.2 6.1 2.6 0.5 15.8 8.9 1.4 3.8 6.7 2.7

39.7 7.3 6.5 6.0 0.5 15.4 8.6 1.4 3.7 8.2

i .7

38.9 8.3 6.7 5.7 0.6 15.6 8.7 1.8 3.4 8.4 2.6

36.9 10.4 6.3 5.3 0.7 15.0 8.3 1.6 3.2 7.9 2.5

38.2 10. 1 6. 1 5.4 0.9 14.5 9.4 1.9 3.0 7.9 2.7

100.0

100.0

100.0

100.0

100.0

[683t

[754]

[811]

[908]

[ 1.004]

• Preliminary figures. b Figures in brackets are actual RGDP figures at 1975 constant prices (Rp. billion). SouRcE: Kantor Statistik (1985a). pp. 96-97 and 108-9.

:::0 -1

1981

1982

1983

37.5 8.5 6.4 5.6 1.0 14.3 10.4 2.3 2.9 8.4 2.8

37.6 7.2 6.8 4.2 1.0 14.5 II. I 3.0 2.8 9. 1 2.8

36.0 5.8 8.9 3.9 1.1 15.6 11.2 3.4 2.7 8.6 2.8

37.7 5.0 9. 1 3.4 1.1 15. 1 11.4 3.4 2.7 8.2 2.8

100.0

100.0

100.0

100.0

100.0

[ 1.086]

[ 1.152]

[ 1.185]

[ 1.257]

[1.355]

1984

8

:c rJl

c:::

~

~ :::0 > z :::0

t'T1

Cl

i5 z > r-

t'T1

(j

0 z 0

~

-


z

:;:tl

m

0

~

)>

r

~

0

:::::

-
:>

rn

~

(/)

::t m

"'

m (/)

;I>

z

0

b

"'m ~ "'-< t-v

'.J

28

THE

ORTH SUMATRAN REGIONA L ECONOMY

In contrast to the estates, the area of smallholding rubber continued to grow slowly, while the area of the "smallhold~r" crops - coconut, coffee, benzoin, and cloves - expanded more rapidly. There was also a big advance into smallholding oil palm in the early 1980s (Table 10~, a~d this has continued to the present day (Dinas Perkebunan 1987). With Its relatively low and unchanging yields, and its concentration on less valuable crops, the smallholding subsector produced only I0 per cent of the total estimated value of North Sumatran tree crop production in 9 1984, although it accounted for some 45 per cent of the planted area. Given the difficulties faced by most tree-crop smallholdings in changing to alternative crops, and barring policy initiatives to overcome these difficulties, the broad historical trends in this subsector seem likely to continue. Thus, smallholders are likely to carry on with the progressive opening up of new lands under traditional commodities. It should also be mentioned that more than half the expansion of such smallholdings in the 1980s, especially that of oil palm, could be attributed to the government-sponsored planting schemes discussed below. The declining share of the Food Crops sector in the 1970s and 1980s (Table 3) was associated with low growth. There was little change in its overall area (Table II), although there was some increase in yields and total production.' o Unlike tree crops, food crops are almost entirely produced by small farms, and for rice and maize in particular have a primarily subsistence emphasis. Here again, there was substantial variation between items, with a considerable increase during the 1980s in wet paddy which was already vastly dominant among the annuals. This was due partly to an improvement of drainage and irrigation facilities, and meant that the province became more or less self-sufficient in rice, with no further need for imports (Table 5). There were also extensions in the areas under maize and peanuts, and in the production of cassava. There were further expansions in the area and production of different vegetables, with enhanced exports to Singapore and Malaysia. These increases in various profitable crops were offset by falls in the areas and production of dry paddy and sweet potatoes. With the exception of cassava and vegetables, the yield increases for annual crops since the 1970s have been small, although it should be mentioned that the production per harvested hectare of paddy and most other annual crops was already well above the Indonesian and Southeast Asian averages in 1970, and remained superior into the 1980s (Biro Pusat Statistik 1985- 86 ; Food and Agriculture Organization 1985). T hese low yield increases, taken with the relatively small improvements to irrigation and the use of some lands for planting trees, account for the low growth of food .crop~ in North Sumatra compared to most other provinces of Indonesia. With the current expectation of low long-term cereal prices on

AGRI CU LTURE, FISHERIES AND FORESTRY

29

world markets, it is felt that further expansions of padi and maize cropping are unlikely, and that increasing emphasis will be placed on palaw[ja and vegetables. The growing share of livestock in RGDP (Table 3) has particularly included eggs and pigs (Table 12). Both these items, together with cows, chickens, and goats, may be expected to expand and further increase their share of agricultural production. All in all, and using the figures of Tables 10, 11 and 12, the total estimated gross value of North Sumatran agricultural production in 1984 (excluding fisheries and forestry which are dealt with separately below) was Rp. 1,973 billion. Rice (wet and dry) was the predominant item, forming 37 per cent of this total, and was closely followed by oil palm with 34 per cent. Rubber came next with 14 per cent of the total. The tree crops as a whole accounted for 55 per cent of the total value of production, and estate tree crops constituted 46 per cent. Both rubber and palm oil as well as coffee, tea and spices, featured importantly in the overseas exports of the province in 1984 (Table 4), although it should be mentioned that the figures in this table also include production from the surrounding provinces. The export of palm oil had in fact been much reduced from 1980, following the imposition of a basic quota contribution to the domestic Indonesian supply of cooking oil.

Regional and Small Farm Characteristics

The regional dispersion of various agricultural activities within the province (Table 13) reflects the quality of land and the climate, as well as the condition of infrastructures and proximity to the main points of processing and export. Thus, the chief areas of rubber and oil palm estates are in the various kabupaten of the East Coast Regions (North and South) as well as Simalungun, where the soils are highly suitable for these crops. All these plac~ have relatively easy access to the major exporting point of Belawan, while the ports at Tanjung Balai and Labuhan Bilik (Figure 1) are convenient to some areas. The smallholding areas of rubber, which actually tolerates a broad range of soil conditions, extend widely in the West Coast and Mountain Regions (Figure 2), where their location partly reflects historical policies which excluded such cultivation from places with more favourable conditions. Smallholdings under coconut, with its partly subsistence purpose, are also widespread, especially in the island of Nias on the West Coast, and in areas of Deli Serdang and Asahan which are unsuitable for other crops. Coffee is grown on smallholdings in suitable elevated locations in the West Coast and Mountain Regions. The cultivation of

TABLE

II.

HARVESTED AREAS AND PRODUCTION OF MAJOR FOOD CROPS," NORTH SUMATRA. 1972- 84

Harvested Areab ('000 ha)

Production ('000 tonnes)c

Crop 1972

Wet Paddy Dry Paddy Vegetables' Maize Cassava Sweet Potatoes Peanuts Soybeans Green Beans Grand

Tota~

1980

442.2 137.6

445.3 117.3

na

na

26.6 20.1 28.0 6.0 5.3 3.2

38.4 24.8 19.8 13.5 5.8 3.9

-669.0

-668.8

1984

512.3 82.6 45.9 34.8 23.4 16.5 12.0 9. 1 2.5

-693.4

1972

1980

1,451.4 206.3

1,406.5 189.0

na

na

48.9 190.0 176.7 6.3 4.6 2.6

52. 1 273. 1 176.1 13.7 4.9 3.6

1984

1.917.3 160.0 245.7 87.4 343.8 163.4 14.8 8.3 2.5

Value of Production, 1984d (Rp. billion)

665.3 (347)' 55.5 (347) na na 16.8 (192) (70) 24. 1 18.1 (Ill) 14.8 ( (.()()()) 4.2 (506) 1.6 (640)

-800.4

Gross Average AMual Production Increase 1972-84 (%)

Average Yield per Harvested Hectare, 1984 (kgs)

2.3 - 2.2 na 4.9 5.1 0.5 7.2 5.0 - 0.7

[739.3t • Major food crops= crops covering more than 2,500 hectares in 1984. Virtually all these crops are grown on small farms. b Including some paddy grown twice (as a second crop) on the same area. c In fonn in which crop is normally sold to consumers (for example, in milled husked form for rice, and as roots for cassava). 4 At Jakarta 1984 average prices for all crops. • Figures in parentheses in this column are prices per kg of the item shown. r Especially chillies, beans, onions and potatoes (kentang). 11 Excluding vegetables. h Grand total area including vegetables. SouRCEs: Kantor Sensus dan Statistik ( 1973); Kantor Statistik ( 1985a and 1986a); and Biro Pusat Statistik ( 1986a).

3,741 1,938 5,348 2,512 14,689 9,913 1,236 918 1,000

~ -1

= z

m

0

;110

-1

= Vl

c:

~

~ ~

;110

m Cl

~

> r m

~

0

~

-


-l

;z:l )>

z

;z:l CT1 C)

0

103.6

19.1

6.6

3.3

z)> r

CT1 ()

0

-

-

10.2 35.7 5.2

-

0.5

10.7

63.9 6.6

0.8 2.0

-

-

-

0.3

14.9

0.4 K.aro

......

Harvested Crop ('000 har

Planted Areas ('000 ha)h Region (bbupttte n and lcotamlldya)d

(...._.

LOCAL AGRICU LTURE, FORESTRY, AND FISHING , NORTH SUMATR A, 1983- 85"

-

35.7 15.8

63.9 6.6

-

-

-

3.9

0.8 3.4

20.8 -

-

-

0.5

-

-

52.4

3.7 0.2

10.0

63.6

11.1

8.3

-

-

8.7

0.9

0.6

10.5

18.9

13.7

135.2

38.4

23.3

1.9 0.8

-

4.3 -

-

-

2.6

-

-

-

2.8

-

-

-

-

-

-

3.7 0.2

10.0

32.1

25.1

6.0

z

-

-

-

-0.6

-

7.5

0.7

0

3::

-
::)

tT1

C/l

-l

25.2

-

17.0

12.0 1.1

10.0

512.4

74.3

34.7

;;>::)

-
;:1 )>

z

;:>;:1

t'T1

Cl

0 4.0 2.7 0.2 0. 1 -

3.7 17.6 0. 1 01

2.9 ll 2.0 I.J

16.7 10.0 lU

I 5.9 36.0

1.4 0.5 0.4 2.6

0.4 0.5 0.2 1.7 0.5

0.2 0.6

0.8 0.3 0.6 0.8 0.2

16.7 11 .5 12.5 12.9 11 .0

2.2 7.2 0.4 0.5 na

z

r

17.5 16.9

0

-

~

-

t'T1

-

-

-

-

7.0

21.5

-

9.3

87:1

-

6.6 -

4.9

JJ

7.4

2. 7

-

-

64.6

10.3

37.4

2.3

04

07

R.O

I2

IJ

0.3

5.0

257 .9

12.3)

0.1
O

02

01

na 1200 37

2.4 na 4.3 16

10 na 48 7 O.X

0.9 na

02

09 na 7A 07

21.5 na 82.9 7. 3

13. 1) na 7.4 na

-

-

(~ORTH)

)

-

n

-

OK

14

--

I 17 7

-

10 4

-

9A

-

50 X

0.8

0. 1

-

6.8

-369.6

4.3

-

J2.8

)>

3.0

4.3

()

z

0

-


()

;;o

(")

--

c: ~ c:

401.J

_rn

128. 1

;;o

GRAND TOTAL

23.4

16.4

::J Vl ::r:

• Planted areas of estate tree crops are fo r 1983, and plant ed areas o f smallh o lding tn:t: crops are fo r 19l:i4. Harves ted areas of a nnual crops and production of ti vestock , eggs, and fi sh are for 1984. Producti on of l og~ is for 19!l5 / l:i6. b In each case for these tree crops, estate planted areas are give n on the tup line, and sma llholding planted areas on the boll om line. c The distribution of vegetable areas is una vailable except for Karo, which had 7.400 ha in 1985 (Bappeda Tingka t II Ka ro. 1986). d The regions detailed here are a lso the officia l .. development areas" of North S umatra . f·:abupat en and k otamad1 •a without a ny of the crops listed are omitted. e Kotamodya . r Including hens and ducks. 1 Hen and duck eggs.

Vl

Sou RCE: Kantor Statistik ( 1984, 1985a, and 1986a); and Dinas Kehuta nan ( 1986).

-


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36

THE NORTH SUMATRAN REGIONAL ECONOMY

both wet and dry paddy is quite widespread, as befits their subsistence character, although the former naturally characterizes lower-lying areas . Pigs are largely produced close to their points of final demand in Medan and the other kotamadya. About half the vegetables are produced in the fertile soils and more temperate climates of the Karo and Simalungan Highlands, both of which have good roads giving access to the major consuming and exporting centre of Medan. Further regional characteristics of small farm agriculture are given in Table 14, which refers to the 1983 census data for the population of almost 900,000 "food-crop, inland fishery and livestock breeding households" in the province (excluding households in the kotamadya). It should be noted that these households are also involved in almost half the provincial area of smallholding tree crops. While the table shows little regional variation from the average small farm area of 0.9 hectares, it denotes considerable differences in rice cultivation conditions, with an especially high proportion of areas irrigated for two crops in the Mountain Region (especially Simalungun), and of rain-fed sawah (wet rice-growing land) in the East Coast (both North and South). Much of this sawah is situated in the partly flooded pasang surut (tidal swamp) lands close to the coast. The table also confirms the relative importance of shifting cultivation, with dry paddy in some parts of the Mountain Region, and smallholding tree crops on the West Coast. Although no figures are available on the actual distribution of the various crops and other enterprises per farm, there is no doubt that most small farms adopt a combination of different rice cultivation methods, together with other annuals, tree crops, and fish and livestock enterprises, and that the average distribution of enterprises in the total (Table 14) reflects this relatively well. These combinations are usually scattered among several parcels of land, sometimes in different location~ . This situation stands in complete contrast to the estates, which usually grow only one, or at most two, tree crops. Some aspects of the farm-size distribution of land operated by a slightly smaller subset of the "food crop, inland fishery and livestock breeding households" mentioned above are presented in Tables 15 and 16, which again refer to the census data. Table 15 denotes a widespread dispersion of farm sizes_, with 32 per cent of households in 1983 "controlling" 8 ·per cent of the total land area in farms of less than 0.5 hectares, while I per cent of households controlled the I0 per cent of la nd in farms of more than 5.0 hectares. The proportion of small farms has, however, dropped slightly over the ten-year period from 1973. This table also shows that the great majority of farms in 1983 were "'owned" by the households concerned, within the conditions of traditional landholding systems; this was especially so for those of a large size.

TABLE 14.

ASPECTS OF SMALL FARM AGRICULTURE BY REGION.a NORTH SUMATRA. 1983 Proportion(% of Land Area)

Regions I. II. Ill. IV.

West Coast Mountain East Coast (North) East Coast (South) Total

Area or Land (ha) b

Average Area or Farm (ha)"

All Uses

Irrigated - I Padi

Irrigated -2 Padi

Rainfed Sawahd

Shifting Cultivation

Tree Crops

8 9 12 6

10 17 5 2

20 43 31 20

43 22 22 31

-

16 5 28 40

-

-

-

-

-

9

20

29

30

3

100

Othere

)>

213,004 223,016 181.437 158.123

0.94 1.02 0.76 0.81

--

-

775,580

0.86

-

9

3 4 2 I

100 100 100 100

• Regions as defined in Table 8, but excluding kotamadya in each case. b Areas "controlled" or operated by the total of 899,057 households invo lved . These households are defined as those concerned with "food crops, inland fisheries, and livestock breeding". but also operated a total of 230,773 hec tare of tree crops. which was almost half of the area of smallholding tree crops in the province in 1983. c Controlled land + households concerned. d lncludingpasang surut areas. • Including grassland, water ponds, etc. Livestock other than pigs and chickens would particularly characterize both "shifting cultivation" and "other" areas. SouRcE: Biro Pusat Statistik ( 1984).

0 ::0

rs

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Ci

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TABLE 15.

FARM-SIZE DISTRIBUTION, BY AREA OF LAND. HOUSEHOLDS INVOLVED, AND OWNERSHIP. NORTH SUMATRA, 1973-83

c...

Oo

....;

1983

Area in Size Group

Area in Size Group

Farm Area Size Group (ha)•

Area of Land (ha)"

Below 0.5

82,276 (0.28]"

10

160,685 (0.69]

20

474,947 [ 1.70]

59

87,439 (8.39]

II

805,347 (0.99]

100

0.5 - 1.0 1.0- 5.0 5.0 +over Total

::1:

1973 %of Total Area of Land

%of Total Households Invol-ved with it

36 29 34

100 (816,432)d

Area of Land (ha)

% or Total Area of Land

72.768 (0.37]"

8

154,358 [0.66]

18

555,910 [1.71]

64

88,517 (7.09]

10

871,553 [ 1.04]

100

ITI

% of Total Households Involved with it

32

z

0

%Area in Siu Group

....;

::1: Cll

Ownedb

c

74

....;

::: )> ::0 )>

28

82

z

::0

rn

0

39

93

0z

)>

r-

98 100 (838.682)d

• Areas "controlled" or operated by each household. The households are again defined (as in Table 14) as those concerned with '"food crops, inland fisheries and livestock breeding", but for some sections of the data, the number of households and land use involved are slightly different from those in Table 14. b . Owned by households concerned, as opposed to being "originated from" or "held by" other parties. c Figures in brackets are average areas of controlled land within each size group (controlled land -:- households concerned). d Figures in parentheses are total numbers of households involved. SouRcE: Biro Pusat Statistik (1984).

::0

rn n 0 z 0

::: o(

AGRICULTURE, FISHERIES AND FORESTRY

39

Table 16 suggests that in 1983 considerably higher average incomes per hectare were earned by the smaller holdings, in that a much greater proportion was involved with the intensive production of padd y, especially when irrigation was used. The larger holdings, on the other hand, were far more concerned with tree crops. Other 1983 census data reveal that, for the smaller farms especially, activities outside the prime focus of the holding were another important source of income (Biro Pusat Statistik 1984). This income came particularly from "other agriculture", which largely involved working for bigger farmers under the typical pattern of cross employment which occurs where there is a widely dispersed farm size distribution.

Markets for Inputs and Outputs

The market for land in North Sumatra has been especially favourable for PTP estates, which with their official position have often been able to acquire new areas without much difficulty, and at minimal cost in terms ofthe small tax and other payments involved. This was une factor behind their wide expansion in the early 1980s (Table 10). Indeed, most PTP estates follow the policy of maintaining land reserves, in which the North Sumatran planted area of 572,000 hectares in 1983 was supplemented by a further 116,000 hectares of land "planned" for further expansion, but not yet planted (Biro Pusat Statistik 1984). The position of private estates in this respect has been less favourable because they have had to pay market prices for their land. In addition, foreign joint-venture companies, which cannot secure ownership, have found it hard to get long-term assurances of control over the lands they develop, with the maximum guaranteed period of land use under the present lease arrangements being only thirty years. Periods of land use beyond this have to be renegotiated with the authorities. These difficulties with land use are one factor explaining the much lower increase in planted area by the private estate sector (Table 10). In the small farm (including the smallholding) subsector, the use of land is largely governed by traditional landholding systems, which basically allow the right of cultivation to the occupier of land, but which nonetheless permit a transfer of effective control to new cultivators following appropriate cash payments. These payments range from the current market rate of some Rp. 300,000 per hectare for undeveloped scrub in remote places, and suitable only for tree and dry-land crops, to 10 to 15 times as much for sawah with irrigation for two crops. Such prices relate to financial rates of return of about I0 per cent on the crop enterprises entailed. Apart from outright transfer through payment,

~

0

TABL E 16. Farm Area Size Group " (ha)

-; :I:

FARM -SIZE DISTR IBUT ION, BY TYPE OF FARM ING , NO RTH SUMA T RA, 1983

m

z

0 i'O -;

Purpo se of land used in size group

:I: Vl

Irrigated -1 Padi

Irrigated -2 Padi

Rain fed Sawah b

Shifting Cultivation

Tree Crops

c: Otherc

All

Uses

:s: )>

-;

i'O

Below 0.5

20

16

26

30

0.5- 1.0

7

15

I

14

100

z

22

31

16

2

8

100

m

21

29

33

2

2

100

12

c

24

55

5

100

)>

1.0 - 5.0

7

5.0 +over

2

Total

9 (70.421 )d

9 (69.953)

20 ( 158.898)

• Defined as in note ·a' of Table 15. b Includ ingpa sang surw areas . c Includ ing grasslands. water ponds . etc. d Figures in parent heses are total hectar es of land involved. Sot•RcE: Biro Pusat Statis tik ( 1984).

29 (227. 147)

30 (230.736)

3 ( 18.425)

)>

100 (775.580)

i'O

0

z

r

m !)

0

z

0

:s:

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• Planted / harvested area in 1984 (Tables 10 and II) -:-- total number of work ers/ house holds in 1983 (at 3 1 December). b Estimated gross value of production from the subsector in 1984 (Tables 10, II , a nd 12) -:-- total number o f wo rkers in 1983. c Defined as workers preparing ground and undertaking various mai ntenance activities. d Defined as workers ~collecting product ". • These workers averaged 230 man-days per year each. r Some tree crops ("estate crops") are also cultivated by certain of these house hold s (see note 'b' of Table 14). 8 Including value of all fish (both sea and inland), livestock and eggs, but not tree crops. n Value of indicated tree crops only (most farmers will also ha ve other enterprises). SouRcE: Biro Pusat Statistik (1984); and Kantor Statistik (1984).

c ~

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PIR / NESd Rubber Oil Palm Tolal

2.0 1.0

2.5

2.0

5.~

~.6

-

-

10

l:U

-

10.6

9.2 25.7

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0.4 18

2.3 2.8

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3.7

4.2

5. 1

34.9

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Or ..a rea realized". Rehabilitati on and Ex tension of Export Cro ps]. b Proyek Rehabilitas i Perluasan Tanaman Ek~pur [Project for the t nough to be continued". T he balance is either "good" or "needs c Figures in parenthese s are percentages of tota l area "not good improvement". d Perusahaan Inti Rakyat f Nucleus Eslate Scheme.

a

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SouRcE: Dinas Perkebunan ( J986a a nd b).

-