Poverty Alleviation in Gorontalo Provinces through Agriculture Sector Institutional Development By Alfian Nurdiansyah, Febri Fahmi Hakim, Marthin

Oktovianus N, Sasi Kirana S, Undiri Kima

I.

Introduction Inequality, poverty, and unsustainability have been a long time problems in Indonesia. Indonesia is considered as one of the developing nations with more than 12 percents of its residents is below the poverty line. According to The Center for Welfare Studies, the number of poor people in Indonesia is increased by 6.7 percent over the last three years (Handayani, 2012). According to UN, poverty is defined as "a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services." Poverty is somehow rooted to inequality and the best way to overcome poverty is by defeat the root of the problem, inequality. Inequality in the opportunity to participate in and benefited from the development could also affects peoples welfare. To cope with these problems, several policies had been implemented by the government of Indonesia, such as Inpres Desa Tertinggal (IDT), a program intended for improving peoples welfare in less developed villages, and Jaring Pengaman Sosial-Penanggulangan Kemiskinan (JPS-PK) in 2006, a community-based social safety nets program which is often renowned as micro and area-based schemes intended to provide social security for the communities to reduce vulnerability at community level, or other policy. But it could be said that the results are not optimum (Radyan & Nurdiansyah, 2008). Among these policies there is one policy that implemented in Indonesia and also related with poverty alleviation. This policy is the decentralization policy, decentralization policy is applied based on Law Number 32/2004 about Local Government (UU 32 Tahun 2004 tentang Pemerintahan Daerah). This law gives local government an authority to make policies for improving services, participation, and also communitys welfare. Although the implementation of this policy is usually applied uniformly by every local government, one of several local governments in Indonesia could apply this policy without losing their creativity in developing their region. Among the provinces in Indonesia, Gorontalo could be considered as one of the success example in term of the implementation of regional autonomy policy. As a new established province, like other newly established region, Gorontalo local government faces crucial problems in how to deliver good public services to meet the needs of the people. With nearly 73,000 inhabitants live below national poverty line, Gorontalo local government put enormous efforts to increase the welfare of the people. The success of Gorontalo province to eradicate poverty problems in the province could be from the facts that the

number of poor people in Gorontalo province is decreased from 73,000 households in 2001 (or about 73% of all Gorontalo province inhabitants) to only 33,450 households in 2005 (Radyan & Nurdiansyah, 2008). Gorontalo, the 32nd province of Indonesia may become also an example of how entrepreneurial thinking of authority figure in the regional autonomy context could create more opportunities to a region to grow. When normally a bureaucrat try to spend all state budget that they manage to get more budget allocation in the following year as University of Indonesias economist Rheinald Kasali said in (Rafick, 2007), the entrepreneur bureaucrats tend to do different things. Bureaucrat with entrepreneurial thinking could manage the budget efficiently to be used to develop their region. The first elected governor of Gorontalo at the time had to reach three objectives: improves the infrastructure facilities, ensure that agriculture products quickly distributed to market or via sea port, and to end Gorontalos dependency on North Sulawesi for air transport (Rafick, 2007). To reach these objectives, with only Rp 35 billion as initial budgets the governor of Gorontalo managed to build roads, sea port, and airport for the province. These facilities are very important to the province as some of driving factor for growth and to ensure the distribution of agricultural products of Gorontalo province to the market. To develop this province, the local government of Gorontalo focusing more on agriculture sector as basis sector. To boost the growth of the region, the governor focuses to develop agriculture sector with agropolitan strategies with special attention on corn production and also fisheries sector (Rafick, 2007). According to the governor agropolitan is the most feasible alternative in developing Gorontalo because the province has the vast area of land while most of the inhabitants are farmers with corn as their main commodity. This In relation with the successfulness of the local government of Gorontalo province to alleviate poverty in the region, there are three things we are going to discuss in this paper. First is how the implementation of local governance in Gorontalo province with regard to decentralization policy. Second is how the implication of this policy in relation with agropolitan strategy that is implemented by Gorontalo local government to develop their region. The third is institutional development strategies and policy related to poverty alleviation that could be carried out in order to improves peoples welfare in the region. The objective of this paper is to discuss institutional constraint that is presence in the development of Gorontalo province related to the poverty alleviation policy in this province, and to propose institutional development strategy and policy related to poverty alleviation in a decentralized country such as Indonesia. This paper is organized as follow: introduction, description of the case, problem structure and analysis, institutional strategy and policy, and references and appendices. 1. Description of the case (just describes) 1.1. Gorontalo provinces development figures

Gorontalo provinces at that time (2006) was one of the newly establish province among several new provinces/regencies that were able to boost the economic growth of the region in their first five years development phase compared to other new regions. Within their first five years development phase local government of Gorontalo province successfully improving the welfare of the inhabitants. According to Sabar in (Radyan & Nurdiansyah, 2008) this could be seen from the facts that the number of poor people in Gorontalo province is decreased from 73,000 households in 2001 (or about 73% of all Gorontalo provinces inhabitants) to only 33,450 households in 2005. Meanwhile, according to UNDP.., Indonesia reached 6.5 percent GDP growth in 2011 and successfully diminish the proportion of poor people to only 12.63 percent of all population by 2010. However, there still remain inequality issues among the regions. Eventhough there are several policies such as decentralization policy which are directed to cope with poverty problems in Indonesia, there are many obstacles and constraints affects the implementation of this policy. Political situation, geographical condition, and the location of the regions that vulnerable to the disaster such as earthquake, tsunami and so on could hamper regional development efforts carried out by government. According to the former governor of Gorontalo province, Fadel Mohammad in (Wirokartono, Malik, Ahmad, Djutaharta, & Cicih, 2010), Gorontalo still faces several problems such as the low education level of the people, the high number of child mortality and gizi buruk, and the low income percapita of its inhabitants. Eventhough there are an improvement in some aspects, there still remain a problem in the level of Human Development Index (HDI). Gorontalo province still at 24th position from total 33 provinces at the time. It means that the HDI of Gorontalo province is among the lowest level in the country. On the other hand, four regencies/cities in Gorontalo province (Gorontalo city at position 150th, Bone Bolango regency at posistion 266th, Pohuwato regency at position 318th, Boalemo regency at position 363rd) are among the middle level of HDI from total 456 regencies/cities.

1.2. Poverty level in Gorontalo province 1.3. Institutional constraints in Gorontalos province (local government/among sectors, private sectors, and community institutional) 2. Problem structure and analysis 2.1. The root cause of the poverty and institutional problems in Gorontalo and possible future consequences (based on data and figures) (basis sector, basis sector and GDRP percapita, shift share?) 2.2. Indicators of institutional performance and poverty (literature review) 2.3. Analysis of the problems base on each indicators 2.4. Possible link among the problems problems tree/mapping and detailed matrix of the problems 3. Institutional strategy and policy

3.1.

Approach, models, and implementation (literature review?) MDGs Goals: (1) eradicate extreme poverty and hunger, (2) achieve universal primary education, (3) promote gender equality and empower women, (4) reduce child mortality, (5) improve maternal health, (6) combat HIV/AIDS, malaria and other diseases, (7) ensure environmental sustainability, (8) develop global partnership for development.

3.2.

Institutional development strategy Local governments are now demanded to carry out reforms in various sectors, to rspond peoples demands related to poverty alleviation. It is not only regard to the economic phenomenon, increasing peoples income and welfare, but it also concerns with social and political aspects, and how these interact each others. These problems can be really understood by general definition of institutions as a set of humanly-devised constraints that structure political, economic and social interaction. Institutional consists of social networks, gender roles, legal system, political-administrative system, and market mechanism (Deolalikar, Alex B. Brillantes et al. 2002). Institution has a vital role on overcoming poverty, it is directly and indirectly influenced in what goverment do or not to do. From figure 1, it can be seen the proximity relationship between institutions policies, economic growth and poverty reduction. In this case the local government of Gorontalo often faced with the reality that it is very difficult to develop an economic potential, barriers arising precisely from the government itself. Therefore institutions strategy applied should be effective and innovative, regarding Gorontalo was a new province.

Source: Poverty Reduction and the Role of Institutions in Developing Asia ((Deolalikar, Alex B. Brillantes et al. 2002)

After had been chosen as the leader of Gorontalo in 2001, the former Governor of Gorontalo had been focusing on the agriculture sector as the basis for developing the local economic. The leader declared to turn Gorontalo into a fabulous "agropolitan province," which essentially makes the agriculture and fishery sectors as local economic prime mover. The institution strategy of Gorontalo by agropolitan policy was formulated to eradicate poverty, this policy had been chosen in developing economics by Gorontalos Government. It is consist of 3 (three) grand strategy, (1) Infrastructure and Local Economic Development; (2) Small and Medium Industries Development; (3) Capacity Building and Technology Upgrading. Although it consists of three stages, however the implementation of Grand strategy performed integrated and simultaneously. Grand Strategy I. Infrastructure and Local Economic Development Local Economic Development (LED) is a development process that encourages the participation of main stakeholders (among local government, private sector and community) to manage their existing resources and enters into new partnership arrangements to create new jobs and stimulate economic activity (Rives and Heaney 1995). LED allows designing and implementing its development strategy using local resources and competitive advantages in a global context. There are strong relationship between local economic development and infrastructure, the level of local economic development is affected positively by infrastructure investment (Smith 1992; Rives and Heaney 1995). It is what lied behind the decision of the Gorontalos Governor to design the strategy to decline poverty in Gorontalo. Grand Strategy I is divided into three sections. First, Infrastructure investment, Gorontalo realized that infrastructure plays an important role in regional economic growth. When other governors might have used the funds to build new offices for themselves or other provincial institutions. Gorontalos governor spent his first central government fund installation for infrastructure investment, admitted without good quality of airport, sea port and roads the new province will never grow. Furthermore, infrastructure development in Gorontalo supports regional development programs that have been declared, that are the development of agriculture, fisheries and marine development, and improvement of human resources. A limited budget was spent on supporting infrastructure such as access roads so that farmers' production to be closer to the market, and irrigation improvement as well as power supply pumps with gravity so that areas that the water deficiency areas can still irrigate agricultural fields. Second, Analysis of local potential, School of commodity perspective states that a region will thrive if it has leading commodity that can serve as the backbone of the local economic. This commodity will spur the development of regional, the infrastructure is built to maximize the performance of competitive

commodities. In this case the analysis of the local potential has a role in determining the leading commodity. The presence of local potential analysis for leading commodity in each region, the regional competency development can be directed towards specialization leading sector (Sabar 2006). Though Gorontalo has main sectors in local economic development (agriculture, fisheries & marine), the Local Government had chosen corn as a leading commodity to be improved since it related to the main food and history of crop cultivation in the community of Gorontalo. Further, picking corn as the backbone of the regional economic due to corn can be grown in tropical climates and do not require much water. Another thing to consider is the fact that Indonesia still imports 1.5 million tons corn (Muhammad 2006). Gorontalo actually has a variety of horticultural crops and all the potential to be developed, such as coconut, cloves, rice, corn, soybeans, peanuts, green beans, cassava, yams and sugar cane. For instance, sugarcane has been a leading crop in Boalemo district. Moreover, the production of sugarcane has been able to directly absorb by Rajawali Sugar Mills that has been established since 20 years. Neither the coconut cultivation, coconuts grow in almost all areas of the province. Oil production has reached 70 166 tons. Once processed into meal and palm oil, Gorontalo grossed 11.8 million U.S. dollars (Radyan & Nurdiansyah, 2008). Third, Intitution and Regulation, in this case institution meant good will from the local government of Gorontalo, not only good will from the top leadership, but also the entire officials of local government. This is the initial capital for poverty reduction in Gorontalo, with the vision that made the province of Gorontalo as Innovative Province, bureaucracy culture was able to change in Gorontalo. The Governor introduces corporate culture into local bureaucracy where performance is rewarded. For example, the best performing staff receive remuneration in terms of bonuses reach until 300% higher than their salary (Rafick, 2007). While regulation is a rule that supports the implementation of agricultural policies. Various policies have been taken in order to improve local economic, for example Gorontalo Governor Decree about the price of corn in Gorontalo, and Regional Regulation (Perda) No. 2 of 2004 on the Fundamentals of Investment Ease. This regulation guarantees ease of licensing services, facilitation and preparation of the land in accordance with the zoning plan, tax breaks and business certainty. Grand Strategy II. Small and Medium Industries Development Grand Strategy II conducted the development of small and medium industries. The small and medium industries play an important role. These can support the stability setting of corn price, so farmers are not tracked by current market. Gorontalo applied the buffer system to avoid the free market mechanism, so the local government can intervene the price of corn by purchasing the corn from farmers, it will prevent traders and speculators from manipulating prices (Rafick, 2007). Thus prices will contribute very well to the farmers and there will be a good cooperation between farmers and industry, where all the farmers will

develop crops or commodities needed by the industry and the industry will then be guaranteed the supply of commodities farmers they need. In the development of Small and Medium Industries there is some connection that should be analyzed further, that the application of cluster system. This strategy meant that local economic development can achieve broad based economic growth. The implementation of the cluster system in the province of Gorontalo can be seen through the development of business clusters, including: (1) Integrated Agro Industrial Zone (Kawasan Industri Agro Terpadu/KIAT); and (2) Creating corn economic cluster or other types of clusters (Muhammad 2006). In addition, the cluster approach is in order to improve competitiveness as a consequence of the market driven. Market demands, subsequently developed into a market analysis so that it can be used as the basis for determining a policy in relation to the small and medium industrial development. The next step is to develop a regional promotion. Regional promotion is conducted to inform potential and investment attractiveness to the public through various media. To make it more interesting media campaign should really be able to convince investors to invest. For example, a media campaign that built online-based Geographic Information System (GIS) to facilitate the accessibility of data and information. Grand Strategy III. Capacity Building Capacity building is carried out in the development of human resources and skilled labor that will enhance the potential of the regions. Improving the quality of human resources is expected to make a major contribution to the increase in the rate of economic growth. This is seen as a key factor for the success of development that can ensure stability and economic progress of society. Gorontalo policies have been focusing on developing human resource capacity, improving the education sector and peoples welfare. Gorontalo is committed to continue investing in long-term education. Gorontaloss local budget for education reaches more than 20%. Moreover various educational and training activities for the short term is conducted for the governments officials and society (Radyan & Nurdiansyah, 2008). In this case the provincial government did not reluctant to spend a large budget to bring in a lot of experts who are known to change the mind-set of the governments officials and society in Gorontalo. The top leader ask experts to redesigned a regional-based curriculum, so the corps lands and the sea could be properly developed for peoples welfare (Rafick, 2007).

3.3. Recommendation for implementing organisation as follow up 3.4. Policy implications (possible future conditions) 4. References and appendices

Handayani, I. P. (2012). Beyond Statistic of Poverty. The Jakarta Post. Retrieved October 07, 2013, from http://www.thejakartapost.com/news/2012/02/13/beyond-statistics-poverty.html Radyan, O., & Nurdiansyah, A. (2008). Penerapan Local Governance dalam Proses Pengentasan Kemiskinan di Provinsi Gorontalo Melalui Kebijakan Agropolitan. Rafick, I. (2007, May). Entrepreneurial Government. Globe Asia, 8892. Wirokartono, S., Malik, A., Ahmad, T., Djutaharta, T., & Cicih, L. H. M. (2010). Pembangunan Provinsi Gorontalo: Perencanaan dengan Indeks Pembangunan Manusia (p. 101). Jakarta.

Deolalikar, A. B., J. Alex B. Brillantes, et al. (2002). "Poverty Reduction and the Role of Institutions in Developing Asia." ADB ERD Working Paper Series No. 10. Muhammad, F. (2006). Pembangunan Daerah Fokus Pada Keunggulan Daerah: Suatu Inovasi Praktek Penyelenggaraan Pemerintahan. Malang, Bawijaya Press. Rives, J. M. and M. T. Heaney (1995). "Infrastructure and Local Economic Development." Regional Science Perspective Vol. 25 No. 1: P. 5 - 73. Sabar, A. (2006). Fadel, Solusi Jitu Membangun Daerah. Jakarta, CV. Arena Seni. Smith, T. R. (1992). "Determinants of Rural Growth: Winners and losers in the 1980s." Research Working Paper Federal Reserve Bank of Kansas City.