Pengembangan Produk Hilir Industri Kokoa: Mengeksplorasi Peran Pemerintah dan IKM Dalam Kemitraan

DOWNSTREAM PRODUCT DEVELOPMENT OF COCOA
INDUSTRY: EXPLORING THE ROLE OF GOVERNMENT
AND SMALL AND MEDIUM INDUSTRY IN PARTNERSHIP

FARDA EKA KUSUMAWARDANA

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
BOGOR
2015

iii

DECLARATION
I hereby declare that the thesis entitled Downstream Product Development of
Cocoa Industry: Exploring the Role of Government and Small and Medium
Industry in Partnership is my work through the guidance of my academic advisors
and to the best knowledge. This thesis has been submitted for the award of Master
of Science from Bogor Agricultural University and Master of Applied Innovation
and Entrepreneurship from The University of Adelaide as a double degree program.
This thesis does not contain any pieces of work of other person, except those are

acknowledged and refrain herein.
Bogor, July 2015
Farda Eka Kusumawardana
NRP F351137171

SUMMARY
FARDA EKA KUSUMAWARDANA. Downstream Product Development of
Cocoa Industry: Exploring the Role of Government and Small and Medium
Industry in Partnership. Supervised by YANDRA ARKEMAN and TITI CANDRA
SUNARTI.
Indonesia is the third largest cocoa bean producers in the world. It puts cocoa
as a valuable commodity that can contribute in sizeable economy development for
the country. As one of the cocoa-producing country, the Indonesian government
intend to develop the downstream industries of cocoa. Even though the
development of the downstream industry based on the local commodities has been
a government agenda, particularly in Indonesia, few studies address the partnership
between the government and Small and Medium Industry (SMI) in the development
of the industry at SMI level. The challenges present in the partnership between the
government and SMI in the development of the downstream cocoa industry. The
challenges are related to cooperation, communication, and objectives between

stakeholder in the industry including the government and the SMI.
This research examine the role of Government and SMI in partnership to
develop the downstream cocoa industry. The research will unite different views of
government, academic, and SMI to explore the partnership between the government
and the SMI in the development of the industry. The role of government, academic,
and SMI is important in the development of economic region, so it will be
interesting to identify the common ground of their views’ in the development of
downstream cocoa industry at SMI level before taking further action.
This study took place in Bogor, West Java, Indonesia. The sampling
procedures used by the researcher was purposive sampling. Purposive sampling is
necessary to make sure that the participant is the appropriate person to get their
insight for this study. The six participant that represent government, academia, and
the industry have been interviewed to explore the current partnership in the
development of the downstream cocoa industry. The collected data were transcribed
and categorized in terms of research questions and emergent themes. The researcher
use Framework method to analyze the data.
Findings show the stakeholders that related to the downstream cocoa industry.
The collaboration between the stakeholders lead by the government can affect the
partnership in the development of the downstream cocoa industry. The study
findings imply the importance of government initiatives, sustainable program,

database creation, market creation, research partnership, and entrepreneurial spirit
as a factor that must be enhanced to increase the partnership.
The implication of this study can influence the policy makers, organization,
and for the theory building. The policy makers can improve their approach to the
development of the cocoa industry. The new insight will increase the partnership
with the SMI by improving the collaboration with other stakeholders. The
stakeholder organization in the downstream cocoa industry hopefully can have
another point of view to develop the industry.
This research provides the information of the stakeholders that related to the
downstream cocoa industry at SMI level. The information regarding the
development of the downstream cocoa industry from government point of view,

v

academic point of view and the SMI point of view. From this research, the
researcher provides the several field that can be used as a basic knowledge to
improve the development of the downstream cocoa industry at SMI level.

Keywords: Cocoa, Downstream Industry, Entrepreneurship, Government and SMI
partnership, Small and Medium Industry (SMI).

RINGKASAN
FARDA EKA KUSUMAWARDANA. Pengembangan Produk Hilir Industri
Kokoa: Mengeksplorasi Peran Pemerintah dan IKM Dalam Kemitraan. Dibimbing
oleh YANDRA ARKEMAN dan TITI CANDRA SUNARTI.
Indonesia adalah produsen biji kakao terbesar ketiga di dunia. Ini
menempatkan kakao sebagai komoditas penting yang dapat berkontribusi dalam
pembangunan ekonomi yang cukup besar bagi negara. Sebagai salah satu negara
penghasil kakao, pemerintah Indonesia berniat untuk mengembangkan industri hilir
kakao. Meskipun pengembangan industri hilir berbasis pada komoditas lokal telah
menjadi agenda pemerintah, khususnya di Indonesia, sedikit studi yang membahas
kemitraan antara pemerintah dan Industri Kecil dan Menengah (IKM) dalam
pengembangan industri di tingkat IKM. Terdapat beberapa tantangan dalam
kemitraan antara pemerintah dan IKM dalam pengembangan industri hilir kakao.
Tantangan tersebut terkait dengan kerjasama, komunikasi, dan tujuan antara
pemangku kepentingan dalam industri termasuk pemerintah dan IKM.
Penelitian ini mendeskripsikan peran Pemerintah dan IKM dalam
membangun kemitraan untuk mengembangkan industri hilir kakao. Penelitian ini
akan menyatukan pandangan yang berbeda dari pemerintah, akademisi, dan IKM
untuk mengeksplorasi kemitraan antara pemerintah dan IKM dalam pengembangan

industri. Peran pemerintah, akademisi, dan IKM sangat penting dalam
pengembangan wilayah ekonomi, sehingga akan menarik untuk mengidentifikasi
kesamaan pandangan mereka dalam pengembangan industri hilir kakao di tingkat
IKM sebelum mengambil tindakan lebih lanjut.
Penelitian ini berlangsung di Bogor, Jawa Barat, Indonesia. Prosedur
pengambilan sampel yang digunakan oleh peneliti adalah purposive sampling.
Metode ini dipilih untuk memastikan bahwa peserta yang diwawancara adalah
orang yang tepat untuk mendapatkan wawasan untuk penelitian ini. Enam peserta
yang mewakili pemerintah, akademisi, dan industri telah diwawancarai untuk
mengeksplorasi kemitraan yang ada saat ini, dalam pengembangan industri hilir
kakao. Data yang terkumpul ditranskripsi dan dikategorikan sesuai dengan
pertanyaan penelitian dan tema. Peneliti menggunakan framework method untuk
menganalisis data.
Hasil penelitian menunjukkan beberapa pemangku kepentingan yang terkait
dengan industri hilir kakao. Kolaborasi antara para pemangku kepentingan
dipimpin oleh pemerintah dapat mempengaruhi kemitraan dalam pengembangan
industri hilir kakao. Temuan penelitian menggambarkan pentingnya inisiatif
pemerintah, program berkelanjutan, pembuatan database, pembuatan pasar,
kemitraan penelitian, dan semangat kewirausahaan sebagai faktor yang harus
ditingkatkan untuk meningkatkan kemitraan antara pemerintah dan IKM.

Implikasi dari penelitian ini dapat mempengaruhi pembuat kebijakan,
organisasi, dan untuk membangun teori. Para pembuat kebijakan dapat
meningkatkan pendekatan yang telah mereka lakukan terhadap pengembangan
industri hilir kakao. Wawasan baru akan meningkatkan kemitraan dengan IKM dan
meningkatkan kerjasama dengan pemangku kepentingan lainnya. Pemangku
kepentingan di industri hilir kakao diharapkan dapat memiliki sudut pandang yang
lain untuk mengembangkan industri.

vii

Penelitian ini memberikan informasi dari para pemangku kepentingan yang
terkait dengan industri hilir kakao di tingkat IKM. Informasi mengenai
perkembangan industri hilir kakao diperoleh dari sudut pandang pemerintah, sudut
pandang akademis dan sudut pandang IKM. Dari penelitian ini, peneliti
memberikan beberapa bidang yang dapat digunakan sebagai pengetahuan dasar
untuk meningkatkan pengembangan industri hilir kakao di tingkat IKM.
Keywords: Cocoa, Downstream Industry, Entrepreneurship, Government and SMI
partnership, Small and Medium Industry (SMI).

Copyright© 2015. Bogor Agricultural University

All Right Reserved
1. No part or all of this thesis maybe excerpted without inclusion and
mentioning the sources
a. Excerption only for research and education use, writing for scientific
papers, reporting, critical writing, or reviewing of a problem.
b. Excerption does not inflict a financial loss in the proper interest of Bogor
Agricultural University.
2. No part of or entire of this thesis maybe translated and reproduced in any
form or by any means without written permission from Bogor Agricultural
University.

ix

DOWNSTREAM PRODUCT DEVELOPMENT OF COCOA
INDUSTRY: EXPLORING THE ROLE OF GOVERNMENT
AND SMALL AND MEDIUM INDUSTRY IN PARTNERSHIP

FARDA EKA KUSUMAWARDANA

A Thesis

Submitted to the Graduate School in Partial Fulfillment of the Requirement for
Magister of Science
Degree in
Agroindustrial Technology

GRADUATE SCHOOL
BOGOR AGRICULTURAL UNIVERSITY
2015

External Examiner

: Prof. Dr. Ir. Anas Miftah Fauzi, M.Eng

xi

Thesis Title

Name
Registration Number

: Downstream Product Development Of Cocoa Industry:
Exploring the Role of Government and Small and
Medium Industry in Partnership
: Farda Eka Kusumawardana
: F351137171

Approved
Advisory Committee

Dr. Ir. Yandra Arkeman, M.Eng
Chairman

Dr.Ir. Titi Candra Sunarti, MSi
Member

Agreed

Coordinator of Program
Agroindustrial Technology

Dean of Graduate School

Prof. Dr. Ir. Machfud, MS

Dr Ir Dahrul Syah, MSc.Agr

Examination Date : 9th June, 2015

Submission Date :

Acknowledgment
First of all, all Praise and gratitude to Allah Subhanahu wa Ta’ala, who the
most precious and the most merciful for His blessing from the first until the last
step of the research process. This research would have been impossible without the
support from many people. I would like to appreciate everything they have given to
me. I would like to acknowledge the support of the Ministry Industry of Republic
of Indonesia for funding my study.
I would acknowledge my supervisors in Indonesia, Dr. Ir. Yandra Arkeman,
M.Eng and Dr.Ir. Titi Candra Sunarti, MSi from Bogor Agricultural University
Indonesia, for their support and their insight of my research and my study. I also

thank Prof. Dr. Ir. Anas Miftah Fauzi, M.Eng as examiner in my final examination
for their constructive comments. I am indebted to my supervisors in the Adelaide,
Dr Barry Elsey and Dr Scott Gordon from the Adelaide University, who supports
me academically and mentally in thesis writing from the beginning until the last
step. I would like also to thank for their insight and his constructive criticism of my
thesis.
Finally, I want to express my appreciation to my parents, my little sister, and
my little brother who have always prayed and gave me the support to complete my
studies. I am also grateful to my wife, Anggraeni, for her endless love, never-failing
patience and encouragement. I dedicate this work to my beloved daughters, Sofia
Taqiyya Nurfargia and Aznii Azkiya Nurfargia, who always gave me their love.
I hope that this work will bring many benefit to the readers and contribute to
the development of knowledge.

Bogor, July 2015
Farda Eka Kusumawardana

xiii

Table of Content

List of Tables
xvii
List of Figures
xvi
List of Appendices
xvii
1. INTRODUCTION
1
Background
1
Statement of Problem
1
Research Objectives
2
Research Question
2
Significance to the Field
3
2. LITERATURE REVIEW
4
Definition of Small and Medium Industry (SMI)
4
The Downstream Cocoa Industry in Indonesia
5
The Importance of the Government and SMI Partnership in the Development of
the Downstream Cocoa Industry
7
Public Private Partnership
7
3. METHODS
9
Setting
9
Participant
9
Research Stage
10
Data Analysis
10
4. FINDINGS AND DISCUSSION
12
The Stakeholders in the Development of Downstream Cocoa Industry
12
The Government Role in the Partnership
16
The SMI Role in the Partnership
18
Learning From the Government and SMI Partnership
20
5. CONCLUSION AND RECOMENDATION
24
Conclusion
24
Recommendation
24
REFERENCES
25
APPENDIX
28
AUTOBIOGRAPHY
29

List of Tables
Table 1 Participants List Information

9

List of Figures
Figure 1 Cocoa Industrial Tree ............................................................................. 5
Figure 2 Cocoa Value Chain ................................................................................ 6
Figure 3 Indonesian Cocoa Beans Market ............................................................ 7
Figure 4 The Stakeholders Relationship ............................................................. 15

List of Appendices
Appendix 1 Interview Question Guidance

xv

26

1

1. INTRODUCTION
Background
Indonesia, as stated in Presidential Decree No. 28 Year 2008 on National
Industrial Policy, want to be an industrialized country in 2020. To achieve these
objectives, the development of SMI based on competitive local commodities is
substantial. One of many Indonesian local commodities that have strong resources
is cocoa.
Indonesia is the third largest cocoa bean producers in the world (ICCO 2014).
It puts cocoa as an important commodity that can contribute in sizeable economy
development for the country. As one of the cocoa-producing country, the
Indonesian government intend to develop the downstream industries cocoa
products, by issuing policy. The policy related to the industry is Ministerial
Regulation No. 67/PMK.011/2010 and updated through No.128/PMK.011/2011,
which sets out the duty for cocoa beans for export that effective since April 2010.
The policies aim to ensure the availability of raw materials to increase the
competitiveness of domestic industries.
Small and Medium Enterprises (SMI) play an important role in economic
development, both in developing and developed countries. The role of SMI in
developing country, such as Indonesia, have been more vital since they contribute
to improvement in several area, such as create new employment, export growth,
increase the foreign exchange, and poverty reduction. Furthermore, it also leads to
the development of rural area, upstream and downstream industry, entrepreneurship
development, and increase the value added of agriculture product. Consequently,
SMI can play a major role in the development of downstream cocoa industry.
The literatures demonstrate that in the development of downstream cocoa
industry, the research focused on improvement on the upstream industry level or
the intermediate product of cocoa industry (Hasibuan et al. 2012; Rahmanu 2009).
Yet, a study exploring the development of cocoa downstream industry at SMI level
need to be review. Moreover, in the development of SMI level, government and
SMI should have create a good partnership in order to successfully develop the
industry (Ajami & Bear 2013; Hussain et al. 2012; Kusmuljono 2009; Smallbone
& Welter 2001).
Unfortunately, the partnership between the government and SMI still become
an issues. Thus, this research aims to explore the partnership between the
government and SMI in the development of downstream cocoa industry at SMI
level.

Statement of Problem
The challenges present in the partnership between the government and SMI
in the development of cocoa downstream industry. The challenges are related to

2
cooperation, communication, and objectives between stakeholder in the industry
including the government and the SMI (Bulkis 2014; Kurniawati & Lestari 2013).
Whereas, learning from others successful SMI development, partnership between
government and SMI is important (Doh & Kim 2014; Kang & Park 2012; Li &
Chen 2006).

Research Objectives
The purpose of this study was to explore the partnership between the
government and SMI in the development of downstream cocoa industry at SMI
level. The development of the cocoa industry at SMI level can increase the
development of economic region in the country since, since Indonesia is the
producer of world cocoa bean and the government intend to develop the
downstream industry. The specific objectives of this study are as follows:
1. To explore the current state of the partnership between the government and
SMI from the perspective of government, academic, and SMI by describing the
stakeholder that related to the industry.
2. To describe the factors that can improve the cooperation between the
government and the SMI.

Research Question
The research will unite different views of government, academic, and SMI to
explore the partnership between the government and the SMI in the development
of downstream cocoa industry. The role of government, academic, and SMI is very
important in the development of economic region so, it will be interesting to identify
the common ground of their views’ in the development of downstream cocoa
industry at SMI level before taking further action. Considering the description
above, the research question is:
“What can we learn from the government, academic, and SMI point of view
regarding the government and SMI partnership in development of the downstream
cocoa industry?”
In order to answer the central question, the researcher will ask the following
sub-questions:
1. Who are the stakeholders involve in development of downstream cocoa
industry?
2. What have the government done in the partnership with the SMI?
3. What have the SMI done in the partnership with the government?
4. What can we learn to increase the partnership?

3

Significance to the Field
Most of studies in the development of cocoa downstream industry usually
limit their focus to intermediate product of cocoa industry. This research will reveal
a strategy to increase the partnership between the government and the SMI in
development of downstream cocoa industry. Hopefully, this would help policy
makers develop policies favoring future partnership with the SMI, as well as
providing insight for the stakeholders in downstream cocoa industry for long-term
planning.

4

2. LITERATURE REVIEW
Definition of Small and Medium Industry (SMI)
The definition of the Industry refers to Law No. 3 In 2014, Industry is all
forms of economic activity that process raw materials and / or take advantage of
industry resources to produce goods that have added value or higher benefits,
including industrial services. Criteria for Small Industries, Industry Medium and
large according to these rules:
1. Small Industries determined based on the number of workers and the value
of the investment, excluding land and buildings.
2. Medium Industries determined based on the number of workers and / or the
value of the investment.
3. Large Industry determined based on the number of workers and / or the
value of the investment.
4. The number of workers and the value of the investment for Small Industries,
Industry Medium and Large Industrial determined by the Minister
Criteria for Small Industries, Industrial Medium, and Large Industries in Law
No. 3 Year 2014 will be regulated in the Regulation of the Minister of Industry
(Permenperin). Until now, in May 2015, the draft of Permenperin concerning the
classification of Small Industries, Industry Medium and Large Industries is still
discussed at an internal level of the Ministry of Industry. Thus, the definition of
SMI that will be used is Regulation of the Minister of Industry No. 41 / M-IND /
PER / 6/2008 regarding Provisions and Procedures Giving Industrial Business
License, Expansion License and Industrial Registered. The regulations contains a
provision concerning the amount of the value of the company's investment criteria,
namely: "Small Industrial investment value up to Rp. 200,000,000 (two hundred
million), excluding land and buildings".
There needs to be an understanding distinguish between "Industry" and
"Enterprises". According to the Indonesian Dictionary (KBBI 2015), Enterprises
are activities with exertion, mind, or body to achieve a purpose; work (action,
initiative, effort, effort) to achieve something (activities in the field of trade with
the intent to make a profit). However, Industry according to the law, is in a forms
of economic activity that process raw materials. Thus, this research use a term of
Small and Medium Industry (SMI) and not using Small and Medium Enterprises
(SMEs). Furthermore, there is a different regulation concerning the SME. The
SMEs is regulated by the Law No. 20 of 2008 on SMEs.

5
The Downstream Cocoa Industry in Indonesia
The scientific name for the cocoa tree is Theobroma cacao. Theobroma is a
Greek composite word for “food of gods” (theo =god and bromin/brosis = food),
and that is exactly what a chocolate has been known to be for centuries. There are
three types of cocoa beans suitable for human consumption. They are the criollo,
trinitario, and the forasteros. In Indonesia the cacao trees come from the hybrid
bean of criollo and forasteros, called trinitario.
The cocoa pod has a lot of potential to be processed into a high added value
derived product. A variety of the cacao products can be seen in the cocoa industrial
tree picture at Figure 1.

Figure 1 Cocoa Industrial Tree
Cocoa value chain is the full range of tangible and intangible cocoa activities
to adding a value to deliver a cocoa product from the start of cocoa tree live until

6
the end (ICCO 2013). The cocoa value chain that have been presented well in
another study (Putri et al. 2015) can be seen in the Figure 2.

Figure 2 Cocoa Value Chain
According to the Ministry of Industry (Perindustrian 2009), the upstream
cocoa industry start from the production stage until the marketing stage. The
intermediary cocoa industry is the result of processing stage, namely, cocoa paste,
cocoa liquor, cocoa butter, and cocoa powder. The rest is the downstream cocoa
industry, the industry that use an intermediary cocoa industry product as the raw
material.
A study in value chain improvement for Indonesian cocoa industry have
conducted (Putri et al. 2015). The study explain that cocoa industry resources and
industries related to the cocoa industry has not been optimized to support the
development of the cocoa industry. Nevertheless, the Indonesian cocoa industry has
less competitive compared to Ivory Coast and Ghana, the largest producer of cocoa
beans in the world. The study proposed that the cocoa industry that has added value
among entities is still low. It can be said that cocoa industry by sector in Indonesia
is underdeveloped. The solution for that condition is increasing the cocoa derivative
products in the form of cocoa paste, cocoa butter, cocoa powder, cocoa cake and
cocoa liquor at the stage of processing. It can provide not only value added between
industrial entities but also increasing the use of cocoa products for domestic
production in food and beverage of cocoa products industry such as ice cream
industry, chocolate and candy industry, cakes industry, and restaurant services. The
study specify that the development of downstream cocoa industry is important. The
development of the industry will provide not only value added between industrial
entities but also increasing the use of cocoa products for domestic production.
However, the study does not discuss the development in the SMI level.
The government realized this, then to develop the downstream industries
cocoa products, the government issued a Ministerial Regulation No.
67/PMK.011/2010 and updated through No.128/PMK.011/2011 Regulation which
sets out the duty for cocoa beans for export are in effect since April 2010. According
to the regulations, the policies aim to ensure the availability of raw materials and
increase the competitiveness of domestic processing industries. In other words, this
rule intended to encourage the growth of the cocoa bean processing industry in the
country. This policy eventually develop the domestic cocoa industry (Rifin 2014).

7
As can be seen from the Figure 3, after 2010 the availability of raw materials for
domestics market was increased. Those trends triggered the intermediate cocoa
industries that produced intermediate product such as cocoa powder to develop.

Production Number
(in Thousand Ton)

600,000,000
500,000,000
Export of
Cocoa Beans

400,000,000
300,000,000
200,000,000

Cocoa Beans
for Local
Market

100,000,000
0
2006 2007 2008 2009 2010 2011 2012 2013
Year

Figure 3 Indonesian Cocoa Beans Market

The Importance of the Government and SMI Partnership in the
Development of the Downstream Cocoa Industry
Ideally, it can be argued that the development of cocoa industry not only
focused in the upstream industry but also in the downstream industry. Furthermore,
the development of the industry in SMI level is essential due to their contribution
in economic development. Previous research (Hasibuan et al. 2012; Rahmanu
2009) has indicated a need to develop the downstream cocoa industry to increase
the industry performance. A study in policy formulation of cocoa industry
(Widayanto 2013) investigate the important of policy formulation based on supply
chain driver performance to support the cocoa industry. The purpose of this study
is aiming to create a model of cocoa industry development policy. The study
indicate that the partnership between the government and the industry is important
in the development of the cocoa industry. This study also describe that not only
government but also the industry should improve in order to sustain in the industry.
However, the study does not discuss the development in the downstream industry.
Furthermore, the corporate policy that the study propose only suitable for big
industry level. Thus, there are some field in the development of downstream cocoa
industry at SMI level that must be explore.

Public Private Partnership
Public private partnerships (PPP) is cooperation among public institutions
and private enterprises which intend to provide public services. PPP according to

8
The EU is a kind of collaboration that linking public establishment and business
world that intend to provide finance, structure, renewal, management or repairs of
an infrastructure or intend to provide a service (Bovis, 2010). Previous study
(Husain et al. 2012) were proposed the following definition PPP for SME sector is
an approach to addressing SMEs growth problems through the combined efforts of
public, private, and development organizations.
PPP can be benefited several ways in developing a well establish SME sector.
First, PPPs can unite diverse actors’ knowledge and skills in formulating effective
decisions as well as results in developing effective strategies and policies (Lowndes
and Sullivan, 2004). Then, PPP can employ different diverse partners’ particular
resources and can devise improved problem solving techniques competently than a
single partner (Cohen, 2001).
PPP enable the Government concerning the disciplines, incentives, skills and
expertise which private sector SMEs have developed in the course of their normal
everyday business. PPP also help governments to release the full potential of the
people, knowledge and assets in the public sector. PPP enables the Government to
deliver its objectives better and to focus on those activities, fundamental to the role
of Government, which are best performed by the public sector - procuring services,
enforcing standards and protecting the public interest. In developing countries,
growth of SMEs can be achieved through public-private partnerships, where the
government delivers the minimum standard of quality for products and services, the
private sector brings skills and core competencies, while government, donors and
businesses jointly bring funding and other resources. Such collaborations will be
especially productive in enhancing SMEs growth through partnerships. Through
PPP, the advantages of the private sector such as dynamism, access to finance,
knowledge of technologies, managerial efficiency and entrepreneurial spirit, are
combined with the social responsibility, network of contacts, environmental
awareness, local knowledge, and job generation concerns of the public sector
(Husain et al. 2012).
Many of the developing countries have not developed policies and systems to
foster the SMEs development. The lack of skills on a business-level has hindered
the development. To overcome these obstacles, formulation of SME development
policies as well as private sector who formulate and implement the policies
appropriately are essential.

9

3. METHODS

Setting
This study took place in Bogor, West Java, Indonesia. The city of Bogor have
two institutions and one SMI that can represent the government researcher,
academic, and SMI. The institutions are the government research center, an
Agricultural University, and two cocoa based SMI in Bogor. Interestingly, Bogor
not only close to the market, but also close to several intermediate cocoa industry
that produce cocoa paste, cocoa butter, cocoa powder, cocoa cake and cocoa liquor.
Those intermediate product is a raw material that can be derived into several
product by the SMI.

Participant
The sampling procedures used by the researcher was purposive sampling.
Purposive sampling in qualitative study is important to make sure that the
participant is appropriate person to get their insight for this study (Bryman 2012).
The participants were selected to those, according the researcher, are the expert in
the development of cocoa industry. Participants includes two government
researcher, two academic from IPB and two SMI.
The participant in the study were also selected because they were from
different expertise. The participant from the government researcher were selected
because they are work closely to government and SMI. The participant from
academic were selected because they related to the development of the cocoa
industry. Finally, the two SMI were selected with different background, one SMI is
the company that have more than 10 years’ experience, and the other is new startup company. The participant list described in the Table 1 below.
Table 1 Participants List Information
Participant List
Participant 1
Participant 2
Participant 3
Participant 4
Participant 5
Participant 6

Institution
Research center
Research center
University
University
SMI
SMI

Status
Researcher
Researcher
Lecturer
Lecturer/Practitioner
Owner
Owner

10
Research Stage
The study was conducted in three phases. The explanation of each stage of
research described as follow:
a. Identification of the Stakeholder of the Downstream Cocoa Industry
The identification of stakeholder in downstream cocoa industry at SMI level
obtained by doing interview with the expert in the downstream cocoa industry.
The interview question guidance can be seen at Appendix 1. From this stage,
the researcher have the information about the stakeholders. This information is
important since it will give the government and the SMI an opportunity to
increase the partnership.
b. Identification of government role in the partnership
The identification of government role in the partnership in the development of
the downstream cocoa industry at SMI level obtained by doing interview with
the expert. The interview question guidance can be seen at Appendix 1. With
interpretative analysis the researcher will describe the current condition of the
industry and then create suggestions of field that should be enhance to increase
the partnership to develop the downstream cocoa industry. From this stage, the
researcher have the information about the current government role.
c. Identification of SMI role in the partnership
The identification of SMI role in the partnership in the development of the
downstream cocoa industry obtained by doing interview with the expert. The
interview question guidance can be seen at Appendix 1. With interpretative
analysis the researcher will describe the current condition of the industry and
then create suggestions of field that should be enhance to increase the
partnership to develop the downstream cocoa industry. From this stage, the
researcher have the information about the current SMI role.
d. Learning From the Government and SMI Partnership
Learning from the Government and SMI Partnership in the development of the
downstream cocoa industry obtained by doing interview with the expert. The
interview question guidance can be seen at Appendix 1. With interpretative
analysis the researcher will describe the suggestion to increase the partnership
from government, SMI and academic point of view and then create suggestions
of field that should be enhance to increase the partnership to develop the
downstream cocoa industry. Finally, the researcher make a conclusion and
recommendation.
.
Data Analysis
The data collection process took place over an eight-week time period. The
data were collected through interviews. The collected data were transcribed and
categorized in terms of research questions and emergent themes. Specific interview
questions were matched to answer the five research questions. The researcher use
Framework method to analyze the data. This analysis commenced with

11
familiarization of the data by a process of immersion. Preliminary emerging issues
and themes were recorded, allowing data to be organized. A thematic framework
was then identified by drawing on the topic guide and the emerging themes, and by
recording any recurrence or prevailing patterning. The next phase, indexing of the
data, by applying the framework to all the interview transcripts. In the final phase
the data were considered again as a whole, the main focus being to provide
explanations, enhanced the findings and added insight.

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4. FINDINGS AND DISCUSSION

The Stakeholders in the Development of Downstream Cocoa Industry
The interview was conducted with the government researcher. The
stakeholders in development of downstream cocoa industry according to the
government researcher views are, the SMI, big industry, cooperatives, government,
research centers, universities, associations, and other food industries. Every stake
holders have their own role in the downstream cocoa industry at the SMI level.
The SMI. Interviewees reported that the SMI is a stakeholder in the
downstream cocoa industry that process the product for the consumer.
Participant 1 said:” SMI … that use a raw materials from the large industry
that produces a cocoa paste.” Participant 2 echoed: “The first is government
… the second is SMI.”
Big industry. Interviewee reported that the big industry supply the raw
materials such as cocoa powder and cocoa paste for the SMI. Participant 1
explained: “If the SMI purchase a raw materials from the large industry, the
SMI are subjected to a minimum order.”
Government. Interviewees reported that the government act as the
facilitator for the SMI. Participant 1 said:” the development of the
downstream industry are the expectations of the government…the
government must provide facilities to the SMI… the government should
promote the SMI.” Participant 2 also said: “The local government should be
act as a bridge between the SMI and the institutional investment providers
and harmonizing the SMI willingness.” Interestingly, the government that
the interviewee said is from several institution, namely, Ministry of
Industry, Ministry of Agriculture, Ministry of Trade, and the local
government. However, the institution that related to the development of
SMI are Ministry of Industry and the local government.
Research centers and Universities. Interviewees reported that the both
institution should be a partner for the SMI. Participant 1 said:” The research
conducted by the R&D institutions and universities is to develop highly
competitive product.” Furthermore, participant 2 mentioned that the
research center want to have a role in the development of SMI based on
leading commodity:” There should be a collaboration between the SMI and
the research center … in the research center itself, they have started to
conducting a research related to the Indonesian local commodities.”

13
Associations. Participant 1 said that if the strategy for the development of
downstream cocoa industry want to use a cluster, creating an association
would be necessary: “If the purpose of the establishment of the cocoa
clusters, the large industry, associations, and the SMI must working
together, they cannot doing it individually ”
Cooperatives. SMI cannot buy a raw materials at retail from the big
industry. Participant 1 suggest there must be another institution such
cooperatives that can bridge the SMI and Big industry so they can buy the
raw materials: “There need to be some sort of cooperatives institutions to
bridging the large, medium and small industry. Thus the SMI can get
cheaper raw materials from this institutions.”
Other food industries. Interestingly, Participant 1 mentioned the possibility
to collaborate with another commodity industry to make a diversifications
product of downstream cocoa industry: “Reflecting on the industry in the
Garut, West Java, they cooperate with other food industries that use cocoa
as well.”
The interview was conducted with the SMI. The stakeholders in development
of downstream cocoa industry according to the SMI are government, association
and research center.
Government. Overall, the role of government in development of
downstream cocoa industry at SMI level is need to be enhanced. Participant
5 reported that regarding to development of the product, there is less
connection between the government and the SMI:” With the government, it
seems we have not been able to solve the problems in chocolate.”
Association. The association has not able to play a role in the development
of the development of downstream cocoa industry if the purpose is to export
the product. The problem arise because the Indonesian chocolate
composition is different from other countries. The participant 5 reported:“
At that time I was offered to participate in overseas exhibitions. Then the
chairman of the association said that Indonesia still inferior in the product
taste.”
Research center. In general, SMI have not been able to utilize the results of
the research conducted by the research center. Two factors arises according
to the participant. First, it is too expensive that only a big industry who can
make a collaboration, next the result of the research is not applicable for the
SMI. Participant 5 said that:” The results of the research center is not all can
be applied by society. .... Moreover, if the results are still commercially,
probably only the large companies that can afford it, the SMI cannot do it.”

14

The interview was conducted with the academic. The stakeholders in
development of downstream cocoa industry according to the academic are: the
government, research center, industry, community, and another institution. The
stakeholder activities should be interlinked to develop the downstream cocoa
industry.
Government. The government must educate the consumer to consume the
product that made by the local industry. Participant 3 said that: “To develop
the downstream industry, our society needs to be educated, that consume
imported goods that are not developing ... nations.” Participant 4 echoed:”
Indonesia is quite unique because they have a chocolate tree, but the
downstream industry is still in distress. The process by the government to
educate people about chocolate downstream products is still lacking,
although people can afford to buy chocolate.”
Research center. The research center including university already have a
role as a partner for the government and the SMI. However, there are some
factors that should be improve. Participant 3 mentioned that research center
is one of stakeholders in the industry. In addition to that, Participant 4
explained more about the current condition:” If there SMI who wish to
consult with the research center, research center will immediately provide
the cost to be paid by SMI. In fact, consultation is still at an early stage to
resolve the problem, and has not reached the production stage. In fact, SMI
do not have a large expense.”
Industry. The industry role is in the manufacture of downstream products
from cocoa. Participant 4 explained that:” The first downstream industry is
the industry that sells cocoa butter, cocoa liquor and cocoa powder.
Furthermore, the next downstream industry is an industry that sells products
to consumers, most of them are multi-national companies.”
Community. The community is the most important part in the downstream
cocoa industry since they are who will buy the product. The challenges for
the industry is the culture of Indonesian consumer is not placing a
downstream cocoa product as their daily consumption. This condition must
be addressed by stakeholders to increase the awareness of downstream
cocoa industry product consumption. Participant 3 explained: “This product
is not such a dishes that everyone consumed every day. This product will
become a consumer’s demand when there is an event. The next is the
awareness about chocolate. Not everyone knows the advantages of
chocolate and it was not promoted well.”
Another Institution. Interesting findings came from the Participant 4
regarding the existence of “Another Institution” that help the SMI

15
overcoming the research collaboration barrier with the research center.
Participant 4 explained: “…due to SMI inability accessing the research
center because of financial issue, I join some organization/institution that
provide some help for the SMI…”
In this study, it is revealed that the government has a major role in the
development of downstream cocoa industry. Other than the government, the
stakeholders in the development of downstream cocoa industry are the big industry
that produce the upstream cocoa industry product, the SMI itself, the research
center, cooperatives, a consumer, and another institution as an alternative solution
between the SMI and the research center. The relationship between the
stakeholders, can be describe on Figure 4.
Government
Association

Big Industry

SMI

Cooperative

Consumer

Research Center

“Another
Institution”

Figure 4 The Stakeholders Relationship
According to the interview, currently every stakeholders is running
independently and not collaborate well. This study also reveal that the SMI
association still have less contribution in development of cocoa industry. Whereas,
the SMI Association should have a role to facilitate the SMI in communicating with
the government. The same condition is happened with the cooperatives, even
though their existence is important in order to facilitate the SMI to order the raw
material from the large Industry. This study also revealed that there are no
institution who have roles as the cooperatives, so the SMI can have an advantages
in supplying the raw material. It is contrary to what the government's objective in
establishing associations and cooperatives (Sandee et al. 2002). Those institutions
role actually an extension of government support for the SMI.
From the government side, the government realized that they should act as
the facilitators for the SMI. Further actions that can be taken by the government as
a SMI facilitator is to increase the role of government research center to facilitate
the SMI in order to increase the SMI innovation. The previous study in the role of
R&D institution (Lakitan 2013) explained the important of research institution as a
trigger for the technology absorption in the industry. Therefore, with the

16
government support as a facilitators, the SMI can have a sustainable growth and
development (Hussain et al. 2012).
From the SMI perspective, it is important for the government to conduct a
research collaboration with the large industry to make a good quality intermediary
product of cocoa. The SMI cannot make a good product if it comes from a low
quality raw materials. It also should be taken as a consideration that the SMI product
only fit for the domestic market due to under quality of the raw materials.
Interestingly, from the academic perspective, this study revealed the existence
of “Another Institution” as a bridge between the SMI and the research center.
Previous research (Anggraeni 2013; Angkasa et al. 2012; Prayitno 2011) already
explained that this institutions come up because the inability of SMI to have access
to the research center. In one hand this institutions actually helping the government
to assist the SMI. On the other hand, this institution showed that the research center
cannot give a good service to the SMI. In accordance to the existence of this
institutions, the researcher suggest that this institutions should have make a
collaboration with the research center. With this collaboration, both institution can
share the service to the SMI. The most important things is the one who get the
benefit is the SMI. The SMI will have another option to make a collaboration in
order to gain an access for the research to develop the product. Thus, they can play
the role in the development of downstream cocoa industry as a producer of the end
product.

The Government Role in the Partnership
The interview was conducted with the government researcher. The current
role of the government according to government researcher are policy makers and
facilitators. Furthermore, from the interviews it revealed that their role cover a
further details.
Policy makers. To maintain the sustainability of downstream cocoa
industry, the government have already make a policy from upstream to
downstream industry. Participant 1 reported that in the upstream cocoa
industry level, the government has been to provide a guidance for the
farmers to increase the quality and quantity of cocoa beans through the
ministry of agriculture. Moreover, in the downstream industry the ministry
of Industry should have more role to the development of the industry. In
accordance to that, the ministry of industry have developed a guidelines in
the development of cocoa industry. Participant 1 said: “Until now, that has
been done by the government is inviting the research center during the
preparation of the cocoa industry priority.” Participant 2 also reported that:
“In 2008 there was a presidential instruction to the development of the
downstream cocoa industry ... so that there is coherence government's role
in the development of upstream and downstream industry.”

17
Facilitators. Up until now, the government already have several
programmed to assist the SMI. Some of the programs are research for
product development, training, and providing the assistance in the form of
buying a machine for the SMI. Interestingly, the government cannot
arbitrarily removing the assistance for the SMI even though they already
give the machine. Participant 2 reported:” The government cannot just leave
the SMI and still requires them to cooperate with research centers even
though the government has given aid equipment purchasing.”
The interview was conducted with the SMI. The government role in the
partnership with the SMI according to the SMI views are training facilitator and
participation in exhibition.
Training facilitator. According to the Participant 5, the trainings given by
the government is useful for the SMI. The SMI can give a lot of knowledge
that can be used in increasing the company performance. Participant 5
reported:” Training from government is very helpful. The training is
conducted by the government was very complete for example there GMP
training, packaging, and others. Approximately there are 8 to 12 types.”
Participation in an Exhibition. Participant 6 explained that the participation
in an exhibition for the new enterprise is important to promote the product.
Participant 6 reported:” We were invited by the ministry of industry to get a
free stand to exhibit.”
The interview was conducted with the academic. The government role in the
partnership with the SMI according to the academics are training facilitator,
assistances, and an equipment provision.
Training facilitator. Up until now, the SMI have been given several training
by the government, like Participant 3 reported:” So far, the government has
provided guidance sanitation, GMP, and registration certification.”
Assistance. The government usually give some assistance through the local
government. Participant 3 reported that:” Typically, governments provide
assistance to local governments through the SMI. Then the local
government give it to the industrial group / business, unfortunately with a
low success rate of result.”
Equipment provision. In Padang, West Sumatra, Participant 4 reported that
even though the government give equipment provision, sometime the
machinery is not what the SMI want:” I've been to ... Bukittinggi and Padang
in West Sumatra.... the actual problems in equipment provision was the
equipment is often given ... but not according to what the SMI needs.”

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From the interview we can conclude that the government role already in line
in some aspects with the public partner partnership concept for SMI (Husain et al.
2012). The role of facilitator that the government researcher mentioned was echoed
by the SMI and the academic. This situations means that actually the government
as a source of information, has already released their knowledge for the public
sectors. Moreover, the government also have already play their role as a regulator
by issuing some policy.
From the SMI perspective, beside given training facilitation in order to
develop the SMI, the government also already provide the SMI to create their own
market by attending the exhibition. According to the interview, usually the local
Indonesian government have more initiative in inviting the SM