DOES THE ROLE OF LOCAL INSTITUTIONS REMAIN IMPORTANT TO PROMOTE

AGRICULTURE-BASED REGIONALISATION POLICY IN INDONESIA?:

THE CASE OF BANDUNGAN REGION IN CENTRAL JAVA PROVINCE

Prihadi Nugroho
Department of Regional and City Planning, Diponegoro University

ABSTRACT. Agriculture-based regionalisation policy basically remains relevant to promoting regional spesialisation in
response to the challenges of decentralisation and globalisation towards Indonesian economy today. Within the
context of regional autonomy, regional specialisation is not supposed to be defined through policies that promote the
intensification of regional competitive products only. More importantly, it should be examined whether the economic
benefits resulted from such policies are advantageous for local stakeholders. Indeed, it might be difficult task to limit
the flows of commodities, capital and other resources for the sake of local economic development per se. Resources
mobility in fact cannot be confined within particular region, therefore parties who search for more benefits should
compete in the market. As a result, local players who are not ready to compete are likely to be marginalised and in
turn they might become spectators within the market economy. This condition is getting threatening particularly
when globalisation with the massive capital inflows tends to takeover domestic market. To make it worst, what if
someday local stakeholders are losing their power to control local resources?

This research attempts to examine whether the role of local institutions remains important to promote agriculture-
based regionalisation policy. This research will focus on the case of Bandungan Region in Central Java Province. The
focus on local institutions is based on the hypothesis that their bargaining positions are threatened by the external
players who are controlling the distribution and marketing network of respective agriculture commodities. The
presence of external players with cartel-typed organisation is likely to threaten the competitiveness of local products
as well, mainly because they also play as an agent of marketing for similar products from outside. The research
methodology used here combines both quantitative and qualitative analyses. Some variables examined include the
forms and patterns of local institutions, the interaction patterns and hierarchical relationships among related
stakeholders, and the flows of resources within the observed location. In the end, the research is expected to produce
some inputs associated with the determinants of synergistic cooperation among stakeholders which may be useful to
formulating policies and institutional framework more effectively.

Keywords: regionalisation, agriculture-based commodities, local institutions

I. INTRODUCTION
Regionalisation policy basically is about the way to determine an imaginary border of region in
which particular functions of natural environments and human activities may persist. It contains
government will and interventions for ensuring the working of natural, physical, economic, social,
and political interactions in a society properly. This aims to create desired order of both natural
and artificial resources utilisation to meet the goals and objectives of development. Thus,
regionalisation policy on one hand will act as a space for accommodating planning processes and
project implementation within the region. On the other hand, it also provides instrumental tools
of direction and control over development initiatives as well as commonly human activities in a
society. Thus, it forms an institutional milieu which permits and constraints the patterns of human
activities that may exist following certain norms and values (Friedmann, 1965; Gore, 1984; Levine,
2001). According to classical theory of regional planning, regionalisation can be established on the
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basis of three criteria: homogeneity, administrative, and nodality. Homogeneity-based
regionalisation is characterised by similar features of either natural physical landscapes of the
region or ethnicity and other sociocultural bonds of neighbourhood. Administrative-based
regionalisation is formed by legally formal jurisdictions of local authorities by which they are
responsible for and have political power to conduct local developments. Meantime, nodality-
based regionalisation features certain functional coherence and interdependences of various
patterns of interactions among urban and rural centres ranging from local to global levels
(Richardson, 1979; Hilhorst, 1990). However, in reality the forms of regionalisation may emerge as
a mixture of those criteria creating a unique spatial framework that may change over time.
Typically, agriculture-based regionalisation policy in Indonesia emerges in response to
abundant resources of agriculture sector in terms of product variation, land suitability, manpower,
and market demand. Within the context of decentralisation era today the policy is still relevant to
promoting regional specialisation where some local governments can rely on their economic
growth based on endogenous agriculture potentials (Hinderink and Titus, 2002). This leads to
initial efforts to intensifying the specification of locally competitive products in order to gain
greater market share and to improve farmers’ livelihood. Instead of social and economic
rationalities, regional specialisation may perform as a useful instrument for increasing bargaining
power of region in globalising world through government protection on domestic agriculture
products for instance. However, approaches to agriculture-based policy is mostly associated with
product prices ranging from pre- to post-production processes which demonstrate (inevitable)
prices inequality the farmers should deal with. Commonly the farmers should bear prolonged
losses over time due to the lower product prices that cannot meet the break even point of entire
production costs. Moreover, they should survive from climate change problems recently where it
becomes more difficult to predict cultivation periods. Dealing with combined natural and
economic transaction problems it seems that the only future the farmers are likely to attain is
sustained impoverishment rather than living standard improvement.
One of failures in existing agriculture-based regionalisation policy is it is less concerned
with the role of local institutions in determining product exchanges at grass root level. All policies
related to agriculture development mostly work on regional/provincial and national levels. For
instance, the prices of fertilizer, gasoline, minimum wage, and final product. If local governments
attempt to reduce the risks of farmers’ losses, they cannot intervene deeper since their technical
and financial capacity to provide social safety net programs is very limited. In addition, the market
transaction at the grass root level is quite dynamic involving a strongly primordial ties among key
stakeholders so that the farmers are commonly coerced into ‘take it or leave it’ situation to
survive. The presence or absence of broader opportunity for the farmers to improve their
livelihood is socially determined by the existence of local institutions in their daily life. They are
not fully independent in deciding what are the preferred commodities to grow and how they
would like to market them. This means that the role of local institutions is so powerful in shaping
farmers’ choices that the market competition at the grass root level is likely to depend on the
performance of these institutions (Bebbington, 1999). Ironically, many cases show that the actors
who steer behind such local institutions are the external players. Mostly they are not local

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residents therefore their concerns on increasing local products’ competitiveness as well as local
farmers’ living standard are questioned. Hence, this research will primarily focus on whether the
role of local institutions remains important to promote agriculture-based regionalisation policy in
Indonesia with reference to Bandungan Region in Central Java Province. By examining the key
issue of bargaining positions between external and internal players in promoting local products’
competitiveness, this research is expected to provide some inputs for policy improvements.

II. AGRICULTURE-BASED REGIONALISATION POLICY IN BANDUNGAN REGION

The introduction of agriculture-based regionalisation policy in Bandungan Region is stated out in
the official strategic plan of Dinas Pertanian, Perkebunan, dan Kehutanan (Dispertanbunhut) or
Agriculture, Plantation, and Forestry Agency of Semarang Regency Year 2006-2010. According to
the plan, the Agency has two visions as follows: i) creating a durable and independent agriculture
development supported by natural resources and human resources potentials and ii) attaining
ecosystem sustainability to promote the social welfare in Semarang Regency. These visions clearly
address the importance of local resources utilisation for the sake of local stakeholders’ welfare in
terms of self management and self benefits. To attain these visions the Agency points out four
missions: i) to increase food security program through product intensification, ii) to increase
farmers’ income through entrepreneurship development program, iii) to preserve natural
resources, and iv) to improve public services in agriculture sector. As part of Agency’s programs to
realise its visions and missions then the agriculture-based regionalisation policy is introduced as a
spatial development strategy as mandated in both Peraturan Daerah (Perda) or Local Government
Regulation No. 3 Year 2002 about Strategic Plan for Semarang Regency 2002-2006 and Rencana
Strategis Dispertanbunhut (Renstra Dinas) or Agency’s Strategic Plan 2006-2010. According to
these regulations, it is endorsed 11 Kawasan Pengembangan Ekonomi Terpadu (KAPET) or
Integrated Economic Development Region and Kawasan Sentra Produksi (KSP) or Production
Centre Region. Bandungan Region is one of these special regions which is primarily directed to
develop: i) tourism sector based on agriculture, natural conservation, and sociocultural heritage, ii)
potential agriculture commodities mainly vegetables, flowers, and fruits, iii) animal husbandry
commodities like cows, rabbits, and land fisheries, iv) handicraft souvenir industries, v) public
infrastructure such as roads, pedestrian ways, market places, public transportation, and utilities,
and vi) the preservation of reserved forestry and cultural heritage site of Gedongsongo temple
(Dispertanbunhut, 2007).
On policy implementation stage the Government of Semarang Regency intends to improve
local products’ competitiveness in order to achieve economic growth as well as social welfare. The
success on selling these products is assumed to generate the improvement of local livelihood.
Product intensification and marketing thus become a means of local economic development with
more emphasis on result oriented process rather than self empowerment process. Even though
the government agencies gradually draw their direct involvement on most development projects
by positioning themselves as a facilitator and enabler of development, in fact they remain act as
the leading sector at the backstage. In general, at least there are four contradictory issues related

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to this government policy. First, the horticulture commodities (vegetables and fruits) which are
mostly cultivated in Bandungan Region have a less economic viability. Even though the policy has
met some principles of homogeneity and administrative regionalisation, it does not clearly
mention how local economic development may be attained. Regarding the chosen potential
commodities, their natural feature as a non-durable and climate sensitive goods has caused them
having less added value. Besides they are still easily produced in traditional ways stimulating the
growing number of competitors from outside regions. For instance, cabbage, tomato, carrot,
potato, shallot, celery, and capsicum are not the specific products of Bandungan since they are
also produced in neigbouring regions such as Temanggung, Wonosobo, Magelang, and
Karanganyar. Even some products like cabbage, tomato, and shallot are also supplied from East
Java Province and West Java Province on Bandungan market. This implies on the growing
pressures on local products’ price competitiveness (Jamhari et al., 2006; UPTD STA Jetis, 2009).

Figure 1. The Administrative Map of Bandungan Region

Source: BAPPEDA Kabupaten Semarang (2009)

Second, that Bandungan Region recently has been facing a serious problem on land
conversion. As can be seen on Table 1 during 2007-2008 there was a dramatic land use change on
housing and building and dryland farming where each rose up to 100 per cent just within a year. In
contrast, the use of state forest suddenly disappeared and the wetland paddy field was relatively
constant. Such dramatic change is mainly associated with the intensive growth of the number of
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villas, resorts, hotels and private housings in the region in response to government policy which
directs Bandungan Region as one of the major tourism destinations in Semarang Regency
(BAPPEDA Kabupaten Semarang, 2007). However, it has worsened the deforestation levels in the
region where the converted forest was previously occupied by the state. This fact demonstrates
how the policy ingredients have been contradicting one another.

Table 1. The Characteristics of Land Use in Bandungan Subdistrict 2007-2008

2007 2008
No. Types of Land Use
(Ha) (%) (Ha) (%)
1. Wetland paddy field 52.08 16.16 52.10 11.99
2. Dryland farming 78.13 24.24 215.20 49.54
3. Housing and Building 80.15 24.86 160.06 36.85
4. State forest 106.00 32.88 0.00 0.00
5. Others 6.00 1.86 7.04 1.62
Total 322.36 100.00 434.40 100.00
Source: BPS Kabupaten Semarang (2008, 2009)

Third, the agriculture-based regionalisation policy in Bandungan Region has focused too
many on local products intensification and marketing but tended to ignore the increase of self
empowerment for local stakeholders, particularly local farmers and traders. According to Jamhari
et al. (2006), local products from Bandungan farmers have been collected and exchanged at most
in local market place i.e. Jetis Agribusiness Subterminal (STA Jetis). Based on 2006 data, about 300-
400 tones vegetables and 800-1,000 thousands flowers were exchanged daily. With exception to
flower commodities, in fact a big portion of vegetables commodities was supplied by outside
regions. This means that Bandungan Region plays as an important trading place from which the
spillover of economic benefits is greatly gained by outside regions.
Fourth, the establishment of STA Jetis in 2000 is not supported by sufficient institutional
framework. The government-led organisational form within the structure of STA Jetis
Management to some extent has caused a rigid coordination among related stakeholders in
developing local products’ competitiveness (see Figure 2). According to Unit Pengelola Teknis
Daerah (UPTD) or STA Jetis Management (2009), the Management conducts partial duties of the
Agency in managing STA Jetis operations. It has some responsibilities to: i) develop its own
working plan and budget, ii) provide market price information and product supply, iii) facilitate
agriculture products marketing, iv) facilitate product management, v) conduct respective attempts
to increase local government revenue, vi) conduct its own public and financial administration, vii)
conduct the treatment of on-site cleanliness, tidiness and security, viii) conduct monitoring and
evaluation over market activities, ix) develop program implementation report towards the Head of

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Agency, and x) conduct the other duties to support its function. As a result, the bureaucratic styled
management in STA Jetis is unable to respond the dynamics of product transaction at the grass
root level so that the key market players such as big traders, intermediate traders, and collecting
traders (tengkulak) have built some informal institutions to take control over the distribution and
marketing of agriculture commodities. Ironically, such product exchange occurs outside STA Jetis
location therefore it fails to function as a fairly trading place for local farmers.

REGENT
(Bupati)

Executive Board of Local

Government Agencies
 Agriculture, Plantation and Forestry Agency
 Local Finance Management Agency
 Transportation Agency
 Co-operation and Small-Medium Enterprises
Agency
 Industry, Trade and Investment Agency
 Tourism and Culture Agency
 Economic Division of Local Government
Secretariat
 Himpunan Kelompok Tani Indonesia /HKTI
(Indonesian Groups of Farmers Association)
 Kelompok Tani dan Nelayan Andalan/KTNA
(Leading Farmers and Fishermen Groups)

THE MANAGEMENT OF
JETIS AGRIBUSINESS
SUBTERMINAL

Direct Buyers
Traders
 Supermarkets
 Hotels
Associations of Farmers and  Restaurants
Traders  Hospitals
 Manufacturing industries
 Others

Groups of Farmers

Figure 2. The Relations Between the Management of

Jetis Agribusiness Subterminal and Related Stakeholders
Source: Jamhari et al. (2006)

Therefore, the existing agriculture-based regionalisation policy in Bandungan Region is

problematic in accomplishing its objective. It could not integrate intersectoral development yet,
particularly between two major sectors of tourism and agriculture. In reality the uncontrolled

6
growth of accommodation facilities related to tourism attractiveness of Bandungan Region
recently has created a dilemma for local economic development. It has indeed increased market
demand for local agriculture products but on the other hand their existence has escalated land
conversion and environmental degradation. Actually, the increasing demand on local agriculture
products is not quite significant to creating local multipliers due to sustained marketing pattern
which mostly promotes large trading instead of retail trading, involving a large number of external
commodities and players. Hence, the policy has demonstrated inconsistency in both its conceptual
ingredients and practical instrumentality.

III. THE ROLE OF LOCAL INSTITUTIONS IN PROMOTING AGRICULTURE PRODUCTS

Responding to the failure of STA Jetis Management to conduct a fairly trade through open auction
mechanism, the government established a quasi non-governmental institution in 2006 to take
over this task. Meantime, the role of STA Jetis Management is reduced to undertake trade
reporting and administrative tasks only. This newly institution is an association of farmers and
traders in Bandungan Region which represents the interests of Gabungan Kelompok Tani
(GAPOKTAN) or the Groups of Farmers and individual farmers. Interestingly, the Association has
such a flexibility to find potential buyers outside STA Jetis place. By widening the market
segmentation, it is expected that the product price competitiveness of local agriculture
commodities can be improved.

POTENTIAL BUYERS
 Large traders
 Supermarkets
 Hospitals
 Hotels
 Industries
 Others

FARMERS-TRADERS
ASSOCIATION

Group of Group of Group of

Farmers Farmers Farmers

Individual Individual Individual Individual Individual Individual

Farmer Farmer Farmer Farmer Farmer Farmer

Figure 3. The Relations Between Farmers-Traders Association and Related Stakeholders

Source: Jamhari et al. (2006) with modification

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 In the vision of Association’s programs it is clearly mentioned that its establishment is to
create a fairly trade mechanism for achieving better welfare of farmers and traders independently.
Some missions of the Association are: i) revitalising Association’s institutional framework in
accommodating members’ aspirations and marketing strategy planning, ii) strengthening
Association’s capacity by creating business network and capital intensification, and iii) improving
both farmers and traders’ capacity in production process, product handling, marketing, business
network, and information development. Distinguished from STA Jetis Management, the major
executing power of Association rests on the hands of the representatives of GAPOKTANs whereas
the role of government representatives is limited to advisory board only (see Figure 4).

ADVISORY BOARD
1) The Head of Agriculture, Plantation and
Forestry Agency Semarang Regency
2) The Head of related local government
agencies

ST ND
1 CHAIRPERSON 2 CHAIRPERSON

TREASURER SECRETARY

PROCUREMENT PRODUCT HANDLING MARKETING PARTNERSHIP

DIVISION DIVISION DIVISION DIVISION

Figure 4. The Structure of Farmers-Traders Association Krido Roso Manunggal

Source: Jamhari et al. (2006)

The existence of Association basically is aimed to demolish the long-lasting cartel practices
in agriculture marketing in Bandungan Region, namely mafia selendang (scarf-throwing mafia). It
is a kind of socially constructed rules of the game where a small number of large traders called as
juragan(s) can freely decide the ceiling price of exchanged agriculture products. There is no
common agreement between juragan(s) to get the price fixed at certain levels. However, once
certain juragan has put certain price levels onto the desired products then the rest cannot put it
on at higher prices. In addition, juragans may pick up the preferred products from suppliers
directly through their downliners, the intermediate traders (brokers). These brokers play the key
role in introducing the fixed price to suppliers and determining whose products they prefer to buy.
Once the brokers throw their scarf to particular supplier’s products – frequently the brokers take
arrest for supplier’s trucks on the middle of the road or jumping into the vehicles before entering
to STA Jetis – so the rest of intermediate traders should not bargain for these products. The

8
brokers may get the desired products either from collecting traders/suppliers usually called as
tengkulak or individual farmers. The brokers operate outside STA Jetis site and waiting for the
suppliers to come to sell their products (see Figure 5).

COLLECTING TRADERS /
SUPPLIERS no link STA JETIS
(Tengkulak)

no link no link
FARMERS

INTERMEDIATE TRADERS
/ BROKERS LARGE TRADERS
(Mafia Selendang) (Juragan)

Figure 5. The Existing Cartel-Typed Mechanism in Agriculture

Commodities Marketing in Bandungan Region
Source: Direct observation (2010)

Unfortunately, such mechanism does not give any benefits to suppliers at all. They actually
have no bargaining power to get higher prices for their products. Usually the brokers put very low
prices on the products. If the suppliers refuse to sell to the first scarf throwers, then there will be
no more scarf thrown to their products. Furthermore, it is also difficult for the suppliers to find the
other potential buyers either inside or outside STA Jetis. Inside STA Jetis there are mostly small
scale traders who are accustomed to demand freshly horticulture products in very specific types of
and limited numbers of commodities depending on their targeted market demand. These traders
have their own customers whose demands are not always predictable. That is why these traders
have never stocked for a large number of commodities. In the meantime, the suppliers always sell
their products in large parties so that the transactions between them are seldom occurred. The
suppliers also have very limited opportunity to sell their products outside STA Jetis including to
potential buyers from other regions. This is mainly caused by suppliers’ limited capacity to spend
extra money, time and transportation arrangement to expand their markets further. In addition,
the large traders (juragans) are controlling the marketing and distribution channels outside
Bandungan Region as well since they are connected to interregional marketing and distribution
network. Therefore, the suppliers are hardly to compete within such a cartel-typed market
mechanism.
Responding to such unfair trade mechanism there are at least four types of local
institutions exist in Bandungan Region currently (see Figure 6). The type I informal collective action
is presented by the role of Association namely Krido Roso Manunggal. As described above the
Association basically features as a quasi non-governmental organisation, where the major role in
directing Association’s daily operations is held by the representative members of farmers and
traders and the government’s role is limited in advisory body only. In fact, it is found that the

9
Association existence is insufficient to cope with mafia selendang practices. As a group the
Association does not represent the interests of all farmers and traders in Bandungan Region
entirely. There is still a large number of farmers and traders who have not already joined into the
Association. This simply means that the Association must compete openly vis-à-vis the rest of non-
member farmers and traders. As a result, the Association fails to take control over the sustaining
cartel mechanism because of reasons as follows.
First, there are only 15 large traders who have joined to the Association. They have a quite
powerful bargaining power to offset the ceiling price of desired horticulture products
independently so that the mafia selendang actors cannot fluctuate the prices irresponsibly. This
means that the Association perhaps may prevent the suppliers from being the losers of such cartel
mechanism in particular, but it cannot protect suppliers’ interests to get involved in reshaping
fairer trade since its members obtain and share the reasonable market prices of certain products
exclusively while the suppliers have no access to such market prices information. As a result, the
Association members still can sustain their own cartel practices inside the organisation where such
circumstance could have not improved suppliers’ bargaining power yet.
Second, the suppliers are reluctant to search for alternative market destination. They
greatly depend on the existing marketing system instead of looking for the other potential markets
abroad. It is found that suppliers’ vulnerability to voice their own interests is related to their
internal capacity to transport their products financially and technically, the great number of
competitors of similar products both outside and inside the region, the lack of information about
potential markets disseminated to local suppliers, and the commonly suppliers’ attitude and
behaviour to submit their production and marketing processes to the predetermined norms and
mechanisms, i.e. the existing patronage and cartel system.
Third, there are neither government policies and regulations nor particular monitoring and
control mechanisms to correct such a market distortion. The government through STA Jetis
Management indeed has been undertaking routine inspection monthly over the prevailing market
prices of horticulture products, but it is only limited to prices recording. There are less government
initiatives to stabilise market prices if they go up and down dramatically. Furthermore, regarding
the structure of Association the government cannot steer up and intervene further on institution’s
decision making process. Thus, the government role is constrained in reshaping the existing
market system of horticulture products in Bandungan Region.
The type II individual leadership marketing network is similar to type I but the Association
is overridden by a person who has a great authority inside the organisation, namely Mr. Farkhan.
He is the member of Association who represents GAPOKTAN Prima Tani, Prima Lestari, and
previously pioneered in the establishment of Association. His position is influential in determining
how the Association running businesses and due to his personal marketing network he can also
influence the shaping of horticulture’s market prices. He enjoys his position to get suppliers’
bargaining power improved by purchasing their products and selling them directly to potential
buyers outside the region. He voluntarily initiates to help local suppliers from being marginalised
from the practices of mafia selendang. However, his action also demonstrates his dissatisfaction
on Association performance in proposing more reasonable prices of horticulture products.

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 STA JETIS

no link
no link

FARMERS-TRADERS
INDIVIDUAL GROUPS OF DIRECT
ASSOCIATION
FARMERS FARMERS BUYERS
Krido Roso Manunggal

TYPE I. INFORMAL COLLECTIVE ACTION

FARMERS-TRADERS
ASSOCIATION
Krido Roso Manunggal
STA JETIS
indirect link
no link
no link
INDIVIDUAL LEADERSHIP
INDIVIDUAL GROUPS OF DIRECT
MARKETING NETWORK
FARMERS FARMERS BUYERS
(eg. Mr. Farkhan’s links)

TYPE II. INDIVIDUAL LEADERSHIP MARKETING NETWORK

STA JETIS

no link
no link

CLOSED INDIVIDUAL
INDIVIDUAL GROUPS OF DIRECT
MARKETING NETWORK
FARMERS FARMERS BUYERS
(eg. Mr. Indro’s links)

TYPE III. CLOSED INDIVIDUAL MARKETING NETWORK

STA JETIS

no link no link

INDIVIDUAL CLOSED GROUP OF FARMERS DIRECT

FARMERS (eg. GAPOKTAN Bina Remaja) BUYERS

TYPE IV. CLOSED COLLECTIVE ACTION

Figure 6. Four Alternative Types of Agriculture Commodities Marketing in Bandungan Region

Source: Direct observation (2010)

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 Even though type II seems to provide an alternative to horticulture commodities marketing
chain it cannot cover entire interests of local suppliers. The number of products that can be
collected and distributed through this individual network is very limited mainly because it depends
on individual capacity to purchase their products. Moreover, the working of such network mostly
relies on trust relationships and social closeness between the traders and suppliers. Hence, the
network sustainability merely depends on individual voluntary actions to promote local products.
The type III closed individual marketing network is similar to type II but it only serves for a
small group of local farmers. This kind of network works on very limited coverage area of
horticulture producers where it exists independently separated from the influences of Association
and traders. The network is based on individual leadership of Mr. Indro who obtains his current
authority due to his formal position as Kepala Dusun (Hamlet Chief) and the Head of GAPOKTAN
Sido Makmur. In addition, he also has direct access to Semarang Regency Legislative Assembly as
well as Semarang Regency Government Agencies through which he can build and maintain
exclusive marketing links with potential buyers outside Bandungan Region. Principally, he is only
concerned with the social welfare of 15 members of GAPOKTAN Sido Makmur based on socially
primordial ties but sometimes he is also welcoming those non-member farmers who need to his
support either for products marketing or other horticulture development issues.
Regarding this type it is clear that the mixture of individual leadership, social relationship,
and access to key decision makers is beneficial to fostering particular marketing channels in order
to improve the living standard of local farmers. In this case we can see how a prominent leader in
society can take an advantage from authoritative influences of bureaucratic systems at both grass
root level and higher decision making level for the sake of particular group’s interests. However,
such individual institutionalisation is inadequate to generate local economic development since it
is likely to augment higher dependencies of local stakeholders to personal figure. This might be
worsening if the local stakeholders mostly surrender their livelihood improvements to the hands
of this leader therefore they will become more vulnerable to deal with market uncertainties.
The type IV closed collective action is similar to type III but it more focuses on alternating
horticulture commodities to higher value added commodities. This network is also built based on
individual leadership of the head of certain group of farmers to broaden marketing opportunities
of local products. In this case the local farmers are introduced to alternate their products instead
of depending solely on horticulture commodities. They are asked to divide off some of their
farmlands to cultivate coffee beans by the Head of GAPOKTAN Bina Remaja in Banyukuning Village
since it offers better economic viability such as more durable products, quick yield harvesting,
easier production process, and higher income. Typically, the marketing network built in this type
covers perhaps the broadest range of marketing area compared to other networks in Bandungan
Region as the marketing of local coffee products involves direct exporters outside the region.
Despite the virtues of type IV marketing network, such alternative is currently developed as
a pilot project in one village only so that its suitability to be adapted as a local strategy in fostering
local products as well as farmers’ livelihood still require some time to be implemented widely. This
type seems promising in improving the bargaining position of local farmers against the practices of
mafia selendang, but there is a big challenge in shifting farmers’ mindset to diversify their

12
products. Traditionally, local farmers are used to growing horticulture products as their main jobs
and often alternating to other commodities such as rice, corn, and cassava. Such practices are
inherited from their predecessors over generations. Therefore, the local farmers tend to continue
such a cultural heritage in part of their obedience to local norms and traditions in spite of their
reluctance to undertake product diversification in order to broaden their opportunity to income
generation.
The existence of these four alternatives of marketing systems along with the prevailing
mafia selendang practices has demonstrated the richness of social capital networking in
Bandungan Region. It is obvious that all of these systems underpinned by the structure and flows
of social relations among local stakeholders. The pursuit to economic benefits therefore is
undertaken by overriding the existing social order for the sake of either individual or group’s
interests in particular. In this context, when the government fails to accomplish its intermediate
functions in bridging market and society as a whole, as exemplified by the malfunctioning of STA
Jetis Management, hence the (informal) prominent leaders who have a great power and relations
in society will take a lead to reshape and control the marketing systems of local horticulture
products. Their influences are much more powerful than local government agencies in decision
making process at grass root level. However, when the government withdraws its role in
controlling the existing horticulture trade in Bandungan Region, this maneuver does not work to
reduce the effects of mafia selendang practices. As shown in the case of Association building in
which the role of government is limited to undertake advisory stuff and the director board is
consisted of the representatives of local farmers and traders, the greater the decision making
power is held by nongovernment actors does not guarantee the more effective control over the
existing marketing system. Instead, the malfunctioning of Association creates greater opportunity
to sustain cartel mechanism.
Therefore, the presence of these alternatives perhaps may challenge the importance of
collective action in reframing the building of suitable institutional foundation for supporting the
agriculture-based regionalisation policy in Bandungan Region. Dealing with the hegemony of cartel
mechanism in horticulture trade in the region, initial efforts emphasising on the role of collective
action of groups are likely to fail against such a cartel organisation. As indicated by the emergence
of these alternatives, mostly they are underpinned by individual leadership instead of depending
on the working of collective actions. The leaders or initiators will commonly work alone to foster
the development of certain horticulture products as well as the wealth of farmers who have
already joined to their networks. Mostly these networks are built and sustained based on social
closeness and common interests so that they may work for fragmenting the sphere of influences
of large traders (juragans) over local suppliers. However, in general such individual-led
institutionalisation still has insufficient power to overcome mafia selendang practices. Instead,
they may create an exclusive institution rather than an opposing group to compete against the
existing cartel organisation.

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IV. SOME CHALLENGES TO THE CREATION OF SUITABLE INSTITUTIONAL FRAMEWORK
Regarding the case of Bandungan Region the role of local institutions is much more important than
formal institutions in determining the common practices of agriculture-based regionalisation
policy. Even though this paper discloses the aspects of marketing mechanism at most it shows
clearly how socially-constructed institutions are dominant in shaping the rules of the game as well
as the organisations that may prevail in the region. The border of regionalisation here thus cannot
be constrained in terms of administrative jurisdictions but more properly the outreach of social
networking supported by the key players in the region (Keating, 2001; Richardson and Jensen,
2003; Dulupçu, 2005). The large traders (juragans) and the informal leaders or initiators with their
own groups are the key players who determine the effectiveness of regionalisation policy
implementation. In this sense the range of social networking thus represents the range of
regionalisation boundaries. As a result, the borders of regionalisation area may expand and shrink
flexibly depending on the continuation of social networking between these key players with other
stakeholders, particularly their potential buyers. In addition, the size of group members in
respective networks sometimes is less important in confining such a sphere of influences of
regionalisation area. As demonstrated in type IV network, the social and economic connectedness
does matter rather than physical distance. In this case even though the group size is relatively
smaller than other marketing networks in Bandungan Region it can sell local products to
international market. This example provides a contrast between the hegemony of cartel
organisation whose marketing distance is limited to regional/national levels only.
However, empowering the role of local institutions in order to support the implementation
of agriculture-based regionalisation policy actually is not an easy task to accomplish. Apart from
the problem of policy consistency as discussed earlier in Section 2, there is a gap between policy
makers and policy implementers and targeted groups. Since the beginning the policy making does
not involve the contribution of policy implementers and targeted groups adequately. The policy is
created and introduced by the government but when the policy implementation cannot meet its
goals and objectives – in this case the malfunctioning of STA Jetis Management as the only formal
government institution to facilitate the exchange of local horticulture products – then the
government calls for the involvement of local institutions to overcome policy failures as shown by
the creation of Association Krido Roso Manunggal. This may lead to a tricky circumstance since the
government seems to lose off the monitoring and control over policy implementation and give
away this task to the hands of Association. In fact, the Association board of director and its
members of farmers and traders have never got involved in the policy making so that their
objectives and interests may differ from the government ones. As a result, once the Association is
unable to perform its functions there is no initial corrections from the government to improve its
performance. Instead, the Association is misused as a vehicle either for a group of large traders –
the case of type I with 15 large traders – or individuals – the case of type II with Mr. Farkhan
initiatives – who have been Association members already to achieve their own agenda regardless
of the fulfillment of initial policy goals and objectives. Again, in this situation the government does
not take any actions to correct such authority misuse. As a result, the existence of Association is

14
elusive in contributing to overcome mafia selendang practices. In other words, there is no big
difference obtained before and after Association establishment.
The third challenge is related to the frictions between formal and informal institutional
leaderships. Referring to the case of Bandungan Region, it is obvious that the role of informal
leaders is dominant in determining how local institutions work on horticulture trade mechanism.
Their role is also influential to succeeding whether policy implementation completed or not.
Hence, there might be conflicts of interests between government agencies and local key players
mainly because of the differences of decision making milieu between bureaucratic system and
socially-constructed setting. Some issues related to such circumstance are coordination,
responsiveness, accountability, and reliability (North, 1990; Morrison, 2006). In bureaucratic
system coordinating functions are associated with formal positions of officials within public
organisations regardless of individual capabilities to handle particular duties professionally. In
contrast, informal leaders getting their positions with regard to the compliance with local norms
and traditions and their contributions to society. The speed of responsiveness between formal and
informal institutions is also different. The formal leadership tends to comply with a set of
predetermined regulations and procedures in responding particular issues and takes a rigid
coordination based on merit-and-sanction scheme in decision making process. This differs from
informal leadership which responds issues based on voluntary actions and power relations within
social structure. The degree of accountability in formal institutions is more complex than informal
institutions as it refers to certain standards of benchmarking for public organisation performance
where government leaders are not only responsible to organisation but society as well. Meantime,
the informal leaders are mostly responsible to the groups or communities where they are being
attached to. Lastly, as the resultant of previous issues hence the formal leaders are usually less
reliable than informal leaders to tackle the changing environment occurred during policy
implementation. This relates to their internal capacity to resources mobilisation and incentives for
undertaking particular actions.
With regard to these challenges the building of suitable institutional framework in
Bandungan Region should pay more attention to the common practices of local norms and
traditions. Creating synergistic co-operation between formal and informal institutions thus should
take social setting into account. The incorporation of the elements of social capital such as trust,
shared norms and values, and reciprocity (Lyon, 2000; Middleton, Murie, and Groves, 2005) into
formal policy making process is required in order to overcome mafia selendang practices. As long
as the government keeps the distance with policy implementers and targeted groups during entire
policy process, there remains great resistance from local stakeholders to comply with policy
setting. Therefore, both formal and informal leaders should work together in designing more
appropriate policy and institutional framework to improve the existing horticulture products trade
mechanism and local farmers’ bargaining power as well.

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V. CONCLUSION
In the case of Bandungan Region, the role of local institutions in promoting agriculture-based
regionalisation policy is vague following its inconsistency to improve the bargaining positions of
local farmers. This has contributed to the creation of somewhat chaotic alternative institutional
milieu to overcome the long-lasting cartel mechanism in horticulture products trade. There is
some evidence to explain such a hazy contribution of local institutions despite their dominating
role in the region compared to formal institution. First, the large traders (juragans) who control
the marketing network of horticulture products have been supporting structural marginalisation of
local suppliers. Actually the big portion of horticulture stocks exchanged in Bandungan Region is
supplied from other regions due to the low productivity of local farmers to produce required
commodities. Such circumstance is exploited by juragans to force down the prices of local
products. Thus, even though most juragans are local inhabitants they have already encouraged
the external suppliers indirectly to compete against local suppliers. Second, the prevailing local
institutions tend to compromise with the practices of mafia selendang. Some of key players in
Bandungan Region indeed have created alternatives for marketing local products outside the
region, but still it cannot disrupt the hegemony of cartel mechanism. Perhaps the core problem
rests on the failures of existing social order in preventing the overriding of social norms and
traditions by certain parties to achieve their own goals regardless of the pursuit of social welfare.
In this sense, the economic benefits have been regarded at most rather than social equity in order
to achieve better living standards. In other words, market economy has eroded the functioning of
bonding social capital to deal with unfavoured situation. Therefore, local customs and social ties
have become meaningless in reshaping the betterment of local livelihood.

ACKNOWLEDGEMENT
The author is heavily indebted to Ms. Laila Rahmah Shiamy for her genuine ideas, perspectives,
and great enthusiasm in supporting the poor and the marginalised groups of society, the basic
ideas that underpin the paper writing. She has made some time and long-lasting concerns on
some issues related to sociocultural inequality, empowerment, and gender mainstreaming in
development from which the author get inspired so much to do this research work. A deep and
lovely gratitude has been given to her contribution in enriching this paper. The author would also
like to thank to Ms. Indah Saptiningrum and Ms. Septiyati Ganjarsari who have helped in data
collection and interpretation. Their inputs during a series of discussions are useful to reshape
author’s understandings on the research issues. Last but not least, the author would also like to
gratitude Dr. Joesron Alie Syahbana and Mr. Jawoto Sih Setyono as the executive chairs in Master
Program in Regional and City Development at Diponegoro University for providing initial research
funding. Without their assistance this paper might not be available to read in front of you.

16
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