A Proposal for the Small Grants Initiative, Beahrs Environmental Leadership Program, 2003

Submitted by: Ade Cahyat

Project title: Supporting the Initiative of Rattan Farmers and Craft-Makers Association in East Kalimantan Through Providing Business Development Assistance

Submitted by: Yayasan Sistem Hutan Kerakyatan Kaltim (SHK)

Submitted to: SGI Beahrs ELP, University of California Berkeley & NRMP Jakarta

Project period: February to July 2003

Problem Statement/Justification

Forest and People in Kalimantan

The tropical rainforests of Indonesian Borneo (Kalimantan) are characterised by extremely high species richness. The wealth in terms of biodiversity is mirrored in the abundance of Non-Timber Forest Products (NTFPs) collected from the island's forests by both women and men. Among the NTFPs of Kalimantan, rattan stands out as of particular importance - both in terms of subsistence value and potential for generating cash income at the village level.

Rattan Resources

Rattans are climbing palms (sub-family Calamoideae) that grow throughout the Southeast Asian region, forming a characteristic component of many forest types. The greatest concentration of rattan species occurs in the island of Borneo and in Peninsular Malaysia. On Borneo alone 160 different species have been identified (Dransfield, pers. comm.).

Indonesia as a whole is by far the largest producer of rattan in the world (about 80% of total), while the canes are primarily collected from the forests of Kalimantan, Sulawesi, Sumatra and West Papua (Irian Jaya). Rattan is usually planted mixed with a large variety of tree species in so-called 'simpukng[1]' or old fallow land. Although cultivated rattan accounts for less than 15 % of total Indonesian commercial production, the complex cultivation system practised by local communities in Kalimantan has been recognised by international experts as representing an outstanding example of sustainable forest management, which is highly biodiversity preserving (see Fried, 1995; Weinstock, 1983).

New Perspectives and Threats

Since the start of the 'Reformasi era' in 1998 simultaneously occurring contrary trends can be perceived in relation to the fate of Indonesia's forests in general and to the prospects of future sustainable rattan harvesting in particular:

1. An open debate has become possible and different approaches towards rural economic development can be freely discussed by all stakeholders.

2. New threats have become manifest:

- A process of decentralisation and transfer of authority in relation to natural resources is under way. (Officially, in effect as from January 1, 2001). The process seems to be ill-prepared, as the capacity to deal with relevant issues appears to be weak at the lower government echelons and as current responsibilities of different players seems to be ill-defined or poorly understood. Meanwhile, local authorities are tempted to use short-term opportunities to generate revenue.

- The effect of increased poverty, ideological brainwash and the weakening of traditional village institutions, has led to a situation in which communities are also more easily tempted to make use of short-term opportunities. These opportunities often imply a negative effect on the environment, as for instance illegal logging is currently rampant.

The Business Opportunity

At the moment, most environmentalist groups are aware that natural conservation can only succeed if the people support it. Therefore, we now believe that an incentive system is necessary in order to promote conservation. In today’s commercialisation era, we believe that the most important incentive for the people is the opportunity to earn incomes. Rattan is one natural product with a high potential to provide incentives for the people to sustain their natural resources.

The global trade (domestic and export) and subsistence value of rattan and its products is estimated at over US$ 7 billion per annum (Sastry, 2000). Domestic trade and subsistence use of rattan create an estimated US$ 3 billion per annum in direct benefits, and another US$ 4 billion are generated through global exports. Europe is a major player in the rattan trade, accounting for about one third of world trade.

The Initiative of The Farmers and Craft-Makers Group in Kalimantan

SHK has been working with the people in the Kedang Pahu watershed, East Kalimantan since 1999. We started by facilitating the understanding of the people of their internal situation and the need for institutional strengthening. There are about 35 thousand people living in 57 villages which, in total comprise approximately 600 thousand hectares of land, cleared and/or forested. Rattan was the main source of income for the area before the government allowed them to harvest the timber from the forest. About 60 to 80% of the people are involved in rattan cultivation and rattan handicraft processing. The rattan programme is the programme of SHK and has been in operation since the end of 1999. SHK helps the people to understand the details (strength, weaknesses, opportunity and threats) of rattan production and marketing. In March 2002, the farmers and craft-makers groups decided to establish an association named “Perkumpulan Petani dan Pengrajin Rotan” (P3R)- Rattan Farmers and Craft-Makers Association.

Project Activities

Strategic Business Planning

Strategic Business Planning is the key to developing a business so that it runs effectively and efficiently. To strengthen the idea of Business Development in the P3R, we believe that the P3R needs assistance from professional consultants in strategic business planning. There are some steps that maybe needed in the process, such as:

- Reviewing the existing data and information which are necessary to support the planning. The data and information are those related to socio economic, resources area, market, supply chain, etc.

- Pre-Planning to identify and determine the needs in planning workshop preparation

- Planning workshop

- Review the existing Business Plan of P3R

- Business Plan Re-Writing

- Identify the needs for further survey and research

- Elaborate the current research & survey results.

- Process review and Evaluation

The representative of the P3R will be actively involved, particularly in step of planning workshop and process review and evaluation. The planning workshop will be held in one village in Kedang Pahu area.

Logistic & Supply Chain Management Planning

The main strength of the P3R is that they cultivate and manage the rattan resources sustainably. There are only 3 groups of people who have a tradition in rattan cultivation: East and Central Kalimantan in Indonesia and Yunan in China. The demand for rattan products has been increasing annually. On theother hand, however, the furniture manufacturing industries in Indonesia continually suffer from a lack of raw material. Moreover, multinational furniture retailers such as IKEA encounter difficulties in buying rattan furniture made from the certified rattan.

The weaknesses of the P3R is its dependency on the furniture manufacturing industries mainly based in Java, about thousands kilometres from the area. Moreover, there are not sufficient transportation facilities both within the area and from the area to outside. The lack sufficient energy sources and the shortage of skilled labour are also significant obstacles preventing P3R from producing additional value from the rattan.

The main demand from the customers is to get the good quality product and services and low price. Based on the internal and external analysis and the demand from the customers, we have to set up our logistic and supply chain management in order to have effectiveness and efficiency in the whole chain of the system.

Organisation Development

Good planning alone will accomplish nothing unless it is supported by an effective organisation. As the company is in the start-up phase, P3R must determine the best structure and arrangement of its organisation. A small, effective efficient team, focused on the objectives is our ideal.

Another concern is how to adequately represent all stakeholders in the business entity. There are various stakeholders involved in the development of the rattan business,such as individual farmers and craft-makers, P3R, SHK, individual investors and donors.

Collaboration Statement

SHK will collaborate with the International Business Development Program, at the Haas School of Business, University of California at Berkeley. The programme was started12 years ago. Each year the programme assigns teams of student consultants to clients with projects throughout the world. The students already have an average of 5-6 years of work experience beyond their undergraduate degrees. They have backgrounds in engineering, finance, marketing, sales, etc. Their clients range from large multinational companies to one or two person ventures. They have worked with Ford, Citibank, Bechtel, Lucent, Hewlett-Packard and dozens of other readily recognized companies. They have worked in many countries on most continents on various kinds of projects such as feasibility studies, market development strategies, business plan writing, etc. In total they have worked for more than 60 clients in approximately 40 different countries

SHK has no staff with backgrounds or experience in business development. Our staff come from forestry and technical areas. Therefore, we believe that the collaboration with the International Business Development Program, at the Haas School of Business, University of California at Berkeley, will fill gaps in expertise.

Further details about this program can be found at:

http://www.haas.berkeley.edu/groups/HaasGlobal/IBDindex.htm

Also, the Director of the Program, Sebastian Teunissen, can be contacted at teunisse@haas.berkeley.edu for additional information. He will be providing a letter of support from his center, The Clausen Center for International Business & Policy, indicating their intention to collaborate with our programme.

Connection with the Summer Course of BELP

There are several relevant learning/skills from the summer course with the idea of the proposed project. Below are the relevant learning points

2^nd day, interdisciplinary panel

- Poverty and Environmental Degradation are the two important factors which are influence one to each other;

3^rd day, trip to Salinas.

- Market will always depend on demand and supply. Environmentally and Social Sound Products are challenged to compete in the market. Government policy will not much more influence the market.

8^th to 11^th days, Community And Natural Resources Management & Trip to Trinity

- Value addition activities can decrease the Pressure to the Forest;

- Dealing in Market is very important for Small Scale Industry. Bigger more efficient than smaller. Access to credit will increase their position in competition;

- Globalization could provide opportunity to the farmers to establish the alliance not only within countries, but also for all of the world;

- Cooperation is very important for people who manage the communal property. If no cooperation means no equilibrium. And all of people try to take as much as they can. That’s tragedy of the common.

12^th days, Population, Poverty and Environment & Video Session

- Because of poor, people in some countries may lack of access to appropriate technology, capital and resources. It will increase the population growth and environmental degradation. Children are the labour for family.

18^th & 19^th days, Entrepreneurship, Innovation and Technology & field visit to Mendel Biotechnology

- Innovation could be technical or institutional. Sometimes new innovation (institution and technical) improve both environmental quality and economic well being;

- Establish the business should be growing by gradually, no significant change in short time- dangerous.

Expected Result and Outputs

- The Improved Business Plan

- The logistic and supply chain management plan

- Organisation structure/arrangement of P3R

Beside those results & outputs, this project will help me to develop the manual of strategic business plan and business plan writing for the NGOs and small scale entrepreneurs.

Timeline and Duration

What	Where	When
Reviewing the existing data and information which are necessary to support the planning. The data and information are the one related to socio economic, resources area, market, supply chain, etc	Samarinda & Berkeley by e-mail, fax & telephone	February-April 03
Berkeley team fly from San Francisco to Balikpapan (not necessary to passing through Jakarta). From Balikpapan continue to Samarinda by car (2 hours)	Samarinda	May 24
Pre-Planning to identify and determine the needs in planning workshop	Samarinda
Planning workshop preparation	Samarinda
Travel to Kedang Pahu by combination boat and car, continue with area orientation
Planning workshop (business strategic plan, logistic and supply management plan & organisation development)	Kedang Pahu
Review the existing Business Plan of P3R	Kedang Pahu
Identify the needs for further survey and research	Kedang Pahu
Conduct necessary survey/research (if possible)
Business Plan Re-Writing	Samarinda
Process review , evaluation and follow-up planning	Samarinda
Berkeley team back home		June 14
Finishing the business plan writing	Samarinda & Berkeley	April-June
Report writing	Samarinda	July

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[1] Simpukng: in the Benuaq language refers to secondary forests, in which enrichment planting has taken place of different species of trees and other plants.