why small-scale tuna fishers in indonesia enter into contracts

Life Impact | The University of Adelaide

Why small-scale tuna fishers in Indonesia enter into contracts: the influence of transaction costs, risk and trust (study case in East Java, Indonesia)

Dias Satria

Life Impact | The University of AdelaideSlide 2

Introduction

• The development of the small-scale fishing economies requires an improvement of the market institution to ensure the reduction of the transaction costs.

• The development of the market institution in artisan Tuna’s fishing economies is one of the important parts in connecting smallholders from the remotes area to the global markets.

• These improvements at the end will support local economic development that can improve artisan fisher’s welfare.


Transaction Costs Economics (TCE) model posits that a governance structure is chosen in order to economize on transaction costs. (Williamson, 1995)

The increased use of contract arrangements in small-scale Tuna Fishing Economies between fishers and middlemen.1. Reduce price risk (Boehlje and Ray, 1999).2. Risk management (Hayenga et al. 2000)3. Access to capital, so they can invest in productive assets (Key

and McBride, 2003).4. Get a wider market access (Muth, 2007).


Transaction cost economics framework

Governance structure

choice

Asset and human

specificity

Uncertainty

Frequency

Life Impact | The University of AdelaideSlide 5 (Chilles and McMackin, 1996; Khoi Son 2011)

Risks and trust in Transaction cost economics framework


Fish marketing arrangements and organization Transaction characteristics in SFE (Small-scale fishing economies) Transaction costs in SFE Role and services provided by intermediaries (Middlemen) in SFE (Platteau &

Nugent 1992); (Lem et al. 2004); (Khoi & Son 2011); (Carnaje 2007) and (Merlijn 1989).

The importance of social ties and relation norms (trust) in contractual arrangements (B. 1975; Batt 2003; Batt & Rexha 1999; Doney & Cannon 1997; Hoffler 2006; Moorman, Deshpande & Zaltman 1993).

Small-scale tuna fishing economies


Research Gap

Transaction Cost Economics

Risks behavior

Trusts

small-scale Tuna

fishing economies


Transaction Characteristics

• Asset and human specificity

• Uncertainty• Frequency• Others

Marketing arrangements

• Spot markets (auction markets)

• Hybrid (contract)• Vertical

integration

Risks behavior

Trust

Transaction costs

Model development


Objectives

To examine the importance of risks behavior, trust and the transaction characteristics (asset and human specificity, frequency and uncertainty) in triggering small-scale tuna fishers to engage in a contract with intermediaries.

1. To investigate the transaction characteristics factors (asset & human specificity, frequency and uncertainty) influencing small-scale fishers to engage a contract with the intermediary.

2. To examine the importance of risk behavior in the contract relationship between small-scale fishers and the intermediary.

3. To analyze the role of trust in the contract fishing in small-scale tuna fishing economies.


Methods

1. Introduction

2. Questionnaire development

3. Operationalization and measurement variables

4. Selection of the samples

5. Data analysis


Result and discussion


Demographic of tuna fishers in East Java

Slide 12


Ethnicity

Jawa

Madura

Bugis

Bajo

Flores

Ambon

Lombok

Others

0 10 20 30 40 50 60 70 80

23.57

0.38

68.44

0.38

0.76

0.76

3.04

1.13

Slide 13


Transaction costs, risks and trust in artisan Tuna fishing economies


Demographic profile • Age• Ethnic• Education • Andon

Transaction Characteristics • Asset specificity• Human specificity• Uncertainty • Frequency

Transaction costs • Searching costs• Negotiation • Monitoring

Risks behavior

Trusts

Probit model


Policy options

• Development of market institutions especially in functioning the auctions market system (Market access to regional and international traders)

• The importance of legal frameworks and enforcement in market arrangements to reduce risks.

• Investment policy in regards to the attraction of the foreign processors close to the port. (cut the transaction costs)


Acknowledgment

Ministry of Education, Indonesia School of agriculture, food and wine, The University of Adelaide Brawijaya university, Malang, Indonesia Dr Elton Li (Principal supervisor) Dr Amos Gyau (External supervisor) A/Prof. Johan Bruwer (Prev. co. supervisor) Mark K. Brindal (Independent supervisor)


Thank you

why small-scale tuna fishers in indonesia enter into contracts

Economy & Finance

life impact

university of adelaideslide

contract fishing

smallscale fishers

influence of transaction

smallscale tuna fishers

role of trust

importance of risks