E-Commerce As An Alternative To Promote Inclusive And Integrated Global Value Chain

Study case: Bulog and Market Operation

The price of Sembako (Nine kind of basic need) has risen steadily from year to year. This problem is caused by the presence of cukong (Food Mafia in English) since long time ago. Their presence has led to the inefficiency of sembako distribution to the consumers, where they prolong this distribution from the village to the town, in order to generate profit. This has hampered the government’s effort in stabilizing the price. It makes those who are poor become vulnerable with this issue.

In order to solve this problem, I see that there are two main problems that need to be concerned.

First, there is information discrepancy between government, farmers and those mafias on distributing the food from the farmers to the consumers. These mafias have figured out the best way to prolong the distribution system from the village to town through their own cycle. This cycle is hardly to be tracked by the government and farmers, which cause these both parties, cannot access this cycle to efficiently distribute their products. 

This problem is compounded with the inefficiency of the government’s bureaucracy and corruption, which has made the government remain powerless in handling this issue. Not only that, this cycle has made the cukong become richer and the farmers become poorer, because they are unable to sell their product with a reasonable price, since their price are forced to be low by these mafias.

Second, the government keeps using a classic way to solve the problem through Operasi Pasar (Market Operation). This operation is being run by selling the cheap products of Sembako to the market, in order to stabilize the price, especially when the price rises significantly. However, this solution has never solved until to its root causes, 

since this market has been monopolized by cukong’s cycle –even the seller can play the price of rice, by saving it until it is the right time to generate profit. This fact has saddened us, when Bulog –as the representative of the government cannot handle the power than those cukongs. Still, the mafias keep richer and cunning; the farmers still remain poor and suppressed.

This problem remains unsolved, when the urbanization rate increases every year. According to Price Waterhouse Copper in 2014, the urbanization population rate in Indonesia increases 51.4%, which are the second highest after Malaysia with 73.4% rate in ASEAN.  This has drained the human resources from the village to the town, when human resources in the villages become scarce, and the city is overflowed by this movement. This has deepen the discrepancy between the city and town.  If this phenomenon continues, thus who will develop the village?

The answer of this question is the villagers. The root cause of this problem is laid on the inability of those villagers to survive in the village, since their life standard is depended by those cukong. This made the income from the villager’s remains low, when the price of goods and services rise every year. This is also the reason for them to move to the town.

What the government needs to do right now is creating another track for farmers to sell their products to the consumers. The answer to this problem is e-commerce.

According to Oxford dictionaries, e-commerce is commercial transactions conducted electronically on the internet. By using internet, it will reduce time and distance limit, which enables all party to save their time. Usually, e-commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business. Almost any product or service can be offered via e-commerce, from books and music to financial services and plane tickets.  This has made producers and consumers easier to sell their products.

I propose that the similar concept should be applied by Bulog. They should make one single website to enable the farmers to sell their products digitally. This website will answer two main problems that have been explained before. In term of information discrepancy, the price of sembako can be sold by farmers directly to the buyers, without going through the cukong’s cycle. Not only that, this will bring forth another solution to solve the problem until its root causes, since it bridges the gap between producers and consumers, by shorten the cycle. The success’s story of executing this program is high, since the government has the authority to accommodate the farmers and stabilize the price. Not only that, as Indonesia is one of the biggest users of internet, e-commerce can help the farmers to sell their products nationally and internationally, which will triggers the villagers to stay in the village.

In order to execute this policy, there are several things that need to be prepared by government.

First, the government needs to build internet infrastructure in the village. As village does not have equal facility with the city, the government can work together with private sectors through private-public partnership with Google, Facebook and other corporations, since it is a promising opportunity to expand their business to Indonesia. Indonesia can take a benefit on this, by distributing the infrastructure equally to the village. This will fasten the economic development there there through e-commerce.

Second, the government needs to provide incentives for those farmers who are using internet to sell their products by Bulog’s e-commerce. The government can provide laptop, hand phone and other facilities that are needed for e-commerce. This should be done simultaneously with the socialization from the government in using this feature, in order to help them to use this feature effectively. Not only that, the government can also provide credit to the farmers that have been done this year, in triggering the market from the village.

I believe that e-commerce can be one of the best methods in fixing Global Value Chains (GVC) in the world. In order to fix GVC, we need to solve the problem from grass-root level, because producers –which in this case is the farmers are the center of gravity of fixing GVC. This will help the government to build the national economy through villages. As the economy in the village grows, it will create healthy competitions among the farmers, which will reduce the unemployment rate in the village. This will relieve the burden from the town to provide jobs to the newcomers from village. If our country has a capacity to provide a good quality of agriculture products, this will increase our exports rate, which will distribute our agriculture products to the needed countries.

Fixing GVCs can be only achieved, if every country can manage the National Value Chains (NVC) within their own country.

 

Written by: Kevin Tan, the Founder and President of Indonesia Berbicara.