Sea Farming and Its Contribution to Poverty Alleviation: An Empirical Study from Indonesia M.Sc. Thesis “Sustainable International Agriculture – International Agribusiness and Rural Development Economics” Faculty of Agricultural Sciences Georg-August-University of Göttingen, Germany by Evita Fathia Luthfina Matrikel: 21168716 Supervisors: Prof. Dr. Matin Qaim Prof. Gabriele Hörstgen-Schwark Dr. Ir. Suharno, M.Adev Ir. Narni Farmayanti, M.Sc Accomplished at the Department of Agricultural Economics and Rural Development 21 January 2013 Acknowledgement First and foremost, I am deeply grateful to Allah SWT for given me tremendous blessing and protection to me. My deepest appreciation to my advisers, Prof. Dr. Matin Qaim and Prof. Dr. Gabriele Hörstgen-Schwark for their critical and valuable inputs, guidance, and encouragement through my thesis writing stage. My appreciations also go to Dr. Ir. Suharno, M.Adev and Ir. Narni Farmayanti, M.Sc for their support and suggestions that are helpful for improving this thesis. I would like also to acknowledge to many individuals who have helped me through the process although it does not make them responsible for the final text. Akhmad Solihin, for his insight on the basic ideas of this thesis, support during field visit, and providing literature from CCMRS. Ahmad Haerudin and enumerators, who helped me in the field. Dr. Enoch Kikulwe, for input in the preparation of proposals and questionnaires. Muhammad Saad Khan, for proofreading my thesis. Simon Kimenju and his wife, for teaching me on operating STATA from the very beginning. Francisco Mourino, for input of the first two chapters. Luis Fernando Terrones, for teaching me the basic idea of probit and logit. Edwine Setia Purnama, for creating Panggang Island map. Deniey Purwanto, for last minute and valuable discussions. Respondents, who were willing to share their time for me. Sincere thanks also to my friends who always supported me. Ami Sukma Utami, Anisa Dwi Utami and Ira Ratna Sari whom to let me stay at their place. Essy Harnelly, Cila Apriande, Ratna Sogian Siwang and “Roko Jaya” family, for their prayers and assistances during my study in Germany. Surya Farid for his advice and support. Friends in PPI Göttingen and Sustainable International Agriculture programs. Ministry of Education and Culture – Republic of Indonesia, which sponsored me with a full year scholarship in Germany. Finaly, I would like to pay thanks to my parents, Bapa and Mamah; my husband and son, Dhonny and Neo; my brother and sister, Reza and Dede for their tireless love, support, and always knew I could do this. To them I dedicate this study. i Abstract This study aims to examine the factors influencing participation of sea farming project and impacts on household income and poverty in Panggang Island, Kepulauan Seribu, Indonesia. The benefits and constraints of the project are also discussed. The probit regression shows that education, occupation, household size, organization member, mariculture experience, and mobile phone ownership are significant factor influencing household decision to participate in the project. The OLS regression shows that organization member, mariculture experience, and mobile phone ownership has positive and significant influence on household income. The findings show that sea farming has positive impact on household income but it needs a lot of improvement to be able to affect poverty on a larger scale. Keywords: sea farming, aquaculture, mariculture, poverty, Panggang Island ii Table of Contents Acknowledgement i Abstract ii Table of Contents iii List of Tables v List of Figures vi List of Appendices vii List of Abbreviations viii 1. Introduction 1 1.1 Background 1 1.2 Research Questions and Objectives 4 1.3 Organization of the Study 5 2. Literature Review 6 2.1 Definition, Types, Dimensions, and Measurement of Poverty 6 2.2 Aquaculture and Poverty Alleviation 7 2.3 Factors that Determine Individual Participation in the Project 10 3. Methodology 13 3.1 Study Site, Data, and Survey Design 13 3.2 Data Analysis 15 3.2.1 Model Estimation for Factors that Determine Individual Participation in Sea Farming 15 3.2.2 Model Estimation for Sea Farming Impacts on Household Income and Poverty 19 3.3 Limitations 21 4. Results and Discussion 22 4.1 Grouper Culture Activity in Panggang Island 22 4.2 Sea Farming in Panggang Island 24 4.2.1 The Basic Concepts 24 4.2.2 The Project Description 28 4.3 Estimation Result 32 4.3.1 Descriptive Statistics of Sampled Household in Panggang Island 32 4.3.2 The Determinants of Sea Farming Participation 35 iii 4.3.3 Sea Farming Impacts on Household Income and Poverty 37 4.4 Benefits and Constraints of Sea Farming 40 5. Conclusion and Policy Implications 43 References 45 Appendices 53 Glossary 57 Statutory Declaration 59 iv List of Tables Table 1. World Fisheries Production and Utilization 1 Table 2. Income versus Expenditure in Measuring Poverty 7 Table 3. Types and Sources of Data 14 Table 4. Definition of Independent Variables for Determinants of Sea Farming Participation 17 Table 5. Definition of Independent Variables for Sea Farming Impacts on Household Income 20 Table 6. Number of Mariculture Activity in Panggang Island Village (2009) 22 Table 7. Characteristics of Brown Marbled Grouper and Humpback Grouper 22 Table 8. Sea Farming Member Classification 29 Table 9. Mean Comparisons of Sampled Participants and Non- participants 33 Table 10. Determinants of Sea Farming Participation 35 Table 11. Sea Farming Impacts on Household Income 38 Table 12. Two-sample t-test with Unequal Variance for Total Income of Both Groups 39 v List of Figures Figure 1. Linkage of Aquaculture to Development Aspects of Individual and Community 9 Figure 2. Map of Panggang Island, Kepulauan Seribu Administrative Regency 13 Figure 3. Grouper Culture Location of Respondents 23 Figure 4. Number of Cage and Pen Culture of Respondents’ Owned 24 Figure 5. Concept of Sea Farming Institution 26 Figure 6. System and Location for Mariculture Activity in Semak Daun Island 27 Figure 7. Protected Shallow Open Sea in Semak Daun Island 27 Figure 8. Facilities and Activities of Sea Farming 28 Figure 9. Proportion of Respondents’ Perception to Restocking 31 Figure 10. Participant and Non-participants Perception to Benefits of Sea Farming 40 Figure 11. Sea Farming Constraints Based on Participants Perception 41 vi List of Appendices Appendix 1. Picture of Brown Marbled Grouper and Humpback Grouper 53 Appendix 2. Picture of Cage Culture and Pen Culture in Panggang Island 54 Appendix 3. Stata Output for the Determinants of Sea Farming Participation 55 Appendix 4. Stata Output for Sea Farming Impacts on Household Income and Poverty 56 vii List of Abbreviations BPS Badan Pusat Statistik (Statistical Bureau) CCMRS Center of Coastal and Marine Resources Study CDF Cumulative Distribution Function CPR Common Pool Resource CSR Corporate Social Responsibility DC Developing Countries FAO Food and Agriculture Organization IAA Integrated Aquaculture-Agriculture KAKS Kabupaten Administratif Kepulauan Seribu (Kepulauan Seribu Administrative Regency) LDC Least Developed Countries NGO Non-governmental Organization OECD Organisation for Economic Co-operation and Development RT Rukun Tetangga (Neighborhood) RW Rukun Warga (Pillar of Residents) SF Sea Farming SSF Small-scale Fisheries viii 1. Introduction 1.1 Background The world fish food supply has been outpacing global population growth for the last five decades. During 1961–2009 the average growth rate of fish production remained at 3.2% per year and is outpacing the average growth rate of world’s population, which increased by 1.7% per year in the same period (FAO, 2012). The world fish supply is the sum of capture fisheries and aquaculture. Capture fisheries refers to all the fish catch in the natural habitat such as seas, lakes and in freshwater. Aquaculture is defined as the production of aquatic plants and animals under controlled or semi-controlled conditions for direct or indirect human consumption (Stickney, 2000). Aquaculture embraces culture in all salinities, from freshwater through brackhiswater and seawater to hypersaline water. Table 1. World Fisheries Production and Utilization 2006 2007 2008 2009 2010 2011 (Million tonnes) PRODUCTION Capture Inland 9.8 10.0 10.2 10.4 11.2 11.5 Marine 80.2 80.4 79.5 79.2 77.4 78.9 Total Capture 90.0 90.3 89.7 89.6 88.6 90.4 Aquaculture Inland 31.3 33.4 36.0 38.1 41.7 44.3 Marine 16.0 16.6 16.9 17.6 18.1 19.3 Total Aquaculture 47.3 49.9 52.9 55.7 59.9 63.6 TOTAL WORLD FISHERIES 137.3 140.2 142.6 145.3 148.5 154.0 UTILIZATION Human consumption 114.3 117.3 119.7 123.6 128.3 130.8 Non-food uses 23.0 23.0 22.9 21.8 20.2 23.2 Populations (billions) 6.6 6.7 6.7 6.8 6.9 7.0 Per capita food fish supply (kg) 17.4 17.6 17.8 18.1 18.6 18.8 Source: FAO (2012) Notes: Data exclude aquatic plants. Totals may not match due to rounding. Data for 2011 are provisional estimates. Table 1 shows data of world fisheries production and utilization. The data exhibits a staggering production of 148.5 million tonnes of fish in 2010. It also shows the growing demand of fish and fishery products. With the growing demand, there are some serious constraints on fulfilling this appetite by only 1