Field Observation Notes on the Indonesian Coffee Trade

Lead photo/ Tung Chih-wei  Women workers at a local buying station sorting beans.

In recent years, the concept of Fair Trade has perhaps gradually become familiar to people in Taiwan, but the problems that this trade model, known as alternative trade, is meant to solve are somewhat hard to imagine from within Taiwan's awkward international political situation.

With two questions in mind - "Why do we need Fair Trade?" and "How is trade unfair?" - I traveled in mid-May, during Indonesia's coffee season, with Wu Tzu-yu, founder of Rainforest Coffee, to the coffee-growing areas of the Gayo highlands in Aceh Province, Indonesia, and to Medan in North Sumatra Province, the largest coffee collection and distribution center on the island of Sumatra.

Aceh Province is located in the northeast of the Indonesian island of Sumatra, and nearby are two (Note 1) important Indonesian coffee-growing regions: the Gayo highlands and the Lake Toba region. The coffee species grown is Arabica, and in northern Sumatra it is also called Mandheling. In just two weeks, we mainly visited coffee-producing areas in Bener Meriah Regency in the Gayo region.

The nearest international airport to the producing area is Medan International Airport in North Sumatra Province. Medan can be called Indonesia's fourth-largest city; it is not only a collection and distribution center for nearby coffee beans, but also an export hub for many tropical cash crops such as oil palm and rubber. The city has a population of nearly 2.1 million, including Javanese and other ethnic groups, and quite a few Chinese also live there.

(In the local traditional market, many kinds of spices indispensable to local daily food and drink are sold. Photo: Fu Wei-che)

For the first half of our Indonesia itinerary, we mostly wandered around Medan. Because Tzu-yu was going to continue signing a memorandum of understanding on research cooperation on rainforest coffee-related issues with the local Universitas Sumatera Utara, and also to meet graduate students sponsored by Tzu-yu last year, we visited the Faculty of Forestry, the Faculty of Ecology, the Department of Agricultural Economics, and the vice chancellor of Universitas Sumatera Utara.

This research funding program is intended to enable local academic institutions to study the local coffee industry. Therefore, since the year before last, Tzu-yu has begun with several biology departments and gradually developed academic cooperation with them.

(A local biology student is presenting his research plan. Photo: Fu Wei-che)

After visiting Universitas Sumatera Utara, we then visited the exporter in Medan who works with Tzu-yu. The exporter briefly explained to us how coffee bean buyers at the production site transport coffee here for final processing before loading into shipping containers. He mentioned to us that he simultaneously holds the Fairtrade licensing certification with the FLO label (Note 2) as well as other coffee certification systems with different requirements.

He also mentioned that, in theory, if one wants to apply for the FLO certification label locally, one must apply to the local organization Indo-Cafeco. The main requirement for application is that one must purchase coffee beans from a producer cooperative composed of farmers who also hold the FLO certification label, and return 22 US cents per kilogram to the cooperative; this "return payment" serves as funds for the farmer cooperative to use and invest freely.

In practice, however, the farmer cooperatives are mostly organized by the frontline collectors at the production sites; furthermore, it is also these collectors who apply to the Fairtrade organization for the certification label. He was not very clear whether the return payment is truly used for the farmers. However, from my later interviews with other buyers, I found that although it is unknown whether farmers receive more benefits, the buyers did indeed gain higher income than before because of the Fairtrade-certified purchasing system (Note 3).

In the latter half of the trip, we entered the Gayo coffee-producing area, which is in Bener Meriah Regency in Aceh Province and mainly produces Gayo coffee beans (Note 4). We visited several local farmers in person. One of them was a coffee farmer who had already worked with Tzu-yu for the third year. We call him Papa. Besides being a diligent farmer, Papa is also a devout Muslim. He was once the local village head, is upright, and is greatly respected by local people.

He told us that most local residents rely on coffee cultivation as their main source of economic income. Such income can at most cover their basic living expenses; therefore, during the non-coffee season, Papa told us, sometimes they may have to borrow rice or even money from people with better economic conditions, usually buyers, to maintain basic living. Therefore, fluctuations in coffee prices affect their lives very severely.

We asked whether he had heard of the operations of the FLO Fairtrade organization. Papa said that he himself was one of the members of the so-called Fairtrade cooperative organization, but he had never participated in the cooperative's discussions. Because his name was simply put on the list, and when FLO inspectors came, the people from the cooperative would even hang the FLO certification sign in his coffee garden to show that he was an FLO-certified farmer. He was not clear what Fairtrade had done; it was only because his friend wanted to borrow his name that he gave it. For him, what Fairtrade had done was not very important.

Papa also said that the recent rise in coffee prices had eased their economic pressure in life considerably compared with before, but overall, income from coffee production could still only cover their basic living expenses.

(Papa is teaching his grandson to recite the Quran. Photo: Fu Wei-che)

(At a local coffee buying station, workers are doing the first round of bean drying. Photo: Tung Chih-wei)

(Papa and his good friend took us to visit his coffee garden. Photo: Tung Chih-wei)

We also met a fairly influential local buyer, Mr. ISLAHUDDIN, who is also a local government official. He introduced us to the general situation of coffee production and marketing in Gayo. He mentioned that he had about twenty frontline collectors under him, and one frontline collector usually also had about thirty coffee farmers under him. These buyers purchased coffee beans from farmers over the long term and also carried out preliminary pulping and drying processing for them. Only after the preliminary processing was completed would the coffee beans be handed over to him. After he collected the goods and carried out the second stage of processing, he would send the processed coffee beans to coffee exporters.

He further told us that this kind of production-and-marketing relationship is very common in coffee-producing areas. Because of this, although he had heard of what Fairtrade does, based on his experience he judged that Fairtrade was not very feasible locally. He gave an example of an organization funded by foreign investors: Long Term Agreement (LTA), which had long purchased and researched coffee locally and established the "GAYO" coffee bean brand for the area.

Although LTA also claimed to let producers get a better purchase price, in reality LTA deceived the farmers and owed them 200,000 US dollars. When the farmers found out, they once angrily rushed into LTA's office and carried away the furniture inside. He believed that the Fairtrade idea was good, but truly implementing it was too difficult, because farmers still could not grasp all the information; information was still held by the buyers, and the buyers could deceive both the Fairtrade organization and the farmers at the same time.

By contrast, he was quite grateful for what Tzu-yu had done for farmers locally. He mentioned that Tzu-yu was the only buyer willing to spend time talking with him all night about how to help local farmers, so he felt that what Tzu-yu did could truly be called "Fair Trade."

After we successively visited several buyers under Mr. ISLAHUDDIN, I gradually began to feel the static, stable structure of local production and marketing, and I also slowly began to think about how so-called "fair trade" and "unfair trade" take shape bit by bit in this coffee-producing area where everything appears quite harmonious.

Notes
Note 1: According to statistics on the website of the Taiwan Coffee Association, as of 2003, Indonesia was the world's fourth-largest coffee exporting country.

Note 2: FLO: Fair Trade Labeling Organization International.

Note 3: In this part, readers should be reminded that how the "return payment" actually returned to the cooperative composed of farmers is unknown because my materials are limited. But what can be confirmed is that from the farmer cooperative to the so-called coffee exporter, there still exists a purchasing mechanism involving large, medium, and small distributors. And I believe that how the Fairtrade mechanism ensures that this intermediate purchasing mechanism can also operate at fair prices is the key to truly achieving the ideal operation.

Note 4: Gayo refers both to the name of an ethnic group and to a place name, mainly in the mountainous area of northern Aceh Province. Because large quantities of Arabica coffee trees are grown there and the quality is highly renowned, it also refers to a coffee brand. One may refer to Wikipedia's introduction to coffee production in Indonesia.