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DIVERSIFICATION STRATEGIES OF INDONESIAN SEAWEED

COMMODITIES TO STRENGTHEN MARKETS, COMPETITIVENESS,

AND ECONOMIC RESILIENCE OF COASTAL COMMUNITIES

Tabrani

, Wisman Indra Angkasa

, Dien Noviany Rahmatika

, Fahmi

Firmansyah

,Teguh Budi Rahajo

Lecturer at Pancasakti University Jl. Halmahera No.KM. 01, Mintaragen, East Tegal District, Tegal City

National Research and Innovation Agency, Jl. MH. Thamrin 8 Jakarta

[email protected]

PAPER INFO ABSTRACT

Received:

November 2022

Revised:

November 2022

Approved:

November 2022

Background: This paper aims to study the potential, opportunities,

problems, and strategies for diversifying seaweed commodities to

strengthen markets, competitiveness, and economic resilience of coastal

communities. Seaweed is an aquaculture product that can improve the

people’s economic welfare, deploy many laborers, and even increase the

country's foreign exchange.

Aim: The potential for seaweed distribution in Indonesia is wide open for

those naturally grown and cultivated in the sea.

Method: There are good opportunities for the seaweed industry related to

the potential for cultivation land, availability of raw materials, and demands

for processed products. However, there are problems and challenges to the

nation’s ability to export and compete for world market share to meet the

world's seaweed needs.

Findings: They include low quality and continuity of raw materials,

provided capital, weak human and institutional resources, and seaweed

products marketing strategies. There must be appropriate strategies for the

diversification of Indonesian seaweed commodities for market

strengthening, competitiveness, and economic resilience of coastal

communities

KEYWORDS

Seaweed, diversification, economic resilience, coastal communities

INTRODUCTION

Seaweed is a commodity for Indonesian economic growth. Its use has a long history, as

does the cultivation of certain groups of species, and is relatively small (Buschmann, et al.,

2017). It is an autotrophic organism that can produce many advantageous compounds

demanded a long time ago. It has also become a source of nutrition in many countries in Asia,

Europe, America, and Australia (Garcia-Poza, et al., 2020). Seaweed cultivation in Indonesia

is carried out in most parts of the archipelago by small farmers (Rimmer, et al., 2021). This is

because the seaweed commodity has a high economic value. It is one of the non-oil and gas

export commodities, a source of income for most coastal communities, and land for

employment in cultivation and industrial sectors. Commercial seaweed cultivation has

undergone drastic changes to keep up with the increasing demands in quantity and quality

(Sugumaran, et al., 2022). More than one million people living in coastal regions in Indonesia

strongly rely on seaweed cultivation that contributes to the rapid growth of the seaweed

industry. Indonesian seaweed has always been a mainstay for non-oil and gas export activities

and contributes to Indonesian export values. In 2020, seaweed contributed USD 279 million

or equivalent to Rp. 4 trillion. The figures released by the Ministry of Maritime Affairs and

Fisheries (KKP) confirm the position of seaweed in the ranks of the national leading export

Diversification Strategies of Indonesian Seaweed Commodities to Strengthen Markets, Competitiveness, and

Economic Resilience of Coastal Communities

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commodities. As a result, seaweed hs been a source of livelihood for coastal communities

throughout the islands in Indonesia.

However, the price of this seaweed is very volatile. It makes it difficult for small

farmers to obtain sustainable income. Their income distribution can cause massive

transformations in the human resources structure and impact economic outputs (Bilan,

Mishchuk, Samoliuk, & Yurchyk, 2020). This unsustainable income may reduce the

production process and affect the government's plan to increase the production rate five times

higher. Until now, seaweed products still experience up and down in the production process.

Many farmers have suffered significant losses due to attacks of pests and diseases which still

cannot be handled properly. The harming pests include copepods, amphipods, and certain fish

(Ward, et al., 2019). There is no growth in the processing industry, especially on the

downstream side. Most of the business units in Indonesia only process Eucheuma cottonii

into semi-refined carrageenan, and only a few turn it into carrageenan.

There have been 23 Indonesian companies engaged in the Euchuema cottonii seaweed

processing (ATC, SRC, and RC) until 2017. The seaweed is a promising protein source for

the future if its protein content is optimized through the cultivation process within high

nutrient concentrations (Stedt, et al., 2022). Seaweed cultivation has become an alternative or

complementary to terrestrial biomass production (Hasselstrom, Visch, Grondahl, Nylund, &

Pavia, 2018). World seaweed production mainly occurs in Asian countries (around 23.3

million tonnes) in 2018. Meanwhile, 5300 tonnes of seaweed are cultivated in Europe in

2018. This represents less than 0.02% of the total volume produced globally, valued at US$

9.6 million (Stevant & Rebours, 2021). This means that ocean aquaculture is needed to meet

the demands for food, materials, and energy for a growing global population (Solvang, Bale,

Broch, Handa, & Alver, 2021). Likewise, the Indonesian seaweed industry has spread across

17 regencies/cities in 10 provinces, namely Bangka Belitung, Banten, West Java, Central

Java, East Java, NTB, NTT, South Sulawesi, Gorontalo, and North Maluku, with a total of

installed capacity of 25,992 tons with annual raw material needs of 102,835 tons. For the

seaweed industry, Gracilaria sp (agar) is processed by 14 companies spread over eight

districts/cities in 4 provinces, namely North Sumatra, Banten, West Java, and East Java, with

an installed capacity of 7,658 tons and annual raw material needs of 66,911 tons. The total

production of seaweed in Indonesia has reached 11.3 million tons, or 38% of the world

production of 29.4 million tons (Busthanul, et al., 2020).

There must be brand new strategies in developing Indonesian seaweed products to be

more competitive. The harvested seaweed can decompose quickly, so it must be processed as

fast as possible (Emblemsvag, et al., 2020). All of the factors mentioned above should be

implemented concerning a holistic work plan through the development of seaweed

commodities by strengthening product diversification. Using a proper diversification strategy,

there will be more added values, business sustainability, and market strengthening for

improving the economic life of coastal communities. Therefore, this paper aims to examine

the potential, opportunities, problems, and strategies for diversifying Indonesian seaweed

products for market strengthening, competitiveness, and economic resilience of coastal

communities.

METHOD

This research uses a desk study approach and is conducted in 2022. The desk method is

an effort to study relevant information, data, and reports to the research objectives. This

method aims to collect and review data or initial and further information related to the

research topics. It also aims to get clarity to develop a theoretical basis for enriching the

conceptual framework and methodological design as well as references during the

preparation of the final study report.

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The data analysis method is descriptive qualitative, and quantitative methods.

Descriptive studies function to ascertain and describe the characteristics of the variables of a

situation. The purpose of descriptive research is to describe relevant aspects of the

phenomena of an individual or organization (Sekaran, 2000). Hasan (2002) explained that to

use descriptive methods appropriately, researcher must have a repressive nature, always seek

instead of test, and have an integrative power towards various kinds of information he

receives into a unified interpretation.

RESULTS AND DISCUSSION

Potential and Opportunities for Seaweed Industrial Development

Talking about opportunities for the seaweed trade market, Indonesia has a great power

in supplying seaweed raw material needs for the world. Seaweed can have more economic

value after receiving further treatments. In general, post-harvest handling of seaweed by

small farmers only comes to the drying stage. Dried seaweed can produce gelatin,

carrageenan, or algin, depending on the seaweed’s contents. The factories mostly carry out

these processes. Meanwhile, product diversification aims to increase added value for the

economic strengthening of coastal communities as seaweed cultivators. Therefore, seaweed

processing should also be in farming communities and women (Anggadireja, 2007).

Seaweed is a potential commodity and a mainstay for empowering women in business

development as an alternative livelihood to increase family income. This happens because

seaweed has become a popular food for humans, either through simple processing (directly

consumed in raw condition) or through more complex steps to become semi-finished goods

and further processed by downstream industries into finished goods such as pharmaceutical,

cosmetics, food, and others (Suhendar, 2006).

Seaweed from red algae is more popular among farmers than those from green and

brown algae. The new brown algae (Sargassum) have attracted more attention from research

subjects. Meanwhile, the cultivation business has not yet been developed. Brown algae

produce alginate. Meanwhile, red seaweed, especially the Eucheuma type, produces

polysaccharides like Agar and Carrageenan. These two polysaccharides are common

materials in many industrial fields. That is why they have a high economic value. The world

market demand for these two polysaccharides has increased every year. In general, the three

secondary metabolites of the three types of seaweed above have the same functions in the

industrial world. They work as thickeners, suspenders, stabilizers, and emulsifiers. In this

regard, the product diversification actors must deploy their maximum efforts so that seaweed

gets added value as a processing result. The complex empowerment system is closely related

to the success of processing seaweed into semi-finished or finished goods. To better utilize

and develop the Indonesian seaweed industry to be an integrated and reliable business from

upstream to downstream, all elements related to the Indonesian seaweed sectors (government

and private sectors as well as cultivators) must cooperate and integrate through the

implementation of the seaweed cluster strategy. There must be good collaborations with the

same understanding of development, including with the regional stakeholders. Other related

agencies should provide optimal facilities to develop seaweed as a superior product in each

region. The seaweed cluster means synergizing several supporting components of the

seaweed processing industry. The success rate depends on some key factors, such as the

creation of partnerships, research innovation, human resources, and cluster locations.

Problems and Challenges of Indonesian Seaweed Product Diversification

Currently, the seeds used and developed by the local communities are still obtained

directly from vegetative development. They usually set aside the thallus from their

cultivation. They have low skills for selecting good thallus for seedlings. Most of them also

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Economic Resilience of Coastal Communities

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still have limited knowledge, so the yields are often not optimal. The limited number of

nursery centers to support seaweed cultivation development areas also makes it difficult for

cultivators to obtain quality seeds.

The low mastery of technology related to seeding, cultivation, harvesting, and drying of

seaweed is also a crucial problem in increasing seaweed productivity. The existing human

resources still have a relatively low level of education, knowledge, and skills related to the

development of aquaculture technology. This is due to the low acceptance of access to

capital, information, technology, and marketing of fishery products. These issues greatly

influence the low scale of business development which in turn results in low job

opportunities.

Post-harvest handling plays a very important role in the seaweed industry. This stage

determines the quality of the seaweed as raw material for processing. This activity must be

carried out carefully, starting from the way of harvesting, washing, drying, packaging, and

storage. Harvested seaweed must be 45 days old. The washing stage must produce a specific

level of cleanliness that meets the requirements such as salt and dirt levels below 5%. The

drying process must achieve a low enough moisture content so that the seaweed is suitable

for sale to manufacturers or exporters. Dried seaweed sold by cultivators has a maximum

water content of 35% for Euchema (Director General of Aquaculture, 2009) and is under

Indonesian National Standard 01-2690-1992 (Ministry of Agriculture, 2013).

However, the problem is that many of them are found in Parigi Moutong Regency. The

harvest age is too young and the post-harvest management is not very well. The farmers often

take the seaweed less than the recommended harvest time of 45 days. This causes the

carrageenan content to be low. They also do not dry the seaweed in a good drying area. There

are still many seaweed farmers who dry their seaweed on the sand using only nets/tarpaulins

without parachutes. This causes a lot of dirt to get stuck in the seaweed. They also do not

apply seaweed drying to the specified water content. Often the water content of seaweed

purchased directly from the farmers can reach above 40% so the salt content can be more

than 5%. This condition will damage the seaweed during the storage and distribution process.

To improve the quality, exporters or manufacturers often have to re-dry and clean the rest of

the salt. This of course requires additional costs and results in heavy shrinkage due to re-

drying and re-cleaning steps.

Indonesian Seaweed Commodity Diversification Strategy for Market Strengthening,

Competitiveness, and Economic Resilience of Coastal Communities. The sustainability of the

seaweed industry is influenced by quality assurance and production continuity (production

system), market (network), business capital, and guarantee for doing business (regulation)

(Anggadiredja, 2007). Meanwhile, the development strategies, according to Keppel (2008),

can be pursued through mapping and structuring cultivation areas, developing business

systems within the area, strengthening institutions, and empowering cultivators. Pandelaki

(2012) explained that the development of the seaweed cultivation industry must also be

followed by the development of the processing industry because it is where the added value

of seaweed lies mostly.

1. Increasing Productivity and Quality of Seaweed

There are some activities to increase the productivity and quality of seaweed. They

include providing more accessible and resistant seaweed seeds to disease through the

provision of seed gardens in production centers. It is also important to provide an

understanding to the local farmers regarding the quality of seaweed produced from pre-

production to post-harvest stages, such as planting age, spacing, RL water content, and

planting calendar, through advocacy and intensive supervision. Meanwhile, there must

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Economic Resilience of Coastal Communities

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also be the provision of seaweed storage warehouses for individuals/ groups or cultivators

and the establishment of seaweed logistics institutions.

Subsidies for production inputs such as drying racks are also important things to do

to increase the productivity and quality of seaweed. Moreover, the government must

optimize its role in advocating partnerships between cultivators and traders. The strategic

roles of local governments in formulating strategic regulations are the preparation of a

master plan and regional spatial planning such as RT and RW supported by the carrying

capacity of the environment. Also, to increase seaweed productivity and quality, there

must be an optimization of the local governments in determining seaweed cultivation

zoning according to the ecosystem and cultivation methods. The next important thing is to

facilitate investment for external investors.

2. Development of The Semi-Finished Seaweed Processing Industry (ATC, SRC, And

RC) in Stages In Seaweed Production Centers

The government strengthens partnerships between the processing industry and

cultivators in production centers to ensure the continuity of raw materials and improve

production efficiency. On the other hand, the government is gradually limiting the export

quota of raw/dried seaweed (raw material) by shifting part of the export market share to

domestic (ATC, SRC, and RC processing industries). It is optimizing the assistance of

seaweed processing plants from the Ministry of Industry and developing new seaweed

processing industries in industrialized locations through a synergy program between the

Ministry of Industry and the Ministry of Ocean and Fisheries.

The government is also collaborating with foreign investors to transfer technology

for the seaweed processing industry through the Training of Trainers (TOT) to realize an

industry with international standards. Meanwhile, there are simpler regulations and easier

licensing facilities to encourage the growth of the seaweed processing industry in

production centers. Thus, the government encourages the private sector to invest by

opening ATC, SRC, and RC seaweed processing units in seaweed production centers

through promotion and consolidation between the government, investors, and other key

players. Besides, the government facilitates a marketing network between the processing

and manufacturing industries (pharmaceutical, cosmetic, food grade, etc.).

3. Development of a business scale for processing seaweed ready for consumption from

micro to an industrial scale

To develop a business scale for processing seaweed ready for consumption from

micro to an industrial scale, there must be strengthening capital through a credit guarantee

scheme in collaboration with the banking sector and the Ministry of Cooperatives and

SMEs. They should also facilitate the processing of business actors in business financial

management through financial management training. On the other hand, it is also

important to assist processing business actors in making attractive product packaging and

branding to improve knowledge and competitiveness. Meanwhile, there should also be

regular socialization and assistance in the context of making P-IRT, halal certification, and

HACCP in the seaweed processing business. It is also important to support business actors

in marketing processed seaweed products through exhibition events, business and partner

meetings, as well as promotion of processed seaweed products, and the establishment of

marketing networks.

Diversification Strategies of Indonesian Seaweed Commodities to Strengthen Markets, Competitiveness, and

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CONCLUSION

Indonesia has a very big opportunity to diversify seaweed commodities to strengthen

markets, competitiveness, and economic resilience of coastal communities for the

development of the seaweed industry. It can be seen from the potential for land area,

production and productivity of seaweed, and the potential for increasingly positive demand.

The support of Indonesia's potential can make it a major producer of seaweed in the world.

Appropriate programs can also make seaweed a source of foreign exchange. On the other

hand, there are still various problems and challenges faced by the seaweed industry,

especially related to the quality and continuity of raw materials in the upstream and

downstream sectors. Indonesian farmers still have relatively low ability to export and

compete in the struggle for world market share to meet the world's seaweed needs. There is

also low added value in the form of processed products ready for consumption. Meanwhile,

the development of the seaweed cultivation industry must also be followed by the

development of the processing industry, because it is where the added value of seaweed is

mostly located. There are some strategies for the development of the seaweed processing

industry, such as; 1) increasing productivity and quality of seaweed, 2) developing of semi-

finished seaweed processing industry (ATC, SRC, and RC) gradually in seaweed production

centers, and 3) development of ready-to-eat seaweed processing business from micro to an

industrial scale.

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