Project Idea

Modelling the “with - and –without” situation

The project idea is based on the possibility of generating additional income for rural households in Central Java, Indonesia through adopting silkworm/ cocoons production.
For simplifying the complexity of Indonesian households, six types of rural households are chosen as exemplary models. The first three are farmers in activities “without sericulture”. The last three ones are farmers “with sericulture” in different land categories, starting from: 0.30 ha (small size of farm); 0.50-0.90 ha (middle size of farm); 1.00-3.00 ha (larger size of farm).

Ex ante:
Case History
Income:

Bapak Sarna, from Kaliori, with three children receives Rp.1,600,000 (USD 190.48)
Exchange rate: 1 USD = Rp. 8400
for his one-hectare corn field (3 months). However he pays out about Rp. 1,000,000 of this on fertilizers and pesticides. So he receives about Rp. 600,000 per 3 month.
(Rp.200,000 per month). His wife also works with a monthly income
Rp. 150,000,-. Total income of family Rp.350,000 (USD 41.7) a month.
Bapak Mamad, with four children receives Rp. 1,300,000 per 6 month for his produce of peanuts and cassava (Rp.217,000 a month) for one hectare. His wife works for Rp. 150.000 per month. Total income of family Rp.367,000,-(USD 43.7 ) a month.
Bapak Karno with his wife work as farm labourers. The average monthly wage of a farm labourer is Rp. 200,000 (23.8 USD). A husband and wife will earn Rp 400,000 (USD 47.6) a month

The average income for one farm family is about 500 USD a year.

Expenditure:

Five persons per family for food Rp. 10,000 x 30 = 300,000
Other basic expenses and school fees (daily)Rp. 2.000 x 30 = 60,000
Monthly expenses for small farming famil Rp. 360.000 (USD 42.9)
(Banyumas Sutera Alam, 1998)

Ex post:

The gross income of silkworm production excluding running monetary inputs for eggs, disinfection agents, fertilisers, without opportunity costs, is 879.59 USD
~ 75.00 % income increase.

Investment is required only for planting mulberries and building worm houses at the beginning.
Table 5 shows that the model of sericulture production will generate an increase of 75 % over the current income. With this result, the project idea gains attraction as a possibility of income generation in rural areas.

Table 5: Net benefit increase of sericulture production (in USD)
The calculation estimated by using 0.50 land mulberry. At the first year: 0.50 box/period and 5 times; second year: 0.75 box and 10 times; Third year:1 box and 10 times; Fourth to tenth year: 2 boxes and 10 times. Harvest = 25 kg fresh cocoons/box. The price of fresh cocoons per kg Rp. 17,500,- (1^st and 2^nd year) and Rp. 20,000,- (3^rd to 10^th year)

FAO (1994) explained that income-generating activities in the countryside can be adopted, if the rural dwellers can boost income and living standards through a number of rural activities: crop and livestock production, processing, para- non-agricultural, artisanal and commercial activities. All these activities must fill full certain conditions: In addition to being technically feasible, they must also be economically and financially profitable. The income-generating activities should be profitable, that is to say they should produce substantial increase in income or surplus (one could also use the term profit) as a result of labor inputs.
If we the term “substantial increase” (rather arbitrarily) as 50%, the project idea can be said to have passed its first test.

Estimating the comparative advantage

Besides a comparison of sericulture production with the current revenue in rural areas, sericulture should be compared with alternatives in crop production. Table 6 shows a comparison revenue between sericulture and three other crops, which are grown in rural areas in Central Java.

Note:
Sericulture was assumed in fourth year, 3 boxes, ten times harvest per hectare per year (BSA,2002)
Paddy was assumed twice, maize three times and cassava one harvest per hectare per year.
Source: Sudaryono (1994) in Adisarwanto, T. (1999), Rukmana (2001), modified.
Description

Expenditure

Revenue

Profit

Sericulture

1,377.00

1785.00

408.00

Cassava

206.24

357.14

150.90

Maize

402.61

568.93

166.32

Peanut

365.48

714.29

348.81

Table 6: Comparison revenue between sericulture, cassava, maize and peanut per one hectare (in USD)

Revenue from sericulture is higher than from cassava, maize or peanut. Sericulture shows higher economic profitability, however it may not be easy to adopt, because peanut, maize and especially cassava, do not require intensive daily labour.
Generally, it can be seen in the results in table 6 that sericulture is competitive with peanut, maize, and cassava.

First conclusions – what is concrete and what is virtual?

In the model presented for income generation the NBI calculation resulted in an increase of 75%. For reality, this economic and financial profitability can only be obtained through using the following social factors:

As a new crop, production sericulture requires an introduction program for farmers. It should be first cultivated in a demonstration farm. The goal of the farmer should be to demonstrate best management of sericulture production and innovative technologies, and illustrate that farmers can increase their income with a sericulture activity. The farmers should be trained with practical skills in sericulture.
Sericulture is a highly labour intensive sector but does not require high-tech scientific skill and expertise. According to Ryu (1998) three boxes silkworm require two workers per day during eighteen days.
Indonesian Office Statistic (BPS, 2003) stated that in Central Java the average number of household members in a family is more than four people. This indicates that labour is available and it can be replaced with family labour.
Sericulture requires also large land.
To cultivate mulberry plant, the land that farmers should use is, where there is no need to cultivate high commercial crops such as paddy, horticulture or fruit crops. However, mulberry can be planted on arable land.
Sericulture requires investment capital to cultivate mulberry plants and worm shed. At the given low income level of a farmer, capital requirements are in conflict with consumption needs. The farmers need credit.
Sericulture needs an organisation of management. Cycle of worm consists two groups’ early instar silkworm and mature silkworm. The early instar silkworm requires intensive cultivation, higher hygienic and clean isolated rooms than mature silkworm larvae. The nucleus-plasma methods should be implemented. The nucleus cultivates early instar silkworms and plasma cultivate mature silkworms larvae.