KEMENTERIAN RISET, TEKNOLOGI, DAN PENDIDIKAN TINGGI

UNIVERSITAS JEMBER
FAKULTAS EKONOMI DAN BISNIS
Jalan Kalimantan 37 – Kampus Bumi Tegal Boto, Kotak Pos 159 Jember 68121
Telepon 0331 – 337990 Faximale 0331 – 332150
Email: feb@unej.ac.id

LEGALITAS PENGAJUAN PROPOSAL SKRIPSI

Menerangkan bahwa :
Nama : MAULIDATUN NABILA
NIM : 170810101185
Program Studi : Ekonomi Pembangunan

mengajukan proposal skripsi dengan persyaratan sebagai berikut (terlampir) :

NO URAIAN KET.
1 Form lembar pengajuan proposal skripsi
2 KRS (Prog Skripsi untuk Reguler tanpa Skripsi untuk Percepatan)
3 Transkrip / KHS
4 Otline / Proposal
5 3 (tiga) Jurnal Internasional
6 Sertifikat PK2 MABA dan JURUSAN, KKL

Jember, 21 September 2020

Ahmad Suyanto
 KEMENTERIAN RISET, TEKNOLOGI, DAN PENDIDIKAN TINGGI
UNIVERSITAS JEMBER
FAKULTAS EKONOMI DAN BISNIS
Jalan Kalimantan 37 – Kampus Bumi Tegal Boto, Kotak Pos 159 Jember 68121
Telepon 0331 – 337990 Faximale 0331 – 332150
Email: feb@unej.ac.id

B_PSEP : Pengajuan Proposal

Pada semester ini (GL/GP : Thn Ajaran 2020/2021),telah memenuhi ketentuan untuk melaksanakan
kegiatan penyusunan skripsi, sehingga yang tersebut dibawah ini :

Nama : MAULIDATUN NABILA

Nim : 170810101185
Mata Kuliah Konsentrasi : REGIONAL
Pilihan Program : Program Reguler Program Percepatan
Judul yang diajukan : ANALISIS EFISIENSI DAN KELAYAKAN USAHA HOME
INDUSTRY GULA KELAPA (STUDI KASUS : DESA
REJOAGUNG KECAMATAN SRONO KABUPATEN
BANYUWANGI)
(KERIS) sebagai landas berpikir dan operasional dalam penyusunan proposal.
Nama KERIS : SUSTAINABLE LOCAL ECONOMICS DEVELOPMENT (SLED
Koordinator : Dr. Regina Niken Wilantari, S.E., M.Si.
Mengetahui
Koordinator Program Studi

Dr. Herman Cahyo D., SE, MP

Diisi khusus program percepatan

Koordinator Kelompok Riset (KERIS), (MENYETUJUI.../....MENOLAK). Dan memberikan
rekomendasi sebagai berikut :
Dosen Pembimbing Utama : ...........................................................................................
Dosen Pembimbing Anggota : ...........................................................................................
Menyetujui
Koordinator Kelompok Riset

…………… ..................................

Menimbang, mencermati dan memperhatikan masukan dari Kaprodi PSEP serta Koordinator KERIS,
maka Komisi Pembimbing (KOMBI), memutuskan sebagai pembimbing tugas akhir:
Dosen Pembimbing Utama : ................................................................................
Dosen Pembimbing Anggota : ...............................................................................

Menetaokan
Ketua Komisi Pembimbing

dibuat Rangkap 3 (1) Prodi, (2) Koor Keris dan (3) Kombi

Dr. Duwi Yunitasari, S.E., M.E.

 KEMENTERIAN RISET, TEKNOLOGI, DAN PENDIDIKAN TINGGI
UNIVERSITAS JEMBER
FAKULTAS EKONOMI DAN BISNIS
Jalan Kalimantan 37 – Kampus Bumi Tegal Boto, Kotak Pos 159 Jember 68121
Telepon 0331 – 337990 Faximale 0331 – 332150
Email: feb@unej.ac.id

dibuat Rangkap 3 (1) Prodi, (2) Koor Keris dan (3) Kombi
 KEMENTERIAN PENDIDIKAN DAN KEBUDAYAAN RI
UNIVERSITAS JEMBER
FAKULTAS EKONOMI DAN BISNIS
Jalan Kalimantan 37 Kampus Tegalboto Kotak Pos 159 Jember 68121
Telepon (0331)-330224, 334267, 337422, 333147 * Faximile (0331)-339029
Laman : www.unej.ac.id

KETERANGAN HASIL STUDI

Nama : MAULIDATUN NABILA Jurusan : Ilmu Ekonomi dan Studi Pembangunan
NIM : 170810101185 Program Studi : Ekonomi Pembangunan

Nilai Nilai
No Matakuliah SKS NxK No Matakuliah SKS NxK
Huruf Angka Huruf Angka
Pengantar Sosiologi dan Ekonomi
1 Pendidikan Kewarganegaraan 2 A 4 8 26 3 BC 2.5 7.5
Politik
2 Pengantar Ekonomi Makro 3 A 4 12 27 Ekonomi Sumber Daya Manusia I 3 A 4 12
3 Pengantar Ekonomi Mikro 3 A 4 12 28 Ekonomi Pembangunan II 3 AB 3.5 10.5
4 Bahasa Indonesia 2 B 3 6 29 Kuliah Kerja Lapangan 1 A 4 4
5 Bahasa Inggris 2 A 4 8 30 Ekonomi Kelembagaan 3 AB 3.5 10.5
6 Pengantar Bisnis dan Manajemen 3 A 4 12 31 Sejarah Pemikiran Ekonomi 3 A 4 12
7 Matematika Ekonomi I 3 A 4 12 32 Ekonomi Internasional 3 A 4 12
8 Akuntansi Bisnis 3 B 3 9 33 Kewirausahaan 2 A 4 8
9 Matematika Ekonomi II 3 A 4 12 34 Ekonomi Digital 2 A 4 8
10 Ekonomi Mikro I 3 B 3 9 35 Ekonomi Regional 3 A 4 12
11 Pendidikan Agama Islam 2 A 4 8 36 Statistik Non Parametrik 3 AB 3.5 10.5
12 Ekonomi Makro I 3 AB 3.5 10.5 37 Ekonometrika II 3 A 4 12
13 Pendidikan Pancasila 2 A 4 8 38 Metodologi Penelitian 3 BC 2.5 7.5
Ekonomi Sumber Daya Alam dan
14 Sistem Ekonomi 3 AB 3.5 10.5 39 3 AB 3.5 10.5
Lingkungan
15 Statistika Ekonomi I 3 A 4 12 40 Perencanaan Pembangunan I 3 AB 3.5 10.5
16 Ekonomi Moneter I 3 AB 3.5 10.5 41 Kebanksentralan 3 AB 3.5 10.5
17 Analisis Proyek 3 A 4 12 42 Perencanaan Pembangunan II 3 A 4 12
18 Statistika Ekonomi II 3 A 4 12 43 Ekonomi Perdagangan Internasional 3 AB 3.5 10.5
19 Ekonomi Pembangunan I 3 AB 3.5 10.5 44 Ekonomi Industri 3 A 4 12
20 Ekonomi Makro II 3 B 3 9 45 Administrasi Pembangunan 3 A 4 12
21 Hukum Bisnis 3 AB 3.5 10.5 46 Ekonomi Publik II 3 A 4 12
22 Perekonomian Indonesia 3 AB 3.5 10.5 47 Ekonomi Koperasi 2 AB 3.5 7
23 Ekonomi Mikro II 3 A 4 12 48 Manajemen Pemasaran 2 B 3 6
Ekonomi Pengangkutan dan
24 Ekonomi Publik I 3 A 4 12 49 3 A 4 12
Perkotaan
25 Ekonometrika I 3 AB 3.5 10.5 0
Jumlah SKS : 136
Jumlah NxK : 500
IP Kumulatif : 3.68
Predikat :
Jember, 11 September 2020
Wakil Dekan 1

Dr. Zainuri, M.Si.

NIP. 196403251989021001
NAMA : MAULIDATUN NABILA

NIM : 170810101185

OUTLINE TUGAS AKHIR

Judul Penelitian : Analisis Efisiensi dan Kelayakan Usaha Home Industry Gula Kelapa
(Studi Kasus : Desa Rejoagung Kecamatan Srono Kabupaten
Banyuwangi)

Latar Belakang : Pengembangan industri gula kelapa sangat tepat dan strategis untuk
dikembangkan di sentra-sentra tanaman kelapa di seluruh wilayah
Indonesia salah satunya adalah di Kabupaten Banyuwangi. Kabuaten
Banyuwangi merupakan salah satu daerah sentra penghasil gula kelapa
terbesar di Jawa Timur. Desa Rejoagung merupakan salah satu desa di
Banyuwangi yang mana sebagian besar penduduknya berprofesi sebagai
produsen gula kelapa. Pengolahan gula kelapa di desa tersebut termasuk
dalam Home Industry, dimana tenaga kerjanya dari anggota keluarga itu
sendiri. Hasil produksi gula kelapa merupakan penyokong utama
perekonomian masyarakat di Desa Rejoagung. Oleh karena itu, Industri
kecil gula kelapa ini perlu untuk terus dibina dan dikembangkan agar
industry dapat lebih maju melalui peningkatan efisiensi dan produksi,
sehingga dapat memaksimalkan pendapatan produsen.

Rumusan Masalah : 1. Bagaimana efisiensi usaha gula kelapa di Desa Rejoagung

Kecamatan Srono Kabupaten Banyuwangi?

2. Bagaimana Kelayakan Usaha Gula Kelapa di Desa Rejoagung?

3. Apa faktor-faktor produksi yang berpengaruh dalam pengolahan

industri gula kelapa di Kecamatan Srono, Kabupaten Banyuwangi?

Tujuan Penelitian : 1. Mengetahui efisiensi usaha gula kelapa di Desa Rejoagung

Kecamatan Srono Kabupaten Banyuwangi

2. Mengetahui Kelayakan Usaha Gula Kelapa di Desa Rejoagung

 3. Untuk mengetahui faktor-faktor yang berpengarruh dalam pengolahan
industri gula kelapa di Desa Rejoagung Kecamatan Srono

Landasan Teori : 1. Teori Fungsi Produksi

2. Teori Pendapatan

Penelitian Terdahulu :
1. Matondang, Khairani Alawiyah; Suman ,Agus; Sasongko; Mahardika
,Putu. (2017) LOCAL ECONOMIC DEVELOPMENT-BASED ON
FARMING MANUFACTURE OF COCONUT SUGAR IN WEST SEI
KEPAYANG DISTRICT
2. RIANSE, ILMA SARIMUSTAQIYMA; ABDULLAH, WEKA
GUSMIARTY; MIDI, LA ODE. (2016) Financial, Economic And
Environmental Feasibility Analysis Of Palm Sugar Domestic Industry
In Kolaka Indonesia
3. Yuroh, Fitri; Maesaroh, Ida. (2018) Technical Efficiency of Coconut
Sugar Agroindustry in Pangandaran District, West Java Province,
Indonesia
4. Mega Indah Muhjiningsih (2013). Analisis Kelayakan Usaha dan
Strategi Pengembangan Industri Kecil Tempe di Kecamatan Matesih
Kabupaten Karanganyar
5. Putri Ambar Sari (2018). Analisis Efisiensi Gula Merah Tebu (Studi
pada Desa Dukuh Kecamatan Ngadiluwih Kabupaten Kediri)

Alat Analisis : 1. Uji Efisiensi DEA (Data Envelopment Analysis)

2. analisis Kelayakan Finansial (NPV, IRR, BCR)

3. Analisis Fungsi Produksi Cobb-Douglass

Model Penelitian : Penelitian Kuantitatif Deskriptif

International Journal of Social and Local Economic Governance (IJLEG) E-ISSN: 2477-1929
Vol. 3, No. 1, April 2017, pages 49-55 http://ijleg.ub.ac.id

LOCAL ECONOMIC DEVELOPMENT-BASED ON FARMING MANUFACTURE

OF COCONUT SUGAR IN WEST SEI KEPAYANG DISTRICT
Khairani Alawiyah Matondang1, Agus Suman2, Sasongko3, Putu Mahardika A.S.4
1
State University of Medan.
2,3,4
University of Brawijaya, Malang.
Email: khairani_1404@yahoo.com, 2agussuman@yahoo.com, 3sasongko0406@gmail.com,
1
4
putumahardika@gmail.com

Abstract
The existence of coconut commodity abundance in the district of West Sei Kepayang of Asahan regency
of North Sumatra province has not been utilized to the fullest. Though the potential of this commodity
can be the basis of local economic development (LED). Of some its derivative products, coconut sugar
has the economic potential to improve farmers welfare due to various advantages as well as a good
market share prospect.This study aims to analyze the potential for the farm manufacture of coconut
sugar to be used as a base of LED in the district of West Sei Kepayang. Data collected by survey method
and then analyzed by descriptive quantitative by a financial feasibility analysis those are the Net Present
Value (NPV), Net Benefit Cost Ratio (NBCR), Internal Rate of Return (IRR) and Payback of Period (PP)
and by descriptive qualitative. The results of a financial feasibility analysis showed that the NPV is
positive, NBCR is greater than one, the IRR is greater than the actual interest rate and PP can be
restored in a relatively short time.
Keywords: Local Economic Development, Coconut Sugar, Financial Feasibility Analysis.

products of economic value for farmers and thus

1. INTRODUCTION
Sugar is the very important basic needs of
human life. The consumption of cane sugar in
the province of North Sumatra is estimated to
increase by 3 percent each year (Purba, et all,
2014). In 2014, the average total consumption of
sugar cane in North Sumatera province reached
148,653 tons, only 27.30 percent domestic
production can be fulfilled (Statistics of
Indonesian Plantation, 2015). The impact, sugar
prices tend to be volatile and sensitive, to the
detriment of consumers (Purba, et all, 2014).
Meanwhile, coconut sugar can be used as
substitutes of cane sugar. That is, demand and
supply gap of cane sugar products in North
Sumatra province likely to be filled with coconut
sugar products. Coconut sugar have the
advantage of health aspects because it has 35
percent of a low glycemic index (Monahar, et all,
2007).
The existence of coconut coomodity
abundance in the district of West Sei Kepayang
of Asahan regency of North Sumatra province
has not been utilized to the fullest. Though these
commodity can produce a variety of derivative
potentially become the basis of local economic
development (LED) (Mahmud and Ferry, 2005;
Damanik, 2007; Bank Indonesia, 2009 and
Kuswanto, 2011).
The development of farm-based on the
derivative productsof coconut commodity is
determined from the intensity of farm value
(Kuswanto, 2011). The successed of based on
the derivative products of coconut commodity
farm will have a direct impact on improving
farmers and communities welfare (Manurung,
2004; Damanik, 2007).
The potential of farm manufacture of
coconut sugar as a driver of LED will be known
through the financial feasibility, so the study on
"Local Economic Development Based on Farm
Manufacture of Coconut Sugar in West Sei
Kepayang District" is important to do. The
research question is "Is that farm manufacture of
coconut sugar feasible as the base of local
economic development in the district of West Sei
Kepayang?"

49
50 International Journal of Social and Local Economic Governance (IJLEG)
Vol. 3, No. 1, April 2017, pages 49-55
2. LITERATURE REVIEW
2.1. Demand and Supply Theories
The demand quantity of an item of good
depends on the price, income and preferences
(Nicholson, 2002). In the economy, this
relationship is applicable to most types of goods
(Mankiw, 2006). The price of certain goods and
others related substitution goods could be affect
the demand of goods (Manurung and Rahardja,
2006). The substitution effect is always negative
and opposite to the price (Semaoen, 2011). This
means that the presence of other goods as a
substitute would depress prices. Falling prices
will increase demand and again push prices up
on new equilibrium, so producers have an
opportunity to increase production (Nicholson,
2002).
2.2. Local Economic Development (LED)
LED is an effort to rid the society of all
limitations to become independent. These goals
achievement obtained by the encouragement of
economic growth and poverty reduction through
the diversification of the local economic base by
utilizing local resources and skills (Nel and
Binns, 2001). The core concept of local
economic development (LED) in Blakely and
Bradshaw, (2002) view is how to increase
economic activity that can open new
employment opportunities.
2.3. Coconut Farmers Empowerment
Friedman's (1992) view positions humans
as the main actors of empowerment. In the local
context, forms of empowerment activities are
participatory, adapted to diversity, local
peculiarities, and independence through changes
in social structures that can be done through
skills, knowledge and power affecting the lives
of individuals within an institution (Swift and
Levin 1987; Parson et al., 1994).
Specifically to coconut farmers, Tarigans
(2003) said that their empowerment can be done
by improving the cultivation and processing
techniques through increasing technology
mastery, information and access to sources of
financing and marketing of products individually
and collectively.
3. RESEARCH METHODS
This research was conducted in the district
of West Sei Kepayang which is a centre of
regional production of coconut plants in Asahan
regency.The research used descriptive survey
method. Sulianto et al (2013) used the same
method to describe matters relating to the
availability of coconut sugar, so it can show that
coconut sugar deserves to be developed as a local
economic activity. This research data is primary
and secondary data obtained through interviews,
observation and documentation. Samples were
coconut farmers with coconut sugar craftsman
status.
3.1. Data Analysis Method
Data was analyzed by descriptive
quantitative and qualitative. Quantitative
descriptive analysis carried out by a financial
feasibility analysis were carried out using a span
of 20 years. Some of the key assumptions used
in the calculation are as follows:
a) The price of nira is Rp. 200/ liter.
b) The price of coconut sugar is Rp. 17,000/ kg.
c) Own capital and or bank credit
d) prices are fixed for the duration of the
operation
e) The business operation is 20 years.
Calculating the financial feasibility carried
out by some methods namely:
1. Net Present Value (NPV)
NPV is obtained by discounting all costs
and revenues on a specific discount rate
(Darusman, 1981). If NPV > 0, then the farm
manufacture should be develop. Conversely, if
the NPV < 0, then its not feasible to be develop.
NPV calculation formula is as follows
(Gittinger, 1982):
𝐵𝑡−𝐶𝑡
NPV = ∑𝑛𝑡=0 (1+𝑟)𝑡 (1)
Where :
Bt = Revenue in year t
Ct = Costs in year t
t = Age project (years)
r = Discount rate (%)
n = Number of years
2. Internal Rate of Return (IRR)
Internal Rate of Return (IRR) is a measure
of the success of a project based on the net
benefit (NPVꞌ> NPV") were obtained. If the IRR
is greater than interest rate, the investment is
feasible to develop. Conversely, if the value of
 Matondang, Agus Suman, Sasongko & Putu Mahardika, Local Economic Develovement … 51

IRR is less than interest rate applicable, the assumptions. The capital comes from bank loans
investment is not feasible to develop. using the assumption of credit interest rate of
IRR calculation formula is as follows food and energy security that is equal to 7
(Kadariah, 1979): percent, with term of credit for five year (Bank
Indonesia, 2015). The assumptions of
IRR = rꞌ+ 𝑁𝑃𝑉𝑁𝑃𝑉′
′−𝑁𝑃𝑉"(r″- rꞌ) (2)
investment and working capital is based on
Where : currently obtained prevailing market price
rꞌ = Interest rate of positive NPV through direct surveys and field observations.
r" = Interest rate of negative NPV
Table 1. Basic Assumptions of Feasibility
NPVꞌ = NPV is positive Calculation on Farm Manufacture of Coconut Sugar
NPV" = NPV is negative
Number /
3. Net Benefit Cost Ratio (Net B/C) No Assumptions Unit
Value
Net Benefit Cost Ratio is the value of 1. Project Period Year 20
benefits that received as a direct influence to the 2. Land + building m² 400
society. If the value of Net B/C> 1, then the Production days per Day 25
3.
investment activity is profitable and feasible to month
be done because the profit is greater than the Month of production per Month 12
4.
total cost incurred. But, if the Net B/C <1, the year
5. Production days per year Day 300
investmentis not feasible to developed.
6. Labor Person 4
The formula for computing Net B/C is as Prices
follows (Gittinger, 1982): 7.
a. Coconut Nira Rp/kg 200
𝐵 𝐵𝑡−𝐶𝑡 𝐶𝑡−𝐵𝑡 b. Coconut Sugar Rp/kg 17.000
𝑁𝑒𝑡 = ∑𝑛𝑡=0 / ∑𝑛𝑡=0 (3)
𝐶 (1+𝑟)𝑡 (1+𝑟)𝑡 8. Input Capacity per day Kg/day 600
Where : The yield output per day
9.
Bt = Revenue in year t a. Coconut Nira % 14,6
Ct = Costs in year t b. Coconut Sugar kg 108
t = Age project (years) 10. Discount Rate % 7
r = Discount rate (%) Sources: Primary data is processed (2015)
n = Number of years
Optimal input capacity of the plant is
4. Payback of Period (PP) assumed to 1000 liters per day, with a yield of
Investment feasibility analysis is specified 14.6 percent (Rumokoi, 1993).
from the ability of businesses in return of Meanwhile, the capital including fixed and
invested capital using the unit year. Usually, the operational costs. Fixed capital include land,
payback period of the project is selected based buildings, infrastructure and installations, office
on the shortest period. Mathematically, the inventory and equipment (details in the
formula used (Gittinger, 1982) is: appendix). Summary of capital is presented in
𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 table 2.
PP = 𝑥 1 𝑦𝑒𝑎𝑟 (4)
𝑁𝑒𝑡 𝑐𝑎𝑠ℎ
Table 2 Fixed Capital of Farm Manufacture of
4. RESULTS AND DISCUSSION Coconut Sugar

Farmmanufacture of coconut sugar is a type No. Elucidation Cost (Rp)

of home business. A unit of bussines can be said 1. Land 40.000.000
to be financially fesible if the income are able to 2. Building 60.000.000
cover all costs incurred. Infrastructure and
3. 500.000
Installation
4.1. Financial Feasibility Analysis 4. Office inventory 400.000
One of coconut tree is able to produce 1.2 5. Equipment 4.400.000
liters of coconut nira (Rumokoi, 1993). While Total Cost of Capital 105.300.000
one kilogram of coconut sugar takes 5.56 liters
Source: Processed Data (2015)
of coconut nira (Jatmika, et, al 1990). These
assumptions are used as one of the basic Fixed capital as the cost of land is 400 m2
assumptions of the feasibility of coconut sugar multiplied by the market price of Rp. 100
production farming in addition to several other
52 International Journal of Social and Local Economic Governance (IJLEG)
Vol. 3, No. 1, April 2017, pages 49-55

thousand/m2. Building consisting of 10 m x 20 of farm manufacture of coconut sugar then

m multiplied by the market price of Rp. 300 presented summarized in Table 5.
thousand/m2. Table 5. Summary of Financial Feasibility Analysis
Meanwhile, working capital of farm Results of Farm Manufacture of Coconut Sugar
manufacture of coconut sugar consists of fixed Over 20 Years
costs, variable costs and additional costs. Fixed Gross
costs consist of salaries and depreciation. The Cost Result Net income
Types of revenue
variable cost consists of the purchase of raw (Million (Million (Million
products (Million
materials production. For an additional fee Rp) Rp) Rp)
Rp)
consists of office stationery. Recapitulation of Coconut
190,300 550,800 360,500 298,360
working capital of farm manufacture ofcoconut sugar
sugar is presented in Table 3. Source: Processed Data (2015)
Table 3 Summary of Working Capital of Farm
The recapitulation of financial analysis has
Manufacture of Coconut Sugar
shown that total net revenue was greater than
The amount of costs total expenditure so profitable to develop.
No. Elucidation
(Million Rp)
On respond to market changes probability
1. Fixed cost 74,790 that occurred during farm manufacture of
2. variable Cost 106,950 coconut sugar operations, performed several
3. Additional cost 1,2 simulations of increase raw material prices of
Total cost 182,940 coconut niraas well as decrease in selling prices
of coconut sugar. Sensitivity analysis of offarm
Source: Processed Data (2015)
manufacture of coconut sugar, assuming other
The financing of farm manufacture of variables remain visible in Table 6.
coconut sugar consists of fixed and working Table 6. Financial Feasibility Analysis Results and
capital during the initial 3 months of bussines. Sensitivity of Price Changes
Fixed capital entirely sourced from bank loans, Price
while the working capital derived from equity NPV PP
No changes Net IRR
commentary (Million (yrs,
and bank financing. The working capital as %
Value
Rp.)
B/C (%)
mth)
much as 65 percent from bank loans and the (Rp.)
1. Basic price 0 17.000 564,028 2,60 12,31 3,2
remaining 35 percent comes from the self-
2. Sugar price (-) 10 15.300 155,720 2,21 9,25 3,9
financing. Meanwhile, the depreciation of 3. Sugar price (-) 15 14.450 -48,434 2,02 5,17 4,2
investments was calculated by straightline Roomie price
10 220
method. Recapitulation of venture capital 4. (+) 107,408 2,19 8,24 3,10
requirements presented in Table 4. Sugar price (-) 10 15.300
Roomie price
Table 4. Summary of Venture Capital of Farm 30 260
5 (+) -1,839,054 1,24 5,20 6,9
Manufactureof Coconut Sugar Sugar price (-) 15 14.450
Source: Processed Data (2015)
Description Owner's Loan Funding
equity (Million Needs
(Million Rp) At 7 percent discount factor, the value of
(Million Rp)
NPV is amount of Rp. 564,028 million. This
Rp)
means that farm manufacture of coconut sugar
Investation - 105,300 105,300 generate profits of NPV value over a period of
Working 5,336 9,909 15,245 20 years shows that the farm is feasible to be
capital develop. The IRR value of 12.31 percent is
Amount 5.336 115,209 120,545 greater than 7 percent of credit interest rate. Net
Percentage 35 % 65 % 100 % Benefit Cost (NBC) obtained with a ratio of
Source: Processed Data (2015) 2,60. This implies Rp.1 invested will gave
benefit amount to Rp. 2,6. Payback of period is
After all basic assumptions structured and 3 years plus 2 months. Investment payback of
the capital designed based on direct price survey, period is faster than the credit period.
the next step is to analyze the financial feasibility Based on the sensitivity analysis of price
changes by assuming other variables remain, the
 Matondang, Agus Suman, Sasongko & Putu Mahardika, Local Economic Develovement … 53
farm manufacture of coconut sugar is still
profitable up to a 10 percent price reduction
although it will require a slightly longer PP to 3
years and 9 months. Decline in selling prices of
coconut sugar by 10 percent resulting NPV at
Rp. 155,720 million or still very profitable over
a period of 20 years. Meanwhile, NBC value is
still stands at 2.21. IRR value remains greater
than real interest rate value of amount at 9,25
percent. That is, the interest rate of IRR
generated benefit amount of NPV.
Based on combination scenarios of increase
of coconut nira purchase prices by 10 percent
with a decrease in selling prices of coconut sugar
by 10 percent indicates that farm manufacture of
coconut sugar is still profitable. It is known from
NPV of amount Rp107,408 million over a period
of 20 years. NBC value obtained was 2,19.
Meanwhile the value of IRR stands at 8,24
percent, or greater than 7 percent of real interest
rate value. For a payback period of 3 years plus
10 months is still faster than bank credit period.
Based on the results of financial analysis is
known that farm manufacture of coconut sugar
is feasible to be developed although with some
market shock scenarios. These results supported
the research of Mahmud and Ferry, (2005);
Damanik, (2007); Bank Indonesia, (2009) and
Kuswanto, (2011). The same study also cited the
results of Sari, (2011); Romano, (2011); Lay and
Pasang, (2012); Bustami et.al, (2014).
4.2. Qualitative Descriptive Analysis
In line with growing awareness of healthy
lifestyle among the citizen, the increasing
demand for coconut sugar product gives chance
to increase the farmers' income (Manohar et al,
2007). However, based on field observations
known that farms manufacture of coconut sugar
in the district of West Sei Kepayang are still
using simple technologies and have led to low
productivity. On the other hand, according to
Mankiw, (2006), demand are influenced by
offered prices by producers to consumers. In
addition, coconut sugar prices also affected by
market demand (Manurung and Rahardja, 2006).
In the context of coconut sugar products, price
was very dependent on season. In rainy season,
coconut nira production becomes over whelming
so that coconut sugar price to be down.
Therefore, to boost farm manufacture
productivity of coconut sugar is necessary to
empower farmers to apply the right technology
to improve coconut sugar quality.
In terms of marketing, coconut sugar
products must be through a long chain so that
farmers do not have strong bargaining power to
determine the selling price (Departemen
Pekerjaan Umum, 2004). The limitations of
market information made coconut sugar product
had not absorbed optimally. To cut long chain of
coconut sugar marketing and to facilitate
coconut sugar producers in obtaining market
information and marketing their products,
farmers need to be established economic
institutions such as cooperatives, associations
(Damanik, 2007).
In the LED development, it’s necessary the
trained institutions to empowerhuman resources
through increasing mastery of technology,
information and access to finance as well as
marketing the products individually or in groups
(Tarigans, 2003). These inseparable from local
government, private sector and cooperatives
role. This is consistent with the results of
research and Corona Rodriguez-Pose (2012),
Reese (2006), and Valler (1996) concluded that
the participation of every stakeholder and the
work ethic were the key to entrepreneurial
success in LED. Therefore, empowering farmers
to develop farm manufacture of coconut sugar
should be supported through the provision of
venture capital, development of social economy
supported infrastructure, establishment of
peasant economy and provide training of
technology used.
5. CONCLUSION
The results of financial feasibility analysis
showed that farm manufacture of coconut sugar
is profitable enough to be developed in the
central areas of the coconut by taking into
account capital availability, adequate supplies of
raw materials and marketing ability of the
product. However, to generate maximum benefit
level required more comprehensive comparative
analysis, the use of better alternative
technologies, both technical, financial and socio-
economic benefits.
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Palavicini. 2012. Does Local Economic
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Integrated Coconut Processing Industry
in the Province of Aceh. Journal Agrisep
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Sari, M.,K. 2011. Opportunity and Potential of
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Suliyanto, Suroso, Agus, dan Dian, Purnomo
Jati. 2013. Potential and Problems of
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Tarigans, D.D. 2003. Development of Rice-
Based Coconut Farming through the
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Financial, Economic And Environmental Feasibility Analysis Of Palm Sugar

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 International Journal of Economics and Management Systems
I. S. Rianse et aL. http://iaras.org/iaras/journals/ijems

Financial, Economic And Environmental Feasibility Analysis

Of Palm Sugar Domestic Industry In Kolaka Indonesia

ILMA SARIMUSTAQIYMA RIANSE, WEKA GUSMIARTY ABDULLAH, LA ODE MIDI

Faculty Of Agriculture
Universitas Halu Oleo
Kampus Hijau Bumi Tridharma Anduonohu, Kendari 93232
INDONESIA
Ilma_lov3@yahoo.co.id, wkgusmiarty09@yahoo.com, l_ode_midi@yahoo.co.id, http://uho.ac.id

SLAMET HARTONO, ANY SURYANTINI, JAMHARI

Faculty Of Agriculture
Universitas Gadjah Mada
Jl. Flora, Bulaksumur, Yogyakarta, 55281
INDONESIA
hartono.slamet@yahoo.com, suryantini@yahoo.com, jamhari@ugm.ac.id http://faperta.ugm.ac.id

WEKA WIDAYATI
Faculty Of Geography
Universitas Halu Oleo
Kampus Hijau Bumi Tridharma Anduonohu, Kendari 93232
INDONESIA
weka_widayati@yahoo.com http://uho.ac.id

Abstract: One of the household agro-industries that have been run for a long time by the people in Southeast
Sulawesi is palm sugar agroindustry. Production activities often led to externality or external impact. Benefit
externality in palm sugar industry is that the palm trees producing saps used to make palm sugar have
ecological value. The existence of these plants can absorb carbon emissions and supports land and water
conservation. The palm sugar production can also generate negative externalities because the needs for fuel are
met by forest firewood. The environmental feasibility of an industry is now an important and strategic issue that
must be addressed properly and the industrial performance should be improved continuously, so does the palm
sugar domestic industry. Therefore, this study aims at determining the financial, economic, and environmental
feasibility of the palm sugar domestic industry. The analytical method used was the Extended Benefit-Cost
Ratio. The results of the study indicate that the palm sugar domestic industry was financially feasible (BCR
1.63) with Net Present Value (NPV) of IDR 79,108,459.75, economically feasible (SBCR 8.69) with NPV of
IDR 613,547,754.74 and environmentally feasible (EBCR 9.48) with NPV of IDR 636,521,858.41.

Key-Words: palm sugar, extended benefit-cost ratio, financial feasibility, economic feasibility, environmental
feasibility, benefit externality

1 Introduction businesses in Southeast Sulawesi are characterized

One of the household agro-industries that
have been run for a long time by the people in
Southeast Sulawesi is palm sugar agroindustry.
Sugar processing business is an effort to diversify
sugar and increase of the utilization of palm sap
economically and stimulate the participation of rural
communities in increasing the family income, even
though the processing is still using simple
equipments or done traditionally with limited human
resources [1]. Generally, the palm sugar processing
by very simple technology and rely solely on family
labor or even done by one or two people [2].
In general, a sustainable development has
three dimensions: economic, social, and
environmental. Specifically, [3] argued that there
are at least three requirements of sustainable
agriculture in a farming system: the productivity of
plants and animals, socio-economic feasibility, and
the maintenance of natural resources in the long
term. A sustainable development must be able to
pursue the achievement of economic goal

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I. S. Rianse et aL.
(efficiency) such as the increase of income;
social/distributive goal in such as the ability to
narrow a gap between the rich and the poor; and
environmental goal such as the increase or, at least,
maintenance of environmental carrying capacity.
Sustainability is defined as an effort to improve the
welfare of the present generation while maintaining
or without damaging environment in order to
continuously support the next generation’s welfare.
Raw materials used to make palm sugar
derived from palm tree sap. Palm sap is liquid that
tapped from palm trees’ male flowers as results of
the metabolism in the trees. The palm sap contains
10-15% of sugar. By the sugar content, the palm sap
could process into palm sugar. However, the sap
used is fresh one.
However, production activities often lead to
externalities or external impacts. Externalities can
occur between producers, between consumers or
between producers and consumers. The externalities
are negative if the activities in a group caused the
expense of other groups or they are positive if those
in a group give benefits to other groups [4].
Benefit externality in palm sugar industry is
that the palm trees producing sap to make palm
sugar have ecological values. The existence of these
plants can absorb carbon emissions and supports
land and water conservation. Entirely, the palm trees
are ideal for land and water conservation and easily
propagated by seeds. The number of seeds produced
by each of the palm trees is very much, easy to
spread naturally to the difficult terrain, resistant to
disease and drought, able to hold soil particles, able
to protect top soil from exposure to rainwater, can
add organic matter and lived relatively long.
Besides a role in land conservation, the
presence of palm population in the mountain region
is also very important for water conservation. Soil
organic matters that are added by palm population
can serve to absorb and hold rainwater in a longer
period of time. The deep and widespread roots of
palm trees can allow rainwater to seep into deeper
soil layers and stuck there for a long time. Palm tree
canopy causes slow movement of rain water on the
soil surface so that it takes longer to sink into the
soil, stored in the pores of the soil, and water does
not flow on the surface of ground [5].
Palm sugar production can also generate
negative externalities because the needs for fuel are
met using forest firewood of large quantity. If the
use of firewood is not restricted despite in small
quantity, in the long term it can gradually lead to the
insufficient availability of firewood for production
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International Journal of Economics and Management Systems
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in the future or even extremely it can be threaten to
be extinct.
The environmental feasibility of an industry
is now an important and strategic issue that must be
addressed properly and the performance should be
improved continuously. Green productivity
approach needs to be used in order that the industry
is able to increase productivity while lowering
environmental impact. If an industrial production is
environmentally feasible, it will allow achieving
efficiency in the use of natural resources, so does
the palm sugar domestic industry. Therefore, it is
necessary to study financial, economic, and
environmental feasibility of palm sugar domestic
industry.
2 Problem Formulation
Natural resources do not only produce
goods and services to be consumed directly or
indirectly, but also generate environmental services
that provide benefits in other forms. The use of a
conventional cost-benefit analysis method often
does not include ecological benefits in its analysis,
so that it is necessary to expand the cost-benefit
analysis by the Extended Benefit-Cost Ratio
(EBCR) [6].
The analysis is a method to calculate the
feasibility of an industry based on a cost-benefit
analysis considering financial, economic and
environmental dimensions. A financial cost-benefit
analysis is the ratio of direct value and direct cost at
the palm sugar producers in using actual (market)
prices.
Model 1
where:
Bt = direct use values
Ct = direct costs
r = interest rate of business loans
t = time
Direct use values are the total output values
derived from cash receipts, i.e. the results of palm
sugar sale and non-cash receipts such as the value of
unsold palm sugar and palm sap. Direct costs are the
total input values derived from cash outlay
(investment costs) and variable costs, equipment
that can be used in a period of more than one year
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(machetes, stoves, pans, mixers, jerry cans, filters, used as correction to the prevailing official
molds, and shell spoon), firewood, and labors. exchange rate [9]:
If the BCR value was > 1 in the period of
the next few years, the palm sugar domestic industry
is feasible to run from the financial side.
A economic cost-benefit analysis is the ratio Where:
of direct value and direct cost in view of local SCFt : standard conversion factor at tth
community as a whole by taking into account the Xt : Indonesia’s export value for tth year
tradable goods and non-tradable goods) using a Mt : Indonesia’s import value for tth
shadow price or so-called Social Benefit-Cost Ratio xt : Government revenue from export tax for tth
(SBCR) [7]. year
Tmt : Government revenue from import tax for tth
Model 2 year

The relationship between SCF and SER was

expressed in the following formula:

Where: SER = OER/SCF ………..………………..(4)

SBT = direct value to using output shadow prices Where,
SCT = direct costs using the shadow price input SER : shadow exchange rate (IDR/US$)
r = interest rate OER : official exchange rate (IDR/US$)
t = time
Table 1. Determination of the Shadow Prices of
If the SBCR value is >1 in the period of the next Output, Input, and Exchange Rates for
few years, the palm sugar domestic industry is Palm sugar
feasible and sustainable from an economic Variety of Outputs- Shadow Price and Social
standpoint. Inputs Opportunity Cost
Tradable direct use values are palm sugar Palm Sugar FOB – Business cost
values based on border price, i.e. Free on Board Palm sap Market (actual) price
(FOB) price and Cost Insurance and Freight (CIF) Firewood Market (actual) price
price. FOB price is used for outputs that are Stove Market (actual) price
exported or potentially exported in the future, while Coconut Oil FOB/CIF + business cost
CIF price is used for outputs that are imported or Calsium FOB/CIF + business cost
likely imported. Determination of the shadow price Other equipments Market (actual) price
of exported commodities is to multiply the FOB Labors Actual wage for labors
price by the Shadow Exchange Rate (SER) minus Place to make palm The price of land lease
business costs, while the shadow price of imported sugar
commodities is determined by multiplying the CIF Exchange Rate OER : SCF
price by the SER plus business costs.
Business costs are approximated by Determination of the shadow prices of both tradable
calculating the entire business cost from the and non-tradable inputs-outputs:
importer or exporter’s port to palm sugar domestic 1. The shadow price of tradable palm sugar
industry. [7] and [8] stated that the business costs outputs using the border price of FOB minus
are differentiated from freight charges and handling, business cost. This is because palm sugar is
including loading/unloading, fees. potential to export.
The direct costs use the shadow price of 2. The shadow price of non-tradable outputs, i.e.
tradable input over the limit price in business palm trees. Palm trees are outputs of the
location. The non-tradable inputs are estimated by farming system that cannot be imported but can
the social opportunity cost. Macro-economic policy be used for other various purposes.
caused the distorted value of foreign exchange rate 3. The shadow price of tradable inputs, i.e.
(US $) and does not describe the real value so that coconut oil and calsium. Equipment used a tool
approximation of the real exchange rate or so-called widely using domestic inputs but there is also
SER is required. Standard Conversion Factor (SCF) the content of foreign inputs, so that the

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I. S. Rianse et aL.
allocation of domestic costs and foreign costs is
50%:50% [10].
4. The shadow price of non-tradable inputs
included palm sap, firewood, stove, the price of
land lease.
Environmental cost-benefit analysis is a comparison
between direct and indirect use values as well as
direct and indirect costs or so-called as the Extended
Benefit Cost Ratio (EnBCR).
Model 3
Where,
EnBt = direct and indirect (environmental) use
values
EnCt = direct and indirect (environmental) costs
r = interest rate
t = time
If EnBCR value was >1 in the period of the next
few years, the palm sugar domestic industry was
environmentally feasible and sustainable.
The benefits of carbon storage were
calculated based on the values of carbon that can be
absorbed by the palm trees. The benefits of carbon
storage were obtained from a study by [11],
indicating that the average carbon content of total
palm trees was 0.478 tons/tree with the largest value
in the trunk reaching 0.378 tons /tree. The minimum
value of 1 ton carbon was US$10-30 [12].
The benefits of soil and water conservation
were such as water contributed by palm plantation
to prevent soil erosion and flood and improve soil
fertility. The value of soil and water conservation
was calculated using the Indonesian forest
ecological value approach in Table 2.
The results of study by the Natural
Resources Management of USAID (1998) showed
that the conservation forest has ecological values as
seen in the table below:
Table 2. Indonesian Forest Ecological Values
Various Values US$ Per Hectare
Per Year
Soil and water conservation 37.97
Carbon absorption 5.00
Flood protection 48.64
Water transportation 5.30
Biodiversity 9.45
Source: [13]
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Direct costs in palm sugar domestic industry
are investment and operational costs. The indirect or
external costs refer to the environmental values or
benefits of forest environment, which lost or
reduced due to the activity to make palm sugar such
as: (1) the loss of timber and non-timber potentials
(opportunity costs) due to the use of firewood, (2)
the cost of losing nutrients in soil due to erosion,
and (3) the cost of losing carbon absorption.
To examine the financial, economic, and
environmental feasibility of palm sugar domestic
industry, the following hypotheses were developed.
Ho : BCR, SBCR, EnBCR = 1
Ha : BCR, SBCR, EnBCR > 1
If BCR, SBCR, and EnBCR values were 1, H0 was
accepted, meaning that the palm sugar domestic
industry was financially, economically, and
environmentally not feasible and sustainable. If
BCR, SBCR and EnBCR values were >1, H0 was
rejected, meaning that the palm sugar domestic
industry was financially, economically, and
environmentally feasible and sustainable.
The one-sample t-test was carried out using the
formula:
where
where:
= average BCR, SBCR, EnBCR
= comparative value
= standard deviation
= number of sample palm sugar producers
= (n-1: α)
If tvalue was > ttable, H0 was rejected or BCR, SBCR,
and EnBCR were >1, palm sugar domestic industry
was financially, economically and environmentally
feasible.
3 Problem Solution
3.1 Financial Cost-Benefit Analysis
The financial analysis is an analysis to
determine the feasibility of palm sugar domestic
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I. S. Rianse et aL.
industry using the market price. Financial
calculation calculates direct use value and direct
costs without including the impact on environment.
Based on Table 3, calculation of the
feasibility of industry estimated for 25 years showed
that NPV obtained was IDR 79,108,459.75 with a
discount factor of 22 per cent. Calculation of the Net
Benefit/Cost Ratio of palm sugar domestic industry
produced a value of 1.63, indicating that each cost
unit spent for the palm sugar domestic industry will
benefit a value of 1.63 units. The results of one-
sample t-test showed that the tvalue (18,317) was
greater than ttable (2.646). Thus, H0 was rejected,
meaning that the palm sugar domestic industry was
financially feasible to run. The Net B/C ratio greater
than one showed the palm sugar domestic industry
in Kolaka Regency was feasible to run.
Table 3. The Financial Feasibility of Palm sugar
domestic industry in Kolaka Regency
No. Parameter Results
1 Net Present Value 79,108,459.75
2 Net B/C Ratio 1.63
Source: Primary Data Analysis, 2014
3.2 Economic Cost-Benefit Analysis
The economic analysis was intended to look
at the cost-benefit of palm sugar domestic industry
in view of the standpoint of communities as a whole
by using the shadow price.
The economic feasibility analysis of palm
sugar domestic industry in Kolaka Regency was
estimated by using a social interest rate of 23.36 per
cent in 2014. The calculation of feasibility was from
the difference between costs and benefits annually,
so that a net benefit was obtained from the results of
palm sugar sale. The calculation for an economic
feasibility analysis of palm sugar domestic industry
in Kolaka Regency can be seen in Appendix.
Results of the calculation of economic feasibility
analysis of palm sugar domestic industry in Kolaka
Regency can be seen in Table 4 below.
Table 4. The Economic Feasibility of Palm sugar
domestic industry in Kolaka Regency
No. Parameter Result
1 Net Present Value 613,547,754.74
2 Net SB/SC Ratio 8.69
Source: Primary Data Analysis, 2014
Based on the table, a calculation of industry
feasibility estimated for 25 years showed that NPV
obtained was IDR 613,547,754.74 with a discount
factor of 23.36 per cent. The calculation of Net
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International Journal of Economics and Management Systems
http://iaras.org/iaras/journals/ijems
Social Benefit-Cost Ratio of palm sugar domestic
industry resulted in a value of 8.69, indicating that
each unit of cost for palm sugar domestic industry
will benefit a value of 8.69 units. The Net Social
B/C ratio values greater than one show that the palm
sugar domestic industry in Kolaka Regency had
economic feasibility. The results of the one-sample
t-test showed the tvalue (11,258) was greater than ttable
(2,646). The results of statistical test showed that H0
was rejected, so that the palm sugar domestic
industry was feasibly to run.
3.3 Environmental Cost-Benefit Analysis of Palm
sugar domestic industry
This analysis was an Extended Benefit Cost
Ratio by using the calculation of economic
opportunity costs and shadow price, and included
the environmental cost-benefits analysis derived
from the palm sugar domestic industry.
Based on Table 8, a calculation of the
feasibility of industry estimated during 25 years
showed that NPV obtained was IDR 636,521,858.41
with a discount factor of 23.36 per cent. Calculation
of the Net Environment Benefit-Cost Ratio of palm
sugar domestic industry produced a value of 9.95,
indicating that each unit of cost spent for palm sugar
domestic industry will benefit a value of 9.95 units.
The Net Value Extended Benefit-Cost Ratio value
higher than one showed that the palm sugar
domestic industry in Kolaka Regency has an
environmental feasibility. The result of one-sample
t-test showed that the tvalue (12,022) was greater than
ttable (2,646). The results statistical tests showed that
H0 was rejected, so that the palm sugar domestic
industry was environmentally feasible to run.
Table 5. Environmental Feasibility of Palm sugar
domestic industry in Kolaka Regency
No. Parameter Result
1 Net Present Value 636,521,858.41
2 Net EBCR 9.48
Source: Primary Data Analysis, 2014
4 Conclusion
Based on the results of the study, it can be
concluded that the palm sugar domestic industry
was financially feasible (BCR 1.63; NPV
IDR 79,108,459.75), economically feasible (SBCR
8.69; NPV IDR 613,547,754.74), and
environmentally feasible (EBCR 9:48; NPV
IDR 636,521,858.41). Thus, palm sugar is a product
108 Volume 1, 2016
 International Journal of Economics and Management Systems
I. S. Rianse et aL. http://iaras.org/iaras/journals/ijems

feasible to develop in Southeast Sulawesi. The [10] Rachman, B., Dampak Keberhasilan Putaran
existence of palm plants gives great economic and Urugay (GATT) terhadap Usaha
environmental benefits, so that the cultivation of Pengembangan Ternak Sapi Perah di Jawa
palm tree needs to be done to ensure the availability Barat, Tesis, Program Pasca Sarjana, Institut
of palm sugar raw materials and provide Pertanian Bogor, 1995.
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ISSN: 2367-8925 109 Volume 1, 2016

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Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.9, No.18, 2018

Technical Efficiency of Coconut Sugar Agroindustry in

Pangandaran District, West Java Province, Indonesia
Fitri Yuroh* Ida Maesaroh
Faculty of Agriculture, University of Galuh
Jl. R.E. Martadinata No. 150 Ciamis 46274

Abstract
The study was carried out with the aim to determine the factors that influence production, the level of technical
efficiency achieved, and the factors that influence technical inefficiency in coconut sugar agroindustry in
Pangandaran District, West Java Province, Indonesia. Research samples were 100 agroindustry. Data analysis
was carried out using a stochastic frontier production function where data processing used Front41 with TE
effect model. The results of the study show that raw materials, firewood and labor have a positive and significant
effect on coconut sugar production in Pangandaran District. The efficiency level achieved ranges from 0.59 to
0.99 with an average of 0.70. Education, experience, family size, and number of tapped coconut trees have a
significant effect on technical inefficiency; while age has no significant effect.
Keywords: Coconut sugar, Agroindustry, Technical Efficiency, Technical Inefficiency

1. Introduction
The sugar industry development program based on coconut plants is very appropriate and strategic to be
developed in centers of coconut plants in all regions of Indonesia (Supomo, 2007). One potential of agroindustry
in Pangandaran District is coconut sugar agroindustry. More than 70 tons of coconut sugar are sent to big cities
on the island of Java (Anonymous, 2015). Coconut sugar agroindustry has a relatively simple technology
characteristic, labor intensive and production does not depend on market demand but based on the availability of
raw materials (Maharani, et al., 2011).
Some studies show that the factors that influence technical inefficiency are: education, age, off farm income
(Diamini, et al, 2010), education, experience (Taru, et al, 2011), family income, education, experience (Saptana ,
2012), age, education (Hussain, et al, 2014), farming size, education, age, extension (Supaporn, 2015).
The study was carried out with the aim to determine the factors that influence production, the level of
technical efficiency achieved, and the factors that influence technical inefficiency in coconut sugar agroindustry
in Pangandaran District, West Java Province, Indonesia.

2. Research Methodology
The study was carried out in Pangandaran District, West Java Province, Indonesia. Pangandaran District consists
of 10 subdistricts, namely Parigi, Cigugur, Cijulang, Cimerak, Kalipucang, Langkaplancar, Mangunjaya,
Padaherang, Pangandaran, and Sidamulih. The whole subdistrict has coconut sugar agroindustry. Each
subdistrict took 10 coconut sugar agroindustry, so the sample size was 100.
The study utilized stochastic production frontier, and the model is defined by:
ln Y = 0 + 1lnX1 + 2lnX2 + 3lnX3 + vi – ui (1)
where: Y = production (kg), X1 = raw material (liter), X2 = firewood (m3), X3 = labor (workday),  = coefficient
of regression, vi = random error, and ui = technical inefficiency effects in the model.
Inefficiency model was defined to estimate the influence of some farmer’s socio-economic variables on the
technical efficiency of the farmers. The model is defined by:
i = 0 + 1Z1 + 2Z2+ 3Z3 + 4Z4 + 5Z5 + 6D1 + 7D2 + 8D3 (2)
where: i = technical inefficiency, Z1 = age (years), Z2 = education (years), Z3 = experience (years), Z4 = family
size (persons), Z5 = number of tapped coconut trees (trees),  = regression coefficient.

3. Results and Discussion

Factors that influence production and the level of technical inefficiency in coconut sugar agroindustry in
Pangandaran District can be seen in Table 1.

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Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.9, No.18, 2018

Table 1. Maximum Likelihood Estimates and Inefficiency Functions

Variable Parameter Coefficient Standard Error t-ratio
Production function
Constant 0 0.4457 0.0763 5.8391a
Raw material 1 0.3550 0.0547 6.4948a
Firewood 2 0.1772 0.0351 5.0521a
Labor 3 0.6875 0.1333 5.1566a
Inefficiency function
Constant 0 -0.0309 0.2660 -0.1160
Age 1 -0.1550 0.1359 -1.1401
Education 2 -0.2539 0.1318 -1.9257c
Experience 3 0.0495 0.0339 1.4583d
Family size 4 -0.1182 0.0619 -1.9085c
Number of tapped coconut trees 5 0.4099 0.1180 3.4721a
Sigma square 0.0036 0.0006 6.2521a
2
Gamma 0.3961 0.1548 2.5582b

Log likelihood function = 151.7384*
LR Test = 13.7595*
a,b,c,d significant at 1,5,10,15%
Sigma-square value (σ2) more than zero indicates that the coconut sugar agro-industry in Pangandaran
District has not yet reached full efficiency level. A value of γ more than zero indicates the effect of technical
inefficiency in the model. Value of γ equal to 0.3961 indicates that the variation of error term values in the
model of 39.61 is caused by technical inefficiencies.
Table 1 shows that raw materials have a positive and significant effect on coconut sugar production. The
more raw materials used, the more coconut sugar is produced. The results of this study are consistent with the
results of research from Suyudi et al (2007), Indarwati (2009), Rusmiati et al (2011), and Wibisono et al (2012).
Firewood has a positive and significant effect on coconut sugar production which shows that the more use
of firewood, the more coconut sugar production. The results of this study are in accordance with the results of
research from Aliudin et al (2011). Coconut sugar agro-industry in Pangandaran District uses firewood as fuel in
the process of producing coconut sugar.
Labor has a positive and significant effect on coconut sugar production which shows that the labor used in
the process of coconut sugar production is a workforce that has competence in the process of producing coconut
sugar. The results of this study are in accordance with the results of research from Anggiadita and Sujarwo
(2016), and Ali and Jan (2017).
Age has a negative but insignificant effect on technical inefficiency which indicates that increasing age
causes more technically efficient. The results of this study are in accordance with the results of research from Ali
and Jan (2017), and Ali et al (2013).
Education has a negative and significant effect on technical inefficiency which shows that the higher the
level of education causes the higher level of technical efficiency achieved. The results of this study are in
accordance with the results of research from Suharyanto et al (2013), Kune et al (2016).
Experience has a positive and significant effect on technical inefficiency which shows that increasing
experience will increase technical efficiency. The results of this study are in accordance with the results of
research from Isyanto et al (2013), Rivanda et al (2015), and Burhansyah (2016).
Family size has a negative and significant effect on technical inefficiency which indicates that increasing
family size will increase technical efficiency. The results of this study are in accordance with the results of
research from Yoko et al (2014), Thamrin et al (2015), and Yusuf and Isyanto (2017).
The number of tapped coconut trees has a positive and significant impact on technical inefficiency which
indicates that the more number of tapped coconut trees will increase technical efficiency. The results of this
study are in accordance with the results of research of Maemunah and Isyanto (2017) which shows that the
greater the business scale, the higher the level of technical efficiency achieved.
The level of technical efficiency achieved in the coconut sugar agroindustry in Pangandaran District ranges
from 0.59-0.99 with an average of 0.70. Frequency distribution of the level of technical efficiency can be seen in
Table 2.

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Journal of Economics and Sustainable Development www.iiste.org
ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online)
Vol.9, No.18, 2018

Table 2. Frequency Distribution of Technical Efficiency

Efficiency Frequency Percentage
0.41 – 0.50 2 2.00
0.51 – 0.60 20 20.00
0.61 – 0.70 38 38.00
0.71 – 0.80 18 18.00
0.81 – 0.90 16 16.00
0.91 – 1.00 6 6.00
Total 100 100.00
minimum = 0.59; maximum = 0.99, mean = 0.70
Table 2 shows that the efficiency level is 0.71 as much as 60%, while that above 0.71 is 40%. This shows
that most of the agro-industries are not technically efficient in using production factors. Illustration of the level
of technical efficiency achieved is presented in Figure 1.
40 38

35

30

25
20
20 18
16
15

10
6
5 2
0
0,41 - 0,50 0,51 - 0,60 0,61 - 0,70 0,71 - 0,80 0,81 - 0,90 0,91 - 1,00

Figure 1. Technical Efficiency

4. Conclussion
Raw materials, firewood and labor have a positive and significant effect on coconut sugar production in
Pangandaran District. The efficiency level achieved ranges from 0.59 to 0.99 with an average of 0.70. Education,
experience, family size, and number of tapped coconut trees have a significant effect on technical inefficiency;
while age has no significant effect.

5. Recommendation
Non-formal education through extension and technical assistance needs to be done in an effort to improve
technical efficiency in the coconut sugar agroindustry in Pangandaran District. It is necessary to increase the
number of coconut trees tapped through credit assistance from the government.

6. Acknowledgement
Authors say thank you to Directorate of Research and Community Service, Directorate General of Strengthening
Research and Development, Ministry of Research Technology and Higher Education, Republic of Indonesia, for
funding this research through a scheme of Penelitian Dosen Pemula of the fiscal year 2018.

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