10 - Trading past the Market-Place: The Case of Cloves (UM)

Summary

Until a few years ago, cloves, like other agricultural produce, were sold by small traders or by the peasants themselves in the local market-place. Today, however, the trade in cloves is subject to government regulations and bypasses the market-place. In summer 1983, for example, the peasants received a guaranteed price of Rp7,500 for 1 kg. of cloves. According to regulations, the KUD (Koperasi Unit Desa, or local agricultural co-operative), of which almost all peasants are members, collects the entire harvest and ships it to PUSKUD (Pusat KUD, the central office of the local KUDs in the district) in Manado, which finally sells it at an auction. However, there is hardly any competition among bidders. Usually, the bulk of the harvest is purchased by PAP (Pedagang Antar Pulau, inter-island traders), an almost exclusively Chinese-owned corporation connected with the kretek cigarette industry in Java. In case the auction price slips below the floor price of Rp7,500 per kg., a government institution (Penyangga) is to step in and purchase the amount of cloves affected.

The actual marketing of cloves, however, deviates quite considerably from the above regulations. Recently, the village KUD of Kakas ran out of money, mainly because, in addition to a case of embezzlement that was said to have occurred among the administrative staff of the co-operative, many peasants failed to repay their loans, with the consequence that the banks refused to provide further money which was badly needed for purchasing the local clove harvest. At the same time, for some reason the government institution that was to guarantee the floor price suffered a serious shortage of money, so that the whole marketing system for cloves has de facto been modified in a way that conflicts with the regulations. This applies particularly to the PAP activities. Now, since the local KUD is unable to buy the clove harvest, PAP contacts the peasants directly, bypassing the KUD. For this purpose PAP employs one or two agents per subdistrict who closely co-operate with approximately ten local traders who approach the peasants directly.