Policy Paper

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In 2022, we supported Center of Indonesia Policy Studies (CIPS) in conducting research on Technology and Knowledge Transfers to Dairy Farms. This report provides recommendations to improve the income of dairy farmers and the quality and quantity of milk production in the country.

Technology and Knowledge Transfers to Dairy Farms in Indonesia

Indonesia’s fresh milk production is only able to fulfill 22% of national milk demands. With growing milk consumption and the national target of fulfilling at least 60% of national demands from domestic production by 2025, boosting the productivity of dairy farms becomes important. This requires more adoption of productivity-enhancing technologies, techniques, and better farm management practices by dairy farms. However, dairy farmers are predominantly smallholders, and investing in technologies is a challenge due to cost, small production scale, and a lack of information and awareness.

Partnering with the private sector offers a solution, as evidenced by case studies of technology and knowledge transfers from major milk-processing companies such as Cimory, Frisian Flag Indonesia [FFI], and Nestlé), and international development organizations operating in West Java and East Java. An example of collaboration is support for digitalization in milk collection points (MCP). The system assigns a price that reflects the quality of milk from each farmer, therefore incentivizing investment in technology, equipment upgrading, and better management by farmers to improve milk quality and production. Different contract mechanisms are applied for the technology transfers—some are put alongside a supplier agreement with mandatory supply requirements, while others are delivered as grants and loans tied to a commitment to maintaining quality and standards.

Meanwhile, public efforts for promoting technology adoption are mostly delivered as free technology provision. The provision of subsidized or free technologies is only effective at introducing technology in the short term, but it leads to pseudo-adoption behaviors; in the long term, the technologies are often disregarded. Comparisons between government and private technology transfer programs also reveal a disconnect. Government assistance often is delivered as technology or equipment grants implemented through a few vendors. The national programs overlap with local government programs and lack proper monitoring and evaluation or user training. In contrast, programs from the private sector and donors utilize a market-based and commercial or semi-commercial approach, which involves multiple stakeholders, and include standardized training and after-sale services. Public and private programs often overlap and promote conflicting knowledge.

To improve technology adoption by dairy farms, the Ministry of Agriculture (MOA) should acknowledge and facilitate the private sector’s role in technology and knowledge transfers.
This can be achieved by first providing a stronger legal basis in the following Ministry of Agriculture Strategic Plans (Renstra) and by revising and enforcing MoA 13/2017 on Partnerships in Animal Husbandry Businesses. This would lead to implementing technology and knowledge transfers as a possible partnership scheme between firms and farms. Reducing fragmentation and overlaps can be achieved by mapping existing technology transfers from the private sector, donors, and local governments. The ministry should refrain from delivering similar assistance that other stakeholders and aims have provided instead to complement and facilitate them through a market-based approach.

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