Value Chain Investment for Sustainable Rural Development and Poverty Alleviation: A Case Study of the Indonesian Boiled Fish Market

Poverty is serious and widespread in the rural coastal areas of Indonesia. Government data suggests that more than 7.8 million people in more than 10,500 villages live below the poverty line. A rapid poverty reduction program has been conducted since 2011 through the provision of infrastructure that supports more productive industries. However, even if the infrastructure is available, can small-scale food producers in coastal areas achieve self-propelled development if they are still poor? The value chain approach to development is suggested as a complement to the existing infrastructure development program by opening up market channels for high value products through vertical linkages. Pindang or boiled fish is used as a case study, since the industry is quite large and it involves many low-income people. Its current value chain is analysed to define the bottlenecks. This leads to a conclusion that to achieve greater economic development, small-scale pindang producers could consider (a) improving their product quality and diversifying their product range, (b) increasing economies of scale by upgrading horizontal linkages, and (c) introducing new leading firms within vertical linkages.