Investment risk management for vanilla agribusiness development in Indonesia

Abstract

Indonesia's position as the world's largest vanilla producer has been replaced by Madagascar. This condition is caused by the declining quality of Indonesian vanilla. Competitiveness is related to the degree of transformation determined by investment capital, technology availability, and managerial ability. Limited investment is one of the characteristics of vanilla development in addition to high business risk and low technology adoption. It is affected by risk perceptions in production and investment behaviour of farmers. This study aims to analyse investment risks in the development of vanilla agribusiness and formulate investment risk mitigation strategies. The analysis uses Risk Matrix Analysis by measuring the degree of severity and probability, and the Analytical Hierarchy Process to assess the strategy. Agribusiness investment is an important element and catalyst to agricultural development. The risks of vanilla agribusiness investment are not only determined by risks arising from the financial aspect but also influenced by technical aspects. They are divided into production risk, price or market risk, financial risk, institutional risk, and human or personal risk. Risk mitigation strategies can be divided into on-farm strategies and share risk strategies. Stem Rot disease, vanilla theft, and price fluctuation are the most important risk in vanilla agribusiness investment.