Entry Barriers in Rural Business: The Case of Egg Production in Eastern Indonesia

Abstract

Market liberalisation should ideally enhance the chances for development of rural business. Yet, entry barriers in poor areas are still high and local resources like land and labour, remain underutilised. This article searches for reasons behind entry barriers in one specific business, in rural Indonesia, namely layer egg production. In Indonesia, the poultry business is strongly concentrated in Java, and the huge populations on other islands are practically without commercial egg producers. Egg prices in these regions are therefore high and quality is low. The research is based on fieldwork in five of Indonesia’s islands: Java, Bali, Lombok, Sumbawa, and Flores. Traditional entry barriers, like capital costs, economies of scale, brand loyalty, and technological development, are found to be low. Main explanations for the lack of entry by small-scale entrepreneurs are: limited information and knowledge; uncertainties due to the concentration and market dominance by powerful business groups. The gap is wide between those who know and control and those who do not. Lowering entry barriers into layer egg and feed production is mainly a matter of increasing competence at the household level, but institutional changes are also required. Government institutions should play a stronger role in competence development, and local cooperatives could facilitate stable supply of quality feed.