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Feasibility of Agarwood Cultivation in Indonesia: Dynamic System Modeling Approach

Most of the Indonesian agarwood in the international market is harvested from the wild, which raises concerns regarding its sustainability. The Government of Indonesia encourages agarwood cultivation produced from the cultivated Agarwood-Producing Tree (APT) to overcome this concern and replace natural agarwood. APT cultivation in Indonesia is not a new development, but it has faced various obstacles, ranging from production quantity and quality to funding and marketing. Therefore, an appropriate policy is needed to support the success of APT cultivation. This study aims to develop a dynamic system model in order to identify the gaps and determine appropriate policy strategies to improve APT cultivation in Indonesia. The model was established by compiling three conceptual stages: planting to harvest, cost–benefit analysis, and feasibility analysis. Agarwood from Aquilaria malaccensis Lam. cultivated by the community and private sector, which produces kemedangan (an agarwood grade in the Indonesian market) and oil, was chosen for the model. The model developed shows that APT cultivation development in the private sector and the community is unfeasible with the business as usual. There are three options to simulate the feasibility of agarwood produces from APT cultivation. The best scenarios are chosen based on the feasibility indicator, when benefit is higher than cost. The development of APT by the private sector that produces kemedangan and oil products is feasible, with the invention of more effective inoculant and processing technology (scenario 1), as well as applying high thinning, which can increase the yield. Oil production requires more investment, so the revenue obtained is lower than the production cost, resulting in the unfeasibility of the production. The development of APT by the community will be feasible with scenario 2, if there is government funding for the establishment of APT cultivation, inoculants application, and harvesting. Based on the model scenario, APT cultivation will be ecologically sustainable, economically feasible, and socially acceptable if carried out by the private sector or the community by applying inoculation techniques and selecting inoculants to increase production effectiveness, and will be supported by lower production costs and market stability. The Indonesian government needs to take several policies to encourage APT development, including financial assistance for APT development, setting inoculant standards at affordable prices, simplifying trade administration, stabilizing agarwood product prices at the local level, and law enforcement.