Since the commencement of the project, a considerable amount of research has been conducted, both at the farm and industry level within the coconut industry of North Sulawesi. The team at Sam Ratulangi University in Manado have completed a budgeting study, investigating the economic feasibility of mixed enterprise farming within existing coconut plantations. The findings of this research have been documented in an internal report entitled "The Opportunities for Alternative Farm Enterprises of Existing Coconut Producers in North Sulawesi". The team at Sam Ratulangi have also conducted a survey, which has been successful in obtaining up-to-date information on the state of the industry, covering both farm-level production and the downstream processing of coconut products. The data from these surveys, along with data collected previously, have been used to inform two additional studies. The first of these is the development of multiperiod, multicrop linear programming model, designed to provide information on the most profitable combination of crops and replanting strategies given typical financial and resource constraints. To date a multiperiod, monocrop model has been developed, however, it is anticipated that the model will be expanded to include multiple crops within the next few months. The second study being conducted is entitled "Marketing of Coconuts in North Sulawesi". This study aims to analyse the existing market structure of the coconut industry and the flow of the raw farm product through its various stages of processing through to the final consumer, detailing the size of the marketing margins at each stage. It is hoped that this study will help identify areas within the industry where farmers can increase their market share and the overall size of total value-added for the industry. A first draft of this report has been received and edited by the team members from the University of Sydney. Work is currently underway to enrich the analysis of this report and thus, provide more useful information to help guide policies aimed at improving farmer share of the total value-added. The findings from this study have already been used in the development of an Equilibrium Displacement Model (EDM) by team members at the University of Sydney. This model examines the economic impact of various efficiency improvements at the farm and processing stages. The development of the model and its findings formed the contents of a conference paper entitled, "The Coconut Industry of North Sulawesi: An Equilibrium Displacement Model Analysis", which was presented at the Australian Agricultural and Resource Economics (AARES) annual conference in Coffs Harbour NSW, 2005. Since then, in response to suggestions made by peers at the conference, the model had been updated considerably, and now includes information on a much wider range of industry products. This model can identify, in detail, the distribution of benefits from cost reducing productivity improvements and changes in demand within any of the markets that comprise the industry. Thus, the findings from this model should help to identify where R&D efforts should be directed in order to achieve the maximum gain for farmers and the industry as a whole.
Another major study was conducted by primarily by Rina Oktaviani, from Bogor Agricultural University, entitled "The Coconut Industry and its Impact on the Indonesian Economy". The analysis in this report was done using a computable general equilibrium (CGE) model, constructed for the purpose of examining the economic consequences of productivity improvements within the coconut industry nationally, as well as the impacts on the coconut industry of broad macroeconomic reforms. The analysis was also presented at the AARES annual conference in Coffs Harbour NSW, 2005. Work is currently underway to modify the study to give it a more regional focus. Progress to this end has already been made with the procurement of an Input Output (IO) table specific to the economy of North Sulawesi. Work is currently being done on updating and modifying the table, which contained a number of errors in its original form. The modifications to the CGE model, to provide a more regional focus will facilitate the linking of the EDM and CGE models, which is one of the major methodological aims the project.

In 2005 a substantial amount of research work was conducted, adding to the preliminary outputs of the previous calendar year. The University of Sydney appointed research assistant, Ben Henderson, spent a five month period in Indonesia, primarily at Sam Ratulangi University in Manado, but also spent time at both the Indonesian Coconut and Palmae Institute (ICOPRI) and Bogor Agricultural University. This permitted closer collaboration between The University of Sydney team and their Indonesian partners and resulted significant progress in each of the major research objectives. The major outputs of this collaboration were three AARES 2006 conference papers There were also two seminars conducted at both Sam Ratulangi University and Bogor University by Ben, which served the dual purpose of obtaining vital feedback for a market model, whilst providing staff with an introduction to equilibrium displacement modelling. Further, a seminar sponsored and organised by Dinas Perkebunan SULUT (Estate Agency of North Sulawesi) and KADIN (Business and Industrial Association of North Sulawesi) based on findings from the market model, along with those from a coconut replanting model was presented in December 2005. Participants included businessmen, government officials from both provincial and regency levels as well as a number of academics from various institutions. During his stay in Manado Ben also had the opportunity to attend the 'Coconut World' discussion held at ICOPRI on October 15 2005. Discussions were based on the potential benefits of developing a coconut-based agricultural park for research, education, tourism and promotion. Through direct discussions with representatives from institutions within North Sulawesi, Indonesia and other south east Asian and pacific countries, Ben was able to significantly expand his professional networks in the industry. Contacts were made with representatives from the following institutions: Albay Research Centre - PCA - Philippines; Institute Plant Breeding - UPLB - Philippines; Coconut and Cocoa Institute - PNG; Oil Palm Institute - Vietnam; Research Institute of Industry Standardization - North Sulawesi; APKI (Indonesia Coconut Farmers Community - North Sulawesi; Departments of Trade and Industry, Estate Crop, and the Agricultural Technology Assessment Institute - North Sulawesi; Cooperative Coconut Farmers Community - North Sulawesi; School of Land and Food Sciences - University of Queensland.

A small workshop is planned later this year for both Indonesian partners and for relevant government agency representatives, to follow up on the introductory material presented in December 2005. Other important networks included those with farmers in Amurang village, farmers and virgin coconut oil processors in Pinaling village and with Dr Julius Pontoh (UNSRAT) a biochemistry expert and advocate of virgin coconut oil (VCO) technology adoption in North Sulawesi. The collaboration with Dr Pontoh has led to plans for the development of an interdiscliplinary project to evaluate different methods for VCO production. The results of this research could have major impacts for raising smallholder incomes. Ben also spent one month at the University of Western Australia liaising with research staff.

The past year was devoted to the further development and refinement of preliminary models and studies carried out in 2004. There were three major models developed in 2004, and there were significant extensions and improvements made for each of these over the course of 2005. A number of important revisions to the Equilibrium Displacement Analysis, conducted by The University of Sydney, were made based on recommendations and advice received at the AARES 2005 annual conference in Coffs Harbour. In summary, the number of coconut industry products included in this market model was increased from three to ten, and the model was expanded to include imports and exports into and out of the Province. Additionally, during the time spent at the various institutions in North Sulawesi it was possible for the University of Sydney to obtain more up-to-date data and information compared with that used in the original displacement model. The updated analysis was reported in a conference paper at AARES 2006 annual conference in Sydney.

During 2005 there was also good progress in extending the previous work on developing a dynamic linear programming model at Sam Ratulangi University and ICOPRI. While ICOPRI were helpful in supplying data, the majority of the modelling work was conducted by team members from the Sam Ratulangi University and The University of Sydney. The preliminary monocropping model which was developed in 2004, received significant amendments in 2005, such as the inclusion of considerably more time periods, the salvage value of harvested coconut timber, an additional enterprise, as well as preliminary modifications to examine the influence of off-farm income. The focus of this modelling exercise was to examine conditions under which replanting is optimal and what the effective replanting strategy is in these circumstances. A significant part of this research was reported in a conference paper submitted and presented at the AARES 2006 annual conference in Sydney.

Team members from Bogor Agricultural University were busy over the course of 2005 making modifications to a CGE model that was developed in 2004, and presented at the 2005 AARES annual conference at Coffs Harbour. The changes were aimed at giving their model a more regional focus. Initially, it was thought that the regional extension should be done using a 'bottom up' approach, which required an Input Output table for North Sulawesi detailing flows between the coconut industry and every other industry within North Sulawesi as well as those between the Province and other regions in Indonesia. Whilst an Input Output table was obtained early in 2005 it was poorly constructed and required substantial modifications to make it balanced and usable. Several attempts using various techniques were used to try and achieve this, but all were unsuccessful. Finally, by using a less data intensive 'top down' approach for the regional extension it was possible to use the national 2000 Input Output table, in conjunction with region specific data for consumption, investment, stocks, import, exports and government expenditure data obtained from the EMERALD model (developed by Monash University). This extension allowed the estimation of region specific impacts from investments in the coconut industry at the national level. The regional analysis is still in its preliminary stages, and was reported in a conference paper at the AARES 2006 annual conference in Sydney.

In addition to the development and refinement of these models, other work from 2004 including farm and market surveys and reports were updated and included in a final project report, which will be provided for review in June 2006.

During the last twelve months a significant amount of work was undertaken tying all the various components of the research together for presentation at the Final Review which was conducted in Manado, Indonesia on June 13, 2006. Review participants included not only members of the research team but also industry and regional personnel.

Following the Review editorial work has been undertaken in relation to the publication of both an ACIAR Technical Report, based on the report finalised for the Review, and on a series of policy briefs for use within North Sulawesi and Indonesia as a whole. The aim of these reports is to disseminate information to a wider audience and serve as a reference for the Indonesian coconut industry with particular reference to North Sulawesi.

Arrangements have also been made to conduct an Equilibrium Displacement Workshop in Bogor to provide training for other researchers in this technique. It is hoped that this workshop will proceed in either late 2007 or early 2008.