Improving Coffee and Agroforestry Livelihoods in Timor-Leste

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Coffee is Timor-Leste’s most important non-oil export, bringing much-needed revenue to the country. Magdalena Salsinha has been picking coffee since she was 15 years old. Now 55, she lives near Ermera and is married with six children.  Photo ID 470250. 15/04/2011. Timor-Leste. UN Photo/Martine Perret. www.unmultimedia.org/photo/

To uplift conditions for farmers in Timor-Leste, the Asian Development Bank in 2020 began organizing a project called Coffee and Agroforestry Livelihood Improvement Project. Using an initial grant of US$4.5 million, the team leading this effort focused on implementing a new coffee sector development plan.

Their strategy is to pilot a new model for training 2,000 coffee farming households in the Aileu, Ainaro, Bobonaro, Ermera, Liquica, and Manufahi municipalities. These households receive training on good agricultural practices for production of coffee and related crops — and they get access to finance.

The project aims to strengthen industry management by supporting initiatives which improve coffee quality and strengthening critical linkages with key markets. The project team believes that this promotes both rural development and food security.

Improvements in coffee production and processing offer one of the clearest pathways for reducing poverty in Timor-Leste and growing its non-oil economy. Coffee provides an important source of cash income for around 27.5% of Timorese households, and it is the country’s largest non-oil export.

However, the coffee sector currently operates far below its long-term potential. Production is low and volatile, quality is inconsistent, and sector management is weak. Current yields of arabica coffee are approximately 200kg of green bean equivalent per hectare (ha). This compares to a global average of 743kg/ha, and an average yield in comparative countries of 787kg/ha.

As a result, many coffee producing households live in extreme poverty. Strengthening sector management and providing targeted support to small-holder producers generates sustained increases in household income. If implemented at scale, this could have a significant impact on the national poverty rate and growth of non-oil exports.

There have been several phases in the development of Timor-Leste’s coffee sector. The first significant plantings were made in the 1860s when Portuguese colonial authorities required households in some areas to plant coffee. During 1890–1920, large private and state-owned plantations were established with support from the colonial government. Since then, the sector grew through increased planting by smallholder farmers. These farmers often acted on their own initiative, but the colonial period also saw a range of government sponsored programs to encourage — or coerce — local people into producing coffee.

From 1975 to 1994, one company was granted an exclusive license to manage the plantation sector and coffee trade. The Indonesian military played a substantial role in the coffee trade during this period, and the price paid to smallholders there was as little as 1/6 of the price paid in other parts of Indonesia.

This contributed to a local loss of knowledge, while underinvestment in the plantation sector led to a steady decline in production. The state-backed monopoly ended in 1994, and since then a range of new business models and markets for Timorese coffee have been developed. Efforts to rehabilitate unproductive farms have also begun, but a huge amount of work remains to be done.

In Timor-Leste, coffee bushes are planted under the shade of larger trees that form continuous areas of forest. This is a form of agroforestry that provides a range of economic products and eco­system services. The shade trees help to stabilize the soils on steep slopes, increase the infiltration of rainfall to aquifers, sequester carbon, and provide a habitat for a wide range of flora and fauna. They can also help to improve soil fertility by fixing nitrogen, and they provide a source of timber and edible fruits. Other economic crops can also be grown within this system, including foods like banana, taro, arrowroot, and spices such as ginger, turmeric, pepper, vanilla, and cloves.

The government increasingly understands that establishing and maintaining productive agroforestry systems requires hands-on management — plus the significant use of labor and other inputs. In Timor-Leste, many smallholder households minimize their labor input and make little or no use of other external inputs. This means that they don’t make full use of proven approaches for improving production such as spaced planting, regular pruning, composting, and pest management. As a result, coffee trees are often old and overgrown, soil fertility is low, and production is affected by a range of pests and diseases. This reduces average yields, which are among the lowest in the world, and amplifies climate-induced variations in annual yields.

Many smallholders continue to live in poverty due to low, volatile production and inconsistent quality. Implementation of a simple package of good agricultural practices can triple coffee yields, but most households need training and other support to do this. Training by public extension officers and private companies is poorly coordinated and insufficient. A survey of households from 25 communities in the main coffee-growing region found that only 14% received training on coffee production during the past four years. The same survey also found that training had very little impact on reported yields. This could reflect weaknesses in training delivery, and other constraints to farmers’ adoption of new practices such as extreme poverty, a lack of access to financial services, household labor shortages, and insecure land tenure.

Many coffee producing households rely on the crop for a majority of their cash income. This income is highly seasonal, and the incidence of household poverty is significantly higher in coffee-producing areas. Households that lack access to formal financial services may use informal mechanisms to smooth their consumption.

However, one survey found that 45% of coffee-producing households significantly reduced their food consumption in the months preceding the harvest, with half of the surveyed households eating one meal or less per day. Hunger, and the need to seek other sources of cash income, constrains household labor input during the pre-harvest period and discourages the adoption of new technologies. Helping smallholder farmers to access formal financial services would enable them to build up savings and to access credit on more favorable terms. This would complement and reinforce interventions to increase smallholder productivity.

Pruning and replanting old trees is crucial for increasing productivity but leads to an initial loss of income until those trees return to full production. This temporary loss of income likely deters poor households. Insecure land tenure also reduces the incentive for investment by some households. Around 25% of the land planted with coffee is state owned and occupied by smallholder farmers who lack clear title. A survey found that 17% of households in Ermera district and 12% of households in Ainaro district perceived some risk of dispossession within the following five years. A new land law was approved, but implementing regulations are still being developed, and it will take time to resolve historical land disputes under the new legal framework.

Improving the price that farmers receive for their coffee can amplify the benefits of increased production. This can be achieved by improving value chain efficiency, increasing local value addition, and increasing the share of exports that are sold for a premium.

Timor-Leste currently exports most of its coffee as a commodity-grade product with little or no differentiation. However, global demand for specialty coffees is growing rapidly, and this provides a significant opportunity for Timor-Leste to achieve better export prices. High quality is the defining feature of specialty coffee and is assessed by examining the physical characteristics of unroasted coffee beans and the sensory profile of the roasted beans. Certifications and other intangible factors are also increasingly important for specialty coffee markets. Recent analysis highlighted supply chain transparency, product traceability, and the knowledge of value chain partners and consumers as factors that condition the un­derlying relationship between quality and create additional value.

The success of initiatives to upgrade production, improve quality, and develop specialty markets hinges on close coordination across the value chain and between government, the private sector, and other stakeholders. Numerous studies and assessments identified weak coordination as a constraint to developing the coffee sector in Timor-Leste, but coordination recently began to improve. In 2016, following an initiative from ADB, a group of stakeholders representing all stages of the coffee value chain came together to form the Timor-Leste Coffee Association (ACTL).

In 2016 and 2017 ACTL organized the new, high-profile "Festival Kafe Timor" to promote Timor-Leste’s coffee sector. It also established lab facilities to assess coffee quality, provide training on sensory analysis, and organize high-profile coffee quality and barista competitions to encourage excellence. The Festival primarily targeted local farmers and industry stakeholders. Around 60 coffee samples were entered into the coffee quality competitions in each year, and several thousand people participated in the various festival events. International coffee specialists, including coffee traders and buyers, participated in the festival at their own expense.

ACTL and other industry stakeholders also worked closely with the government to prepare Timor-Leste’s first national coffee sector development plan. Preparation of the plan confirms the need for increased investment in the sector and further improvements in coordination. The Ministry of Agriculture and Fisheries (MAF) is the designated public agency for development of coffee and other agroforestry crops. The government identified the coffee sector as a strategic priority and public investment in farm rehabilitation and expansion has increased since 2015. However, farm rehabilitation efforts remain fragmented and are well below the levels needed to achieve sustained and widespread improvements in smallholder productivity.

Some of the key foundations of an effective national system for farm rehabilitation are still being established. MAF has a network of extension workers — but these staff are responsible for supporting production for all crops, livestock, and aquaculture. This is an extremely challenging mandate, and it is generally accepted that extension services need to be improved.

MAF has identified training partnerships with NGOs and private businesses as a model with excellent potential for the coffee sector. However, there is currently no shared system for tracking the replanting and rehabilitation of coffee farms or the provision of training. There is also no established system for engaging businesses and NGOs to implement public funded programs. This makes it difficult to assess resource requirements; plan and implement rehabilitation and training programs; evaluate the efficacy of different training models; and maximize the returns on public investment.

The absence of a shared framework for assessing the quality of coffee at each stage in production and processing is another notable gap in sector management. Clearly defined quality standards would facilitate training and communication across the supply chain and could be used by businesses to provide clear incentives for quality improvement. Timor-Leste benefits from clearer and more coherent communications with specialty coffee importers, roasters and consumers in major consuming markets such as Australia, the European Union, Japan, Korea and the United STates..

The project has three principal areas of focus:

• More productive coffee and agroforestry systems. The project helps households to rehabilitate and improve agroforestry systems on land that they own or occupy with consent of the state and their community. Production systems are being strengthened through establishment of 100 farm-level demonstration plots.

These farmer-managed plots enable local-level demonstration of useful technologies in conditions that are highly relevant and relatable for local households. The demonstration plots serve as hubs for the training of 5,000 farm households, and at least 40% of the people trained are women. Training is provided regularly over several harvest cycles to ensure knowledge transfer.

These trainings are delivered through partnerships with private-sector companies that leverage their existing supply chain relationships. The project works with local financial institutions and businesses that procure coffee to improve the financial inclusion of participating households. Around 1,000 of the poorest households receive a conditional cash transfer through a cash-for-work scheme to facilitate successful adoption of productivity improving technologies. Eligibility for the cash-for-work scheme is determined using a proxy means test that is developed in partnership with Timor-Leste’s Ministry of Social Solidarity.

• Improved quality and stronger market linkages. The project supports annual coffee quality competitions, training, and communications that are linked to Festival Kafe Timor. This helps to raise awareness and understanding of quality improvement. The festival is promoted as forum for developing new market linkages. The project also supports Timor-Leste’s participation in leading international trade shows for the specialty coffee market.

• Improved coffee industry management and coordination. The project supports the design and initial deployment of a farm information management system. The project develops national quality standards and works with the government, ACTL, and other stakeholders to establish a platform for regular sharing of knowledge and information related to productivity and quality improvement.

The project’s primary goal is a simple one: Sustained increases in value creation through coffee and agroforestry production. The one primary impact is sustained growth in per-capita incomes and the elimination of extreme poverty by 2030.