A Comprehensive Economic Analysis of Tobacco Farming Potential in Grobogan Regency, Central Java

Abstract

This study aims to investigate the planning for the Tobacco Products Industrial Area (KIHT) development in Grobogan Regency, Central Java, based on economic analysis. KIHT is an area where the activities of the tobacco products industry are concentrated, equipped with infrastructure, facilities, and supporting facilities for the tobacco products industry. The study was designed with a survey approach, in-depth interview, and focus group discussion (FGD) with 100 key informants to obtain facts from the existing phenomena and find information factually. The number of key informants is based on the number all of tobacco numbers in Grobogan regency. The study, therefore, analyzes tobacco competitiveness, labor absorption, product market, and macroeconomic analysis. To sharpen the analysis, the study was supported with a questionnaire instrument to see how far tobacco farmers were prepared in KIHT development. Empirically, the results showed that tobacco farming absorbed 150 HOK/ha per season, greater than corn farming which only absorbed 52 HOK per season per ha and rice farming which absorbed 87 HOK per season per ha. It had high competitiveness with the oligopsony market structure. In addition, the market for tobacco products was experiencing a significant upward trend, and it is in accordance with the Cobweb Theorem law that the behavior of farmers will try to increase the planting area when there is a previous price increase. From the potential of tobacco products, Grobogan Regency received an excise duty of IDR 14.87 billion or 2% of the total excise duty of Central Java Province. This revenue-sharing fund will increase the regional fiscal capacity.