Preliminary System Dynamics Model to Understand the Struggle of Downstream Agro-Industry Development in Aceh, Indonesia


  • Trisna Mulyati ISSED
  • Diaz Adi Prasetyo



The successful agriculture industrialisation in developing regions is a big challenge which continues to be pursued globally. It is a dynamically complex system with many interplay stakeholders. Properly managing it therefore requires root understanding of the underlying structures and feedback mechanisms that influence the systems behaviour. This study explores the system dynamics modelling approach in Aceh that has been envisioning a progressive downstream agro-industry development for decades after the Tsunami and conflict rehabilitation but with very little success. The findings indicate that the reinforcing loop of numerous efforts is slow and worsened by the strong balancing loop of pressure from agriculture mafia in the system. This particularly includes the massive investment promotion that has caused a shifting of the burden for Aceh due to widespread extortion practice being unaddressed, and thus leading to temporary business establishments or inactive business plans. It is also evident that necessary law enforcement has been mainly ignored. Results from the simulation model have been able to replicate the historical behaviour of stagnant agribusiness growth in the downstream. Three scenarios were simulated in order to recommend policy intervention, which is by looking at the effect of doubled and halved extortion rate. The latter is projected to achieve a more favourable result for Aceh agro-industry development. In order to maintain the balance between economic growth, sustainable use of resources, and minimisation of unintended environmental and social consequences, such intervention is subjected to other policies. 

Keywords: agriculture, agro-industry, industrial development, system dynamics

JEL: C63, O13, Q13


Aceh Bureau of Statistics. (2016). Aceh dalam Angka (Aceh in Figures) [Online]. Available:

Aceh Investment Coordinating Board. (2016). Aceh Investment Profile. Banda Aceh, Indonesia.

Alhilali, S. (2013). Sustainable Agro Value Chains. Montreux, Switzerland: 3rd Global Networking Conference on RECP, September.

Ananta, A. & Onn, L. P. (2007). Aceh: A New Dawn. Singapore: Institute of Southeast Asian Studies.

Anshar, K. & Karningsih, P. D. (2014). “Penentuan dan pengembangan komoditas unggulan agroindustri subsektor perkebunan berbasis sistem inovasi daerah di Provinsi Aceh (Identification and development of leading commodities in the plantation agro-industries subsector based on regional innovation systems in Aceh Province).” Surabaya, Indonesia: ITS.

Baihaqi, A. & Hamid, A. H. (2015). “Pengembangan agribisnis unggulan dalam upaya penanggulangan kemiskinan di Provinsi Aceh (Featured agribusiness development in poverty reduction efforts in Aceh Province).” J. Agrisep Unsyiah, 16(1), 79-87.

Crow, K. D. (2000). “Aceh - The 'Special Territory' in North Sumatra: A Self-Fulfilling Promise?” J. of Muslim Minority Affairs, 20(1), 91-104.

da Silva, C. A., et al. (2009). “Agro-industry trends, patterns and development impacts.” In Agro-industries for Development. Oxfordshire, UK: CABI Publishing, pp. 46-91.

Government of Aceh Province. (2014). “Lampiran Peraturan Gubernur Aceh 97/2014 tentang Kawasan Perhatian Investasi Aceh: Tinjauan Akademik (Appendix of Aceh Governor Regulation 97/2014 on Special Investment Region of Aceh: Academic Overview)”.

Hicks, P. A. (2007). Review of the Challenges and Opportunities for Rural Infrastructure and Agro-industries Development in the Asia Pacific Region.

Holzhacker, R. L., et al. (2016). Decentralisation and Governance in Indonesia. Springer International Publishing Switzerland.

Jan, T. S. & Chen, H. H. (2005). “Systems approach for the industrial development of a developing country.” Systemic Practice and Action Research, 18(4), 365-377.

Lee, D. R. & Barrett, C. B. (2001). Tradeoffs or Synergies? Agricultural Intensification, Economic Development, and the Environment. Oxfordshire, UK: CAB International.

Lektauers, A. (2015). “System Dynamics Framework for Sustainable Development Analysis of Local Governments.” Eastern European Bus. and Econ. J., 1(2), 85-101.

Maani, K. E. & Cavana, R. Y. (2007). Systems Thinking, System Dynamics: Managing Change and Complexity, 2nd ed. Rosedale, NZ: Prentice Hall Pearson Publishers.

Mai, T. (2012). “Sustainable Tourism-Systems Thinking and System Dynamics Approaches: A Case Study in Cat Ba Biosphere Reserve of Vietnam.” Ph.D. dissertation, School of Agr. & Food Sci., Univ. Queensland, Australia.

McCulloch, L. (2005). Aceh: Then and Now. Minority Rights Group International.

McCarthy, J. F. (2007). "The demonstration effect: natural resources, ethno-nationalism and the Aceh conflict." Singapore J. of Tropical Geography, 28, 314-333.

Phelps, N. A., et al. (2011). “Post-disaster economic development in Aceh: Neoliberalization and other economic-geographical imaginaries.” Geoforum, 42, 418-426.

Setianto, N. A. (2014). “Systems thinking approach to develop smallholder beef farming in rural Java, Indonesia.” Ph.D. dissertation, School of Agr. & Food Sci., Univ. Queensland, Australia.

Sofyan, H. (2014, November 8). Quo Vadis Hutan Aceh? (Quo Vadis of Aceh Forestry?) [Online]. Available: [URL]

Sterman, J. D. (2000). Business Dynamics: Systems Thinking and Modelling for a Complex World. New York: McGraw-Hill.

United Nations for Industrial Development Organization (UNIDO). (2009). Agro-Value Chain Analysis and Development: The UNIDO Approach.

Wilson, K. & Morren, G. E. B. (1990). Systems Approaches for Improvement in Agriculture and Resource Management. NY: Macmillan Publ. Co.

Wiranatha, A. (2003). “A Systems Model for Regional Planning Towards Sustainable Development in Bali, Indonesia.” Ph.D. dissertation, School of Geography, Planning and Architecture, Univ. Queensland, Australia.