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ROLE ANALYSIS OF THE PARTIES TO EUCALYPTUS OIL BUSINESS CONTRACT AS REFLECTED IN PROFIT SHARING IN THE REGENCY OF BURU

Keywords: contract , principal-agent , institutional economics

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Abstract:

Eucalyptus oil business is one of the dominant sector of forestry/agriculture in the regency of Buru. At least there are more or less 1.939 workers in this industry whose livelihood depends on it. This sector is also the one with the greatest prospect in supporting the economy of the Buru regency. The routines of eucalyptus oil refining by farmers in the regency of Buru is part of the economic activities which have been carried out for generations. As a business which has been handed down for generations, the role of farmers is very important,that is as the supplier of production factors, supplier of labor and other equipment. The implication of farmers' position as owner has created a problem due to the role of the parties to eucalyptus oil business contract. This phenomenon has created a bias on the principal-agent problems since the actors related to the contract have imbalanced capacity. This study aims at investigating the role of parties to eucalyptus oil business contract. Using institutional economics approach, the findings of this study are: (1) the business contract has not placed the farmers in a position as principal but instead as worker/laborer (agent); (2) the ownership over asset (village/land), labor and means of production and others is not sufficient to bring adequate bargaining power to the farmers.

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