Transaction Cost of Small Scale Fisheries Eva Anggraini 1 , Sahat Simanjuntak 1 , Gatot Yulianto 2 1 Department of Environmental and Natural Resource Economics-Faculty of Economics and Management, 2 Faculty of Fisheries and Marine Science, Bogor Agricultural University Introduction Marine is one of the most important natural resources of Indonesia which covers 70 % of total area. Nevertheless, contribution of fisheries as a whole to GDP is very low which is 2.2 % and it is dominated by fish capture which its quantity of production in 2005 was about 4.7 million tones (BPS, 2005). The big problem of marine and fisheries sector in Indonesia is the low welfare of big number fishermen. Many efforts are run by government to solve this problems that derived become many kinds of programs such as grant for boat and gear, grant or cash for work, etc. Most of those programs use productivity approach and it is rather difficult to prove that the programs work well. For example, grant for boat--especially large boat--will enable fishermen to catch fish in along distant from shoreline. The fact, most of them lack of capital for operational cost, therefore they cannot operate their boats continuously, and finally they will depend on informal lender to support their business. This relationship will cause snowball effect to fishermen and also will make transaction cost for them. The problem is not only caused by low production factor or high production cost, but also non production costs faced by fishermen which is called transaction cost. Ronald Coase in his paper titled ”The nature of the firm” in 1937 defined transaction cost as the cost of using the price mechanism. But then it develops that not only market structure causes transaction cost but also social structure and property right. Transaction cost is ubiquitous, and fishermen face high transaction cost it makes economic pressure. High transaction cost reduces fishermen income. Aggregately it decreases economic efficiency of fisheries. Reducing transaction cost must get big attention from many parts as one of exit solutions from vicious cycle of poverty of big number fishermen. This paper studies about transaction cost of small scale fisheries and its impact to fishermen’s community welfare. Transaction Cost There are some components faced by fishermen that create transaction cost, those are : 1) catch retribution and collection; 2) middleman cost; 3) security cost; 4) management cost; 5) local institutional cost. Catch retribution and collection is cost of existence for fishermen in fishing sector that paid to the manager and fishing association. Middleman cost is cost of information that paid by fishermen since the limited access of market information. Security cost is to secure the asset such as boat and paid to the informal leader of port area. Business management cost is honorarium or commission that paid to someone who is delegated tasks to organize the expense and administration affairs. While institution cost is paid by fishermen for the purpose of maintaining conducive condition for working. All of those costs have no influence to production, and called transaction cost. Fishermen with different scale face different proportion of transaction costs. The most component of transaction cost that faced by small scale fishermen is middlemen cost, it is about 92.54 % of total transaction cost, while security cost and local institutional cost only take the rest those are 6.95 % and 0.51 %. Middle scale fishermen face different condition, where the most component of transaction cost are business management cost and catch retribution and collection which take 49.29 % and 45.69 % of total transaction cost, while security cost and institutional cost are only 0.89 % and 4.13 %. Table 1. Components of Transaction Cost of Small Scale Fisheries (SSF) Compared with Middle Scale Fisheries (MSF) (per unit) Components SSF MSF 1. Catch retribution and collection - 45,69 2. Business management cost - 49,29 3. Middleman cost 92.54 - 3. Security cost 6.95 0,89 4. Local institutional cost 0.51 4,13 Total 100,00 100,00 Anggraini (2005) Factors Cause Transaction Costs for Small Scale Fisheries By observing the daily activities of small scale fishermen and analyzing their problems, some factors that cause transaction cost are found. First, price information in local market is monopolized by middleman