Competitiveness Analysis and Factors Affecting Trade Flow of Natural Rubber in International Market
Sudiyana, Irfan Rahadian
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Natural rubber is one of the plantation commodities, which plays an important role in the economic development of many countries. This commodity also provides job opportunities for many people, primarily for smallholder farmers. The supply of natural rubber in the world market is dominated by Thailand, Indonesia and Malaysia. According to UN-Comtrade, the natural rubber export share in 1987, Malaysia is the largest exporter. By period of 1990, however, the condition of trade had started to change, allowing Thailand and Indonesia to shift the position of Malaysia. This change was due to the improvement of natural rubber production in Thailand and Indonesia. Moreover, the Malaysian production decreased due to several factors. This situation illustrates the increasing competition between the three major producers of natural rubber in the international market over the last several decades. Thailand, Indonesia and Malaysia differ in their individual export destinations. However, according to the IRSG data, these three producing countries all exported to ten primary importing countries. As mentioned above, the competition between the main exporting countries is relatively high. Therefore, it is necessary for Thailand, Indonesia and Malaysia to individually focus on improving the quantity and quality of the product in order to remain competitive in the international rubber trade. According to the background information and problem statement, the aims of this research are, to analyze the competitiveness and the level of competition of the three major exporters of natural rubber in the international market and to identify the determinants that influence natural rubber export in international market. All data used in this study is secondary panel data, which is a combination of time series data and cross-sectional data. Time series data includes annual data from 2003 to 2013, while the cross-sectional data covers ten major export destinations of the three main natural rubber exporting countries, with the largest export volumes going to the United States, Japan, China, Singapore, the Republic of Korea, Germany, Canada, Brazil, India, and Belgium. The data used were obtained from Statistics Indonesia (BPS), the International Rubber Study Group (IRSG), the United States Department of Agriculture (USDA), the Centre d'Etudes et d'Informations Internationales prospectives (CEPII), UN Comtrade, the World Bank, and FAOSTAT. First method is Revealed Comparative Advantage (RCA). RCA is a method of analysis for determining the competitiveness of a player, while taking into account the comparative advantage of an individual, organization or country. The performance of natural rubber exports from exporting countries to importing countries is a variable that is measured by calculating the share of natural rubber exports to total exports of all commodities to destination countries, compared with the share of world exports to the destination countries. So that it can be quantitatively the ability or inability of three main exporting countries compete in international trade. And the second method is gravity model. The gravity model is used to analyze the economic factors that affect the flow of trade between two countries. According to Lineman (Lapipi, 2005), the gravity model is an econometric model that is used to analyze the effects of economic integration on trade, as well as being an analytical tool that can be used to estimate the value of exported and imported goods in a region. The estimation results of the RCA analysis for natural rubber, in the period from 2003 through 2013 shows these three countries have a comparative advantage in the international market as indicated by an RCA value greater than one. The average value of the RCA for Thailand, Indonesia and Malaysia respectively, are 29.66, 29.36 and 9.15. If the RCA value is greater than one, it indicates that the share of the natural rubber commodity, out of all commodity categories, that is exported from the three main exporter countries is greater than the share of the natural rubber commodity worldwide. From the three main exporter countries, Thailand has the highest RCA, followed by Indonesia and Malaysia. China, the Republic of Korea and India are the major natural rubber export destinations of Thailand, demonstrated by the highest average RCA values. On the other hand, the main natural rubber export destination countries of Indonesia are the US and Canada. While for Malaysia, Germany is the main natural rubber export destination. The second result is about gravity model. The variables that significantly influence the natural rubber export value are, among others, the GDP of importing countries, natural rubber production of exporting countries, and exchange rate. The exchange rate variable has a coefficient sign that is not consistent with the hypothesis, but is supported by a condition that can explain it. Meanwhile, the remoteness index variable has no effect on the natural rubber export value.
- MT - Economic and Management