Author : Ratya Anindita

Summary : This study assessed the economic effects of trade liberalization on the Indonesian coffee, coconut and rubber industries using time series data from 1969 to 1999 and primary data to estimate the price competitiveness. Specifically, it assessed the effects of trade liberalization on production, consumption and export competitiveness of coffee, coconut and rubber. A multiple regression model was employed to determine the factors that influenced the export volume of coffee, coconut, and rubber. The CM, RCA, a dummy variable, exchange rate, production, consumption, export price, producer price, NPC, and interest rate were included in the regression model. Indonesia initiated trade reforms and reduced input subsidies after it incurred budgetary deficits when the world price of oil, a major export, fell in the 1980s. The export duty for all commodities covered in the study was the first to be abolished in 1981. The subsidies for pesticide and fertilizer were later abolished in 1990 and 1993, respectively. The Indonesian government also embarked on these trade reforms in line with its commitments under the GATT-WTO agreement. The study revealed that Indonesian coffee, coconut and rubber industries benefited from trade liberalization. Trade liberalization has a positive effect on the production, consumption, volume of export, net trade, CM and RCA of coffee, coconut and rubber. The price competitiveness analyses showed that coffee and rubber were competitive but copra and coconut oil were not. This reflected the price control policy enforced by the Indonesian government on copra and coconut oil to protect the consumers.