Analyzing the Competitiveness of Indonesian Agricultural Commodities Under WTO Commitments

Abstract

This paper provides an ex post analysis of the competitiveness of Indonesian agricultural commodities during the implementation of the WTO commitments. Using the COMTRADE databases according to the Standard International Trade Classification revision 2 (SITC rev 2) that was published by World Bank, the study revealed that Indonesia's exports to world market in 1985-1990 and 1990-1995 period consisted mainly of coffee, tea, cocoa, spices, and manufacturing products (SITC 07). They are classified as Declining Stars, respectively. These commodities continue to decline under WTO commitments (1995-2000 periods) and therefore the section qualifies as a Retreat. Similarly, Section 03 (fish, crustaceans and mollusks and preparations thereof) was classified as Rising Stars in the first period (1985-1990) and Declining Stars in the second period (1990-1995). Other commodities such as miscellaneous edible products and preparation (SITC 09) also changed from Rising Stars in the first period and the second period into Retreats, followed by those of SITC 05 (vegetables and fruit) which was classified from Declining Stars to Retreat. Under WTO commitments (1995-2000), there are no items in that could be classified as a Rising Star. All commodities were classified as Declining Stars (SITC 00, 02, 04 and 09) and Retreats (SITC 01, 03, 05, 06, 07 and 08). Thus, most of agricultural commodities classified as Stagnant Commodities, even in the third period in which commodities that were classified as Dynamic Commodities were zero. These indicated that Indonesian agricultural commodities have decreased in terms of its competitiveness under WTO commitments. Thus, government should provide strong support to facilitate the development of agricultural sector. Indonesia may consider some facilitation role for the government such as the establishment and improvement of facilities and developing mechanism for attracting domestic and foreign investments in agricultural sector. In addition, government should improve the competitiveness of agricultural export industries with high potentials for market expansion through the development of agricultural processing technology.