Abstract
Indonesia is the largest coffee producer in the world after Brazil, Vietnam and Colombia, but it was confronted with market problems. This paper, therefore, analysed the demand system as the position market for Indonesian coffee, either green bean or roasted coffee in the main importing countries such as Germany, Japan and The United States. The linear Approximate Almost Ideal Demand System (LA/AIDS) model was used to analyse the position of Indonesian coffee and its competitors. Time series data from 1996 to 2017 were obtained for the analysis. Empirical results indicated that most of the slope coefficients were statistically significant and in accordance with microeconomic theory. The variables of trade policy effected the Indonesian coffee trade. Indonesian green bean was found to be elastic in Germany, Japan, and The United States. Then, Indonesian roasted coffee was found to be inelastic in Japan. Indonesian green bean was a luxury good only in Germany, but Indonesian roasted coffee was an inferior good in Germany and The United States. Both Indonesian green bean and roasted coffee were a necessity in Japan. Almost Indonesian coffee substitute for Brazilian coffee and Colombian coffee, and complementary with Vietnamese coffee as its competitor.
Highlights
Coffee is consumed by most industrialized countries, such as The United States, European Union and Japan, but it is grown and exported by almost developing countries, like Indonesia, Vietnam and Brazil
The estimation results in this study indicate that the NTM policy has a positive effect on the value of Indonesian coffee exports to the main importer countries
The empirical results concluded that the variable tariffs and non-tariffs as the trade policies effect to demand of Indonesian coffee export, either negative or positive
Summary
Coffee is consumed by most industrialized countries, such as The United States, European Union and Japan, but it is grown and exported by almost developing countries, like Indonesia, Vietnam and Brazil. Indonesia's abundant coffee production making Indonesian coffee exports spread to many countries in the world. World consumption was 169.113 million bags in 2018-2019, an increase of 4.6 percent compared to 2017-2018 and 6.5 percent compared to 2016-2017 Those increasing coffee demand was rise either domestic consumption in exporting countries or in importing countries [3]. Based on the National Long Term Development Plan (RPJPN) 2015-2019, the government has a target of increasing the export volume of Indonesian coffee beans by 24.3 percent or 462,497 tons in 2025 [5]. The formulation of the problem in this study is what the factors affect Indonesian coffee exports and how the market position of Indonesian coffee in Germany, Japan, and The United States as the main importing countries among Brazil, Colombia and Vietnam as the major coffee exporter
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