THE IMPACT OF TRADE LIBERALIZATION ON THE COMPETITIVENESS OF INDONESIAN RICE IN DOMESTIC MARKET)*

Keywords: Efficiency, Comparative Advantage, Competitive Advantage, Government Policy, Supply and Demand.
The implementation of trade liberalization imposes free import duties, free market and almost unlimited business opportunity (borderless world). This kind of condition will be likely to create negative effects, particularly on rice commodity which in general has low rate of competitiveness due to inefficient agriculture practices.

The objectives of this research are to identify (a) efficiency rate of input usage in rice production business, (b) competitiveness rate of rice commodity in domestic market, (c) factors influencing rice supply and demand in domestic market, and (d) level of rice supply and demand in domestic market. The research area is determined by means of a purposive sampling method within the area of the Regency of Jember and Lumajang. Given that these two regencies are amongst the rice producing centres in East Java, they are then deliberately selected. Secondary data are derived from the current national figures so that no specific research area is necessary. The used method of population and sample taking is the two stage cluster sampling. With reference to the number of villages located in Jember and Lumajang regency, the primary sample unit falls into two villages of each regency with the required total sample of 159 people. The result of analysis of the profit function in model I indicates that the function of demand input of P fertilizer is not efficient with the Prob > t (0.2854). This condition is caused by the allocation of 20 kilograms P fertilizer per hectare in spite of the suggested 45 kilograms per hectare. The result of analysis of the Domestic Resource Cost ratio (DRC) is Rp. 3,552.20 or is under the shadow price of Rp.11,831,65, resulting in a Domestic Resource Cost Coefficient Ratio (CDRCsocial) of 0.3002. The result shows that the rice commodity has a comparative advantage since the cost of rice production in Indonesia is only 30.02% of the import cost. Therefore, the provision of rice by domestic farmers is able to save Indonesian foreign exchange up to 69.98% of the effective import cost. The result of analysis of the Domestic Resource Cost (DRCactual) shows that the Domestic Resource Cost (DRC) ratio is Rp. 4,351.47 and the Domestic Resource Cost Coefficient (CDRCactual) is 0.4463. Regarding the value of the CDRCactual < 1, it is considered that rice production in the village retains a competitive advantage. This is basically due to the fact that domestic rice production will save Indonesian foreign exchange up to 55.37% of the total import costs. In other words, a domestic input cost of Rp.4,348 is required in the effort to create a $ 1 US added value. Accordingly, the agriculture practices are deemed efficient in terms of financial aspects with regard to the use of the domestic resources. The current government policy is not in line with the efforts to increase the competitiveness of rice as indicated by the Effective Protection Coefficient (EPC) ratio of 0.67. The Government does not provide rice farmers with the necessary protection; on the contrary, it increases the cost of rice production up to 28% as indicated by the Subsidy Ratio to Producer (SRP) ratio of -0.28. With regard to the sustainable competitive advantage (SCA), rice commodity does not have competitiveness since the rate of supply surplus is only 0.6 million ton, despite the fact that the required stock is 1.5 million ton. Hence, Indonesian rice commodity has not yet retained competitiveness in the domestic market
)* Penulis adalah Alumni Pascasarjana Agribisnis Universitas Jember