COMPETITIVENESS AND EXPORT SIMILARITY OF INDONESIAN HORTICULTURE IN THE ASEAN-ASEAN + 3 Daya Saing dan Kemiripan Struktur Ekspor Hortikultura Indonesia dalam Kerangka Asean-asean + 3

In the framework of ASEAN+3 integration, Indonesian horticultural trade is facing a dilemmatic position. Being in the middle of a fi erce competition with benchmark countries, it is important that Indonesia gain the highest profi t from its integration strategy. Evaluation is n of needed to investigate Indonesian’s position in ASEAN +3 horticultural markets and the sustainability of specifi c trading prospect on each member country. Therefore, this study aims to investigate competitiveness and similarity of Indonesian horticultural export structure in intra-ASEAN+3. Revealed Comparative Advantage (RCA) analysis shows that Indonesian horticulture does not have aggregate competitiveness in ASEAN+3 market. The average of Indonesian RCA decreased from 1,64 in ASEAN level during 1999-2014 to 0,45 in ASEAN+3 level. In addition, based on Export Similarity Index (ESI) analysis, Indonesia has the highest and the most consistent similarity of horticultural export structure with Singapore, both in ASEAN and ASEAN+3 level. Meanwhile, Thailand has the highest level of export structure similarity in ASEAN with ESI index of 93,77. Integration of ASEAN+3 has led to an alteration in trading scheme in which ESI with each member country generally decrease. The highest level of export structure similarity occurs with Singapore with ESI index of 85,95. Overall, the trade of horticultural commodity in the framework of ASEAN+3 integration is dominated by export structure similarity which may lead to a competition between the members of ASEAN+3.

Kata kunci: comparative advantage, hortikultura, similarity index the division of trading blocks is based on geographical approach in order to support effi ciency and welfare improvement for the members of the trading blocks (Krugman, 1991).The main reason of establishing trading blocks is to increase the volume of goods and services trade, mobility of capital and labors, production, production efficiency and product competitiveness which are expected to improve the welfare of the member countries.It is supported by improvement of production specialization which is based on comparative advantage (Lapipi, 2005).
In addition to economic integration, l i b e r a l i z a t i o n e r a a l s o b r i n g s a n implication on the importance of world trade liberalization scheme, particularly regarding agricultural products since developing countries heavily depend on agricultural sector including horticultural

INTRODUCTION
The 1997 crisis and the failure of Doha Round cause an increase on ASEAN's preference on economic integration in form of regional trade agreement.Even though ASEAN countries can still gain advantages from liberalization of multilateral trade in WTO, they believe that countries will receive greater and faster benefits from regional trade agreement.ASEAN recognizes the importance of the role of developed countries in fostering economic growth of ASEAN members.Therefore, ASEAN invited China, South Korea and Japan into a regional trade agreement and established ASEAN+3.Moreover, in ASEAN+3 level, there is China as a great producer which may encourage a fi erce competition.
Market extension and the fact that the members of ASEAN+3 members have similar natural resources may create a complexity which will infl uence performance effectiveness of ASEAN+3 integration whereas one main reason of a free trade area establishment is to make use of existing complementarity (Sinaga, 2010).Otherwise, the aim of integration in the context of horticultural commodity cannot be achieved.
Market extension leads to a more dynamic market.Competitions in domestic and international market become more intense.ASEAN+3 is a potential target market for Indonesia.However, ASEAN+3 is also an important target market for other countries.This phenomenon gains serious attention in the middle of liberalization and regional integration issues since each country has similar interest to make the most of the open market access.
Indonesia is concerned that ASEAN+3 may create a distortion especially related to the risk of fl uctuation in price which will be diffi cult to be handled by Indonesian farmer with relatively limited skill, fi erce competition and pressure to efficiently decrease transaction cost.Indonesia must compete to dominate the market share.
On the other hand, Indonesia becomes a great target market for other members.The interdependence of the relationship needs a sustainable evaluation in order to avoid unequal benefi t distribution.Furthermore, greatly diverse industrial trees have an implication on the variation of supply chain and value chain of horticultural commodities with a certain target market.As the consequence, there is a need of specifi c and intensive interventionist policies.In this case, it is important to evaluate the comparison between Indonesia and other ASEAN+3 members' competitiveness in order to observe Indonesia's position.In addition, differences in the structure of the exported products from all countries make the comparison of market share and growth level cannot completely represent a country's competition level (Yao and Wan, 2014).Therefore, competitiveness position needs to be complemented by an analysis of export structure similarity which also becomes information regarding potential regional integration in the future (Nasrudin, et al., 2014).Both of them will be indicators for Indonesia to determine its position in order to maintain its existence and make the most of the ASEAN+3 trading integration.The effects of regional integration, especially trade integration, have always been important information for policymakers.It is useful for knowing the benefi ts of regional trade cooperation to a country, as well as showing potential sectors to be harmed from higher market competition (Sudsawasd, 2012).The variation of ESI indexes range from 0-100 (Peters, 2008).Zero value indicates that the structures of commodity export between i country and j country are totally different.100 on ESI indicates that the structures of commodity export between i country and j country are similar.

METHODS
Therefore, values which are closer to 100 indicate that the commodity export structures between the two countries are similar and the competition in the global market will be more intensive (Fundira, 2013).ESI is subject to aggregation bias implying the more disaggregated the data considered, the lower is likely to be the value of the index.Thus,there is a certain degree of arbitrariness due to product/ industry choice (Gul, 2014).

RESULTS AND DISCUSSION
T        Meanwhile, ESI decrease with Japan was caused by a signifi cant change of Japan's structure.There was a decrease in Japan's share of various fruits and vegetables, while Indonesian's market share was still higher.However, Japan's increasing share of fl oriculture was not followed by Indonesia's share of the same product.
Economic integration leads to trade policies stipulating discriminative agreement to lower or even eliminate trade barriers (tariff and non-tariff) only between member countries.Naturally, sub-sector.Indonesia is also included in these developed countries.Horticultural commodities are in strategic position for Indonesia since they have various benefits including food, plant-based biopharmaceutical and aesthetic purposes.Those benefits open more market opportunities, especially for Indonesia whose agro climate and biodiversity support become its comparative advantage.ASEAN+3 have 30% of the world's population in 2015.Mentioned, there are approximately 67 million household in consuming class with total income of USD 7.500/ year in ASEAN.The number is estimated to increase to 125 million in 2025.It makes ASEAN+3 an economic area with great potential market (Eastpring Inverstments Indonesia, 2016).T h e t r e n d o f h o r t i c u l t u r a l consumption in ASEAN+3 increase each year.However, the increased consumption is followed by a decrease in export of ASEAN+3 countries from 54,17% in 2010 to 49,71% in 2014.With 31,52% export to ASEAN+3, Indonesia merely achieve only 2,43% of all market which make Indonesia the second lowest in ASEAN+3, it is lower than Indonesian market in ASEAN.In ASEAN+3, Indonesia has to compete with not only great producers such as Thailand and Philippines, but also China which has a very effective production system.More than half of total consumption of ASEAN+3 members are dependent on China.The big three dominating countries in ASEAN+3 market in every period are China, Thailand and Philippines.Meanwhile, three main destinations of Indonesian export in every period are Singapore, China and Malaysia.As the owner of great endowment factor, Indonesia has a privilege of being a potential country as target market as well as a big player.Indonesia is the home of 41% of total ASEAN population and 12% of total ASEAN+3 population.Meanwhile, regarding the GDP, Indonesia dominates 35% of ASEAN economy and 5% of ASEAN+3 economy.However, the development of horticultural sub-sector in Indonesia is rather disappointing.Indonesian horticultural trade shows defi cit balance for every year during 2010-2014.The defi cit comes from trade with China and Thailand.It is caused mostly by import of various fruit and vegetable products (Erwidodo, 2014).From the total of Indonesian horticultural export, 42,05% of the total export circulated in ASEAN+3 in 2010.The value decreased into 31,26 in 2014 that occurred in the middle of relatively signifi cant improvement of world export and Indonesian export to global market.It could be an indication of obstacles encountered by Indonesia regarding market penetration in the context of ASEAN+3 market.Generally, ASEAN+3 countries are greatly diverse in size, endowment factor, economic structure, trade orientation, economic development level and sociocultural background (Kwan and Qiu, 2010).It will support economic growth of the members since there is not much head to head competition in some sectors.Diversity will prevent trade diversion because of high complementarity.However, it is different when it comes to agricultural sector, especially horticultural sub-sector.In ASEAN level, the ratifi cation of ASEAN Free Trade Agreement in 1993 did not increase the volume of trade because of relatively similar products between members of ASEAN.Referring to comparative advantage, especially in horticultural subsector, the similarity of natural resources may lead to competition among the members.
This study uses secondary data which include the data of export and import of horticultural commodities based on code HS 1998: 06, 07, 08, and0910 from UN Comtrade (comtrade.un.org).The data was taken in a period of 16 years(1999)(2000)(2001)(2002)(2003)(2004) from eight main countries in ASEAN+3 namely Indonesia, Malaysia, Singapore, Thailand, Philippines, China, South Korea, and Japan.These ASEAN countries were included in the analysis based on similarity in natural resources, particularly in horticulture sub-sector, and the continuity of data availability during the research period.The equation of RCA (Revealed Comparative Advantage) index in this research is taken from Balassa which is written as follows (Balassa, 2013).where is the export value of i country on k commodity to ASEAN+3, is the total export value of ASEAN+3 on k commodity, is the total export value of i country to ASEAN+3, and is the total export value of ASEAn+3.i represents Indonesia, Malaysia, Singapore, Thailand,Philippines, China, South Korea and Japan, while k is aggregation of horticultural commodity group with code HS 1998: 06, 07, 08, and 0910.RCA indexes range from 0 to infi nity (0≤RCA pi ≤∞).Based on its RCA value, a concept that is directly related to competitiveness.Evaluating the relative competitiveness of two countries with very different trading patterns (and especially with very different export structures) would not make sense.Thus, ESI is used completing the analysis.The equation formula of ESI is written asfollows(Finger and Kreinin, 1979): Figure 1.The RCA's Comparison of Horticulture in Intra-ASEAN Source: UN Comtrade (edited), 2017

Source
on their exports by the accesses which were easier.The capability of a country to benefit that open market access could determine its competitive performance.Figure 2 displays that ASEAN+3 markets did not cause each country' competitive performance to grow equally.From those eight countries, that was only Thailand, Philippines, and China which had competitiveness in horticulture commodity aggregately.Thailand and Philippines was two ASEAN countries which experienced signifi cant competitive performance development in ASEAN+3 markets while the other ASEAN countries experienced dropping off.Philippines and Thailand respectively led the achievement of RCA value in the level of ASEAN+3.Both countries successfully benefit the openess of markets to escalate their exports

Figure 2 .
Figure 2. The RCA's Comparison of Horticulture in Intra-ASEAN+3 Source: UN Comtrade (edited), 2017 Figure 3.ESI of Indonesian Horticulture in Intra-ASEAN Source: UN Comtrade (edited), 2017 Source: UN Comtrade (edited), 2017 shift of ESI.On the other hand, China went up to the second position in the end of the period even though the ESI increase was not really high.It means that the level of competition between Indonesia and China before and after ASEAN+3 was relatively the same.China's export structure was dominated by various vegetables, while Indonesia's by balanced proportion of fruits and vegetables.Thailand and Japan also had quite significant ESI shift until the end of the period while Philippine's index increased.The opposite conditions between Thailand and Philippines were caused by Philippine's export preference which was more oriented to ASEAN+3 market with faster acceleration of share compared to Thailand, especially regarding various fruit products.Fruits nearly became the only source of competition between Philippines and Indonesia.On the other hand, Thailand's share in ASEAN+3 market was dominated by various vegetables.

Figure 4 .
Figure 4.ESI of Indonesian Horticulture in Intra-ASEAN+3 Source: UN Comtrade (edited), 2017 relatively high export similarity may caused by specifi c conditions of each included commodity.This possibility make relevant policy implication will be very much determined by the availability of specifi c information of each commodity especially those which play important roles in infl uencing aggregate horticultural dynamics.In addition, market potential of ASEAN+3 for Indonesia's horticultural trade is very great.Meanwhile, researches in the context of Indonesian agriculture, either aggregate or partial, is still limited.On the other hand, other countries, particularly China, have massively conducted research regarding this topic.It is important since the integration of ASEAN+3 will continue creating dynamic horticultural market which leads to a need of specifi c interventionist policies.In addition to a variety of fruits which recently show positive growth of endemic commodities potential, Indonesia needs to consider developing other groups of horticultural products which show low competitiveness in ASEAN+3, especially plant-derived biopharmaceuticals.This commodity is relatively specifi c in terms of its endowment factor since it can be found only in certain countries.Long term optimal management will support Indonesia to specialize in this horticultural product and encourage aggregate horticultural performance improvement.In addition, development of downstream industries and support of trading infrastructure are also important to increase products' added value and trade fl ow.Finally, those will help Indonesia to be able to make the most of ASEAN+3 integration.

Table 1 .
The RCA's Comparison of Horticulture in Intra-ASEAN 2014 per Commodity Group

Table 2 .
The RCA's Comparison of Horticulture in Intra-ASEAN+3 in 2014 per Commodity Group

Table 3 .
The Change of Indonesia Competition Level in Horticulture Commodity Trade in Intra-ASEAN

Table 4 .
The Change of Indonesia Competition Level in Horticulture Commodity Trade in Intra-ASEAN+3