Integration of Rice Market in ASEAN

Abstract

Rice, as a trading commodity in the ASEAN, has a pivotal role in economic, social, and political stability. The existence of the ASEAN Economic Community has provided some evidence that shows that market integration in ASEAN becomes apparent. This study analyzes rice import and export trends in the ASEAN, long-term, and short-term relationships among ASEAN rice markets, causality relationships, and impulse response analysis based on ASEAN’s rice prices. The data that is used in this research consists of annual rice data of import and export from Thailand, Indonesia, Malaysia, the Philippine, and Vietnam in 1989-2013 as well as monthly data on rice prices in 2012-2016. Trend analysis, Johansen co-integration test, Vector Auto Regression estimation (VAR) with Vector Error Correction Model (VECM), Granger causality, and impulse response analysis are employed to answer the objective of this research. The results show that Indonesia’s import trend relatively constant, but export and import trends from Thailand, Vietnam, Malaysia, and the  Philippines increase every year. Long-term and short-term relationships exist among rice markets in ASEAN, with the pattern of causality relations as Malaysia affects the Philippines’ market, the Philippines’ market affects Vietnam’s market, and Vietnam’s market affects Indonesia’s rice market, but there are no reciprocal linkages. In the short run, Indonesia’s market is positively influenced by Malaysia and Thailand’s markets and negatively influenced by Vietnam’s rice market. Malaysia’s rice market is influenced by its rice price from the previous first and second months. Malaysia and Thailand’s markets positively influence the Philippines’ rice market. Indonesia’s rice market positively influences Thailand’s rice market. Vietnam’s rice market is positively influenced by the Philippines’ rice market from the first and third months.