THE PROGRESSIVE EXPORT TAX AND INDONESIA’S PALM OIL PRODUCT EXPORT COMPETITIVENESS

The relationship between Indonesia’s palm oil product competitiveness and the government's policy intervention is still disputable among stakeholders. This research analyzes the association between the progressive export tax and the changes in export shares of Crude Palm Oil (CPO) and Refined Palm Oil (RPO) as well as the competitiveness of both commodities. Revealed comparative advantage (RCA) and export product dynamic (EPD) are used to measure the change in the export shares of CPO and RPO as well as of their export competitiveness to the main destination countries. To examine the impact of this policy, this research compares before and after the enactment of a progressive export tax policy at the end of 2007 and uses monthly export data for CPO and RPO products for the period 19972018. The result finds that after the enactment of the progressive export tax of CPO, the export share of CPO declined by 21% and the level of competitiveness of CPO products moved from Rising Star to Lost Opportunity compared with the condition during 1997-2007. In contrast, the export share of RPO products increased and its competitiveness level moved to a better position from Falling Star to Rising Star. Although shifting the export value of both CPO and RPO, as one of the objectives of the implementation of the export tax, was achieved, this study The Progressive Export Tax and Indonesia's Palm Oil ..., Immanuel, Suharno, Amzul Rifin | 211 is highlighting essential commentary in which policymaker still needs to search for new export markets while maintaining export shares in the main export destinations.


Agricultural Commodities
In order to maintain the economic that a country will export commodity that possesses not only the low price of production factors but also in much quantities. Conversely, a country will import commodity that the production of it will absorb the high price and rare of production factors (Salvatore, 1997).

Impact of Trade Policy
The Indonesian government applied the export tax policy of Palm Oil commodity and its fraction since September 1994. This policy has two objectives, namely (i) stabilizing the inventory of the raw material that will use for oil cooking industry and (ii) developing the downstream Industry of Palm Oil. Figure 3 illustrates the condition of exporting country in term of the effect of export taxes at the rate of t.
The domestic price of export falls to P t , reducing the sum of consumer and producer surplus by the area of P f DCP t .
However, the tax yields revenue equal to after-tax volume multiplied by the tax rate or the area of P* t ACP t . The loss of tax is equal to the area of BCD, while the terms of trade gain is equal to the area of P* t ABP f (Helpman and Krugman, 1989).

Theory of Competitiveness
The competitiveness of a commodity especially regarding the comparative advantage is not only related to natural or artificial factors. Salvatore (1997) revealed that all sources of comparative advantage of a country could be obtained by the learning factor which is usually referred to as dynamic advantage. Meanwhile, the comparative advantage using labor and capital is usually called static advantage. Indonesia as a developing country has a static advantage through the excess supply of labor, however the developed countries as providers of technology have a dynamic advantage.
One method for measuring the comparative advantage of a country is the revealed compared advantage method (RCA).
The comparative advantage of a country is not automatically followed by a competitive advantage. The result of the combination of the vertical agribusiness beginning with input markets, on-farm and local markets and ending with export-import is called competitive advantage. In order to raise the competitive advantage, it is necessary to develop a robust cooperation between the on-farm sector and the off-farm sector of agribusiness.
Furthermore, the competitive advantage of a commodity and its dynamic movement can be measured by using the export product dynamic method (EPD).

On 2007 the Government of
Indonesia changed the mechanism of export tariffs for palm oil and its derivatives from constant export tax to progressive export tax. The new calculation of export tariff has been determined based on reference prices at applicable in international prices. As a consequence, if international prices rise, export tax of CPO will also increase (Hafizah 2011). In addition, this policy was implemented because of the increase in the international price of CPO without followed by the increasing of export tariff, it was successfully encouraging producer of CPO to export its product rather than supplying CPO to domestic market (Rifin 2014

Export Product Dynamic
The market position of the export of one product from one country to a specific destination country can be determined by using EPD. This method allows to assess the movement of a commodity in the international market based on the level of growth of this commodity during a certain period. It can also be applied to the movement of CPO and RPO commodity.

RCA = Xij/Xtj Wij/Wtj
Mathematically, the X-axis can be simulated as follows: By contrast, the Y-axis is formulated as follows: Where, t is the year and T is number of year analysis.
An EPD matrix consist of market attractiveness and business-strength information. The former is calculated based on growth in demand for a product in a certain market destination, while the rest is measured based on growth in the country's market share of a particular market destination (Bappenas, 2009). The market position of one product can be categorized using a matrix that is divided into four levels.        (Rifin, 2010b).
An effect of the enactment of the progressive export tax policy consisted in the reduction of the movement of Indonesia's CPO export value.
Comparing the RCA values in figure 5, we can obtain the diminishing points of the comparative advantage of CPO due to the implementation of the progressive export tax policy. In other words, the implementation of this policy led the changing of structure of Indonesia's CPO export into derivatives products (Syadullah, 2014).      1997-2007 2008-2018 1997-2007 2008-2018 1997-2007 2008-2018   Furthermore, these board can be focused to acquire more non-traditional markets by setting special export tariff's structure as well as accelerate domestic market creation.