INTRODUCTION
International
trade is an activity to trade various outputs in the form of goods and services
produced by a country to be sold abroad and bring goods and services from
abroad to be imported to that country to meet domestic needs. Activities to
sell goods abroad are commonly called export activities, while moves to bring
goods from abroad are called import activities. If exports are more significant
than imports, it will cause a surplus in the trade balance, but if imports are
more significant than exports, it will cause a deficit in the trade balance (Razak & Jaya, 2014).
International
trade is necessary for every country. At this time, there is no single country
in a state of autocracy or an isolated government without economic relations
with other countries. It is because no country can meet its needs
independently. The occurrence of international trade is base on the differences
in resources owned by each region or country. As an illustration, when a
government wants to produce a good, creating that good is more expensive when
compared to buying the item from another country. So, these countries will
prefer to buy them from other countries (Sarwono & Pratama, 2014).
Indonesia is an agricultural country blessed with abundant natural
wealth. This tremendous natural wealth can be in large areas, superior
varieties, and a good climate for growing crops. Various types of natural products
thrive in Indonesia, some of which are cloves (eugenia aromatica), vetiver (vetivera
zizonioides), patchouli (pogostemon
cablin), fragrant lemongrass (cymbopogon
nardus), and nutmeg (myristica fragans).
This commodity has a high economic value because it is a plant that produces
essential oils where the world market is looking for it (Sarwono & Pratama, 2014)
Indonesia has widely known as the center of world spices. One of the
products is an essential oil, one of Indonesia's non-oil and gas export
commodities. Indonesia's essential oil exports to the world fluctuate every
year. Based on data from the International Trade Center (ITC) for 2014-2018,
Indonesia dominates the world's essential oil market. Essential oil is one of
the potential agro-industrial export commodities that can become a mainstay for
Indonesia in earning foreign exchange.
Central Java Province is one of the leading production centers for
Indonesia's essential oil exports. Central Java Province produces the most
various essential oils among other essential oil production centers in
Indonesia. The essential oils produced and exported by the Province of Central
Java are patchouli oil, clove oil, fragrant lemongrass oil, nutmeg oil, and
Cananga oil. Essential oils are also one of the primary export commodities of
Central Java Province (Fitria, 2012).
Essential oils have volatile or volatile properties that smell
delicious, are found in many plants, and smell the same as the original plants.
Essential oils come from spices or herbs. Derivatives from spices or herbs are
the main constituent compounds of these spices or herbs. Usually, the
constituent compounds of spices taken as essential oils are the dominant
compounds that determine these spices' or herbs' characteristics. The aroma of
spices or herbs is determined by compounds that evaporate, extract into
essential oils or oleoresins. The average essential oil content of the spices
is 2%. Essential oils come from herbs consisting of hydrocarbons (terpenes,
sesquiterpene, sesquiterpene, and terpenes). It also consists and hydrogenated
alcohol (esters, aldehydes, ether, and ketones). Examples of essential
oils used to flavor food are lemongrass oil (citronella),
almond oil, and clove oil. Essential oil needs to be studied and developed as a
potential commodity because several countries need it. In fact, of the 150
types of essential oils traded internationally, 40 of them are produced in
Indonesia (Anto, 2019).
Price according to (Fadhlurrohman 2018), price is money
billed for a product or service or the number of value consumers exchange to
benefit from owning or using a product and service. The price depends solely on
the company (producer) policy but ignores various aspects. The low or high
price of a product depends on the product's specifications and advantages,
which are very relative. In general, prices can affect the number of goods and
services that consumers will consume. When a product or service price
increases, consumers will purchase less of the goods or services, and vice
versa. International prices are prices that occur in the global market. This
international price can affect the demand for a good or service in the domestic
market. If the domestic price is higher than the international price, then
exports will automatically experience a decline. On the other hand, if the
domestic price is lower than the international price, the export will
automatically increase.
The exchange rate is the number of currency units submitted to
obtain one foreign currency unit. Foreign exchange rates show the price or
value of a country's currency expressed in terms of another country's currency.
The basics of forex trading state that exchanging one currency for another is
called foreign exchange (forex). When exchanged for another currency, the
foreign exchange rate generally means the foreign currency price. In simple
terms, the foreign currency exchange rate is the value ratio between foreign
currencies or foreign exchange. It means that the exchange rate shows the value
ratio between two different currencies. The exchange rate is the value of a
currency in exchange for another currency. It means that a currency's value is
determined by the exchange rate of that currency against other currencies. The
exchange rate is the price of a country's currency expressed in another
country's currency (Septiana, 2016).
Gross domestic product is the
market value of all final goods and services produced by a country in its
economy during a specific period. This gross domestic product is one of the
indicators often used by economists to measure success in a country carrying
out its economic activities (Fadhlurrohman, 2018). An increase in
national income is expected to increase per capita income because per capita
income divides national income by the total population. Per capita income will
increase if the increase in national income is more significant than the
increase in population. If the opposite happens, then the country's per capita
income will decrease. It means that the prosperity of the people of that
country will fall because per capita income is the average income of a
country's population for one year (Sattar & Wijayanti, 2018).
Research
conducted by Tyanma Maygirtasari, Edy Yulianto, and Mukhamamad Kholid Mawardi
in 2015 (Maygirtasari, 2015) on the
analysis of factors affecting the export volume of Indonesian Crude Palm Oil
(CPO) in 2009-2013 and using four independent variables, namely: Domestic CPO
Production, Domestic CPO Prices, International CPO Prices, and Exchange Rate.
This research is secondary data analysis in the form of time-series data from
2009-2013. The analytical tool used is multiple linear regression models. The
test used is a statistical test which includes: t-test, F test, and R2. They show
that the variables of Domestic CPO Production, Domestic CPO Prices,
International CPO Prices, and the Rupiah Exchange Rate against the U.S. Dollar
have a combined effect on the Export Volume of Indonesian CPO. Concluded from the F Test, it is obtained a
significant value of 0.00 or less than the significant level. Hinted (0.000
<0.05). The data analysis results show a significant positive effect of
Domestic CPO Production on Indonesia's CPO Export Volume. This positive
influence can be said that if the Domestic CPO Production increases, the
Indonesian CPO Export Volume will also increase. Based on the results of the
t-test, the hypothesis, which states that there is a significant effect between
Domestic CPO Production on Indonesia's CPO Export Volume, is partially
acceptable.
Moreover, it is
known that there is a significant negative effect of domestic CPO prices on the
export volume of Indonesian CPO. This negative influence can be said that if
the Domestic CPO Price increases, the Indonesian CPO Export Volume will
decline. Based on the results of data analysis, it is known that there is an
insignificant positive effect of International CPO Prices on Indonesia's CPO
Export Volume. This positive influence can be said that if the International
CPO Price increases, the Indonesian CPO Export Volume will also increase. Based
on the results of the t-test, the hypothesis, which states that there is a
significant effect between the International CPO Prices on the Export Volume of
Indonesian CPO, is partially rejected. It is because Domestic CPO Prices more
influence Indonesia's CPO Export Volume. Based on the results of data analysis,
it is known that there is a significant positive effect of the Rupiah Exchange
Rate on the Export Volume of Indonesian CPO. This positive effect can be said
that exports will also increase if there is an increase in the Rupiah Exchange
Rate against the U.S. Dollar (appreciation). Based on the t-test results, the
hypothesis that there is a significant effect between the Rupiah Exchange Rate
against the U.S. Dollar on the Export Volume of Indonesian CPO is partially
accepted.
Ratana, Azam A,
Andati (Ekonomi & Keuangan, 2012), in their study entitled The Impact of Changes in Currency
Exchange Rates on Indonesian Exports found, three things. They are discussed,
including the impact of exchange rate changes on the volume of aggregate
exports and commodities of Indonesian CPO, coal, and rubber. Important factor
to see the safety factor in consumer demand (Siswanto, DJ, 2019). Several factors
affect the export of Indonesian CPO, rubber, and coal. The response of
Indonesian exporters to variable shocks that influence it. Data analysis
methods used were VAR/ VECM, impulse-response function, and fixed effects
vector decomposition. The result of this research is that currency has a causal
relationship with the production index and relative prices. Meanwhile, based on
VECM analysis, the aggregate exchange rate model does not significantly affect
exports, both in the long and short term. The variable that affects CPO exports
in the short term is the export itself. In the long run, there is a positive
relationship between export volume and rupiah depreciation and a negative
relationship between export volume and relative prices.
Daulika et al., (2020)
said about export competitiveness and factors affecting Indonesia's natural rubber
export price. This research analyzes two topics: the factors that influence the
price of Indonesian natural rubber exports and Indonesia's rubber
competitiveness in comparative and international competitive advantages. This
research using time series data is from 1995 to 2017. Data were analyzed using
multiple linear regression to influence the price of Indonesian natural rubber
export while analyzing Indonesian natural rubber's position competitiveness.
The study using a revealed comparative advantage (RCA) and competitive
advantage by using the Trade Specialization Index approach (TSI). The factors
that significantly affect Indonesia's natural rubber export are international
rubber price, exchange rate, and domestic consumption. Based on competitiveness
analysis, Revealed Comparative Advantage (RCA) indicates that the
competitiveness of Indonesia's natural rubber exports on the international
market has a comparative advantage seen from 1995-2017 with an average value of
RCA> 1, which is equal to 1.01.
Based on
the problems and facts obtained above, the authors are interested in
researching the extent of the factors affecting essential oil export in Central
Java Province with the title "Analysis of Factors
Affecting Essentials Oil Export to
United States in Central Java Province,
1990-2019". Following the problems stated above, this study aims to:
First, to know the effect of the variable exports price on the growth rate of
essential oil exports to the U.S. in Central Java Province. Second, to know the
effect of the exchange rate variable on the growth rate of essential oil
exports to the U.S. in Central Java Province. Third, to know the influence of
the GDP export destination country (U.S.) on the growth rate of essential oil
exports to the U.S.
HYPOTHESIS
The export price of Central Java essential oil
is used in this study because if the price increases, it will increase the
amount of supply in the law of supply. According to (Hia et al., 2013),
export prices and GDP importing countries influence exports.
H1:
Export prices have a negative impact on essential oil exports to the U.S. in
Central Java Province.
According to Munandar (2012)
foreign trade cannot be separated from
exchange rate problems. The exchange rate has an impact on the exports and
imports of a region. Fluctuations in the exchange rate of the rupiah against
the dollar impacted the exports of Central Java Province. It means that exchange rate fluctuations can cause changes
in essential oil exports in Central Java Province. In addition, the
strengthening of the rupiah exchange rate can reduce essential oil exports in
Central Java Province. The rupiah raises the price of Indonesian products if
valued in foreign currencies if the exchange rate strengthens. The demand for
Indonesian products abroad will decrease so that exports will decline.
H2:
The exchange rate is thought to positively
affect essential oil export to the U.S. in
Central Java Province.
According to Munandar (2012)
the increase in national income (GDP)
is expected to increase people's purchasing power to import. U.S. federal
income has grown every year, meaning that the U.S. has a remarkable ability to
fulfill the needs of its people by importing a
product.
H3: The GDP of the export destination country (United
States) is thought to positively affect essential oil export to the
U.S. in Central Java Province.
METHOD
The type of data used in this research is quantitative
data. According to Yusuf and Daris, (2019), Quantitative data
is a type of data that can be measured or calculated directly, in numerical
information or explanation. This study uses a time horizon, namely the time
series. Time series consist of one object but include several periods: daily,
monthly, weekly, annual, and others. One or more variables will be observed in one
observation unit within a certain period in time-series data. In retrieving
data in this study, based on the type of data used, the export price of
essential oil in Central Java Province, currency exchange rates, GDP of the
export destination countries (U.S.), and the export volume of essential oils in
Central Java Province were obtained from the Central Java Province Central
Bureau of Statistics in over 30 years (1990-2019).
To analyze the effect of the variable price, exchange
rate, and GDP per capita of the export destination country on essential oil
export in Central Java Province. The researcher used multiple linear regression
analysis to measure the effect of several independent variables on the
development of the volume of essential oil exports in Central Java Province as
the dependent variable. Data processing is carried out using statistical data
processing software
Testing the Significance of the Hypothesis
a) Statistical t-test
Testing
the t-test hypothesis can be done by comparing the probability of the
regression results with the degree of confidence (5%). If the probability is
less than 5% or 0.05, the independent variable significantly affects the
dependent variable. Furthermore, vice versa, if the probability is greater than
the degree of confidence of 5% or 0.05, the independent variable does not
significantly affect the dependent variable.
b) The test simultaneously (Test
F)
In
testing the hypothesis, the method used compares the probability of the
regression results with the degree of confidence (5%). If the probability is
less than 5% or 0.05, the independent variables simultaneously significantly
affect the dependent variable. Moreover, vice versa, if the probability is
greater than the degree of confidence of 5% or 0.05, it means that the independent
variables together do not affect the dependent variable significantly.
c) Coefficient of Determination/
Goodness of Fit (R2)
According
to Ekananda (2015), the coefficient
of determination shows the percentage of variation in all dependent variables,
explained by the resulting regression equation (independent variance
variation).
RESULTS AND DISCUSSION
A.
Results
This study using the
method of multiple linear regression or Ordinary Least Squared (OLS) analysis.
The estimation results obtained in this regression analysis are processed
through statistical data processing applications with the following results::
Table
1
Results
of Study
|
Variable
|
Coefficient
|
Probability
|
Result
|
|
Export
Price
|
1.015991
|
0.0013
|
Positive
and Significant (H1 Rejected)
|
|
Exchange
Rate
|
0.356042
|
0.2538
|
Positive
and Insignificant (H2 Rejected)
|
|
GDP
Importing Country (US)
|
1.646675
|
0.0142
|
Positive
and Significant (H3 Accepted)
|
Based
on the results of the regression test in the table above, the multiple linear
regression analysis equations for this study is:
Y
= α + β1 X1 + β2 X2 + β3 X3 + e
Based
on the regression model that has undergone data transformation using
logarithms, the regression equation changes to:
lnY=-5.830017+1.015991ln(
X1)+0.356042ln(X2)+1.646675ln(X3)+ e
The
regression equation provides the following explanation:
A
constant value of -5.830017 tons means that if the export price of essential
oil of Central Java Province, Exchange Rate, and GDP Importing Country (U.S.)
is worth 0, then export essential oil Central Java Province will decrease 5.830017
million tons. The regression coefficient value on the export price of essential
oil in Central Java Province is 1.015991, meaning that if the export price of
essential oil in Central Java Province increases by 1%, assuming the exchange
rate. The GDP Importing Country (U.S.) is fixed, then the export of essential
oil in Central Java Province will increase by 1.015991. The positive value
coefficient means a positive relationship between the export price of essential
oil in Central Java Province and the export volume of essential oil in Central
Java Province.
The
regression coefficient value on the exchange rate is 0.356042. The positive
value coefficient means a positive relationship between the exchange rate and
the volume of essential oil exports in Central Java Province. However, the
exchange rate variable has an insignificant impact on the volume of essential
oil exports in Central Java Province. So if there is an increase in the
exchange rate variable, it is not sure that the volume of essential oil exports
in Central Java Province will also increase. The regression coefficient value
on the GDP Importing Country (U.S.) is 1.646675. Suppose the GDP Importing
Country (U.S.) increases by 1% with the export price of essential oil in
Central Java Province. Then, the fixed exchange rate and essential oil export
in Central Java Province will increase by 1.646675. The positive value
coefficient means a positive relationship between the GDP Importing Country
(U.S.) and the export volume of essential oil in Central Java Province.
1. Simultaneous Test (F Test)
Researchers
conduct F-test to determine the effect of independent variables on the
dependent variable simultaneously or together. The results of the F test in
this study have a coefficient value of 49.45399
with a probability of 0.000000. The probability value is less than the
significant value of 0.05. The study results have the meaning that the export
price, exchange rate, and GDP of the export destination country simultaneously
have a significant effect on the volume of essential oil exports in Central
Java Province.
2. Partial Test (t-Test)
Researchers
conduct a t-test was to determine the effect of the independent variable on the
dependent variable partially. The explanation of the output of multiple linear
regression is presented as follows:
a) The export price of essential
oil in Central Java Province
The
probability value obtained by the variable export price of essential oil in
Central Java Province in this study is 0.0013.
From the probability value of 0.0013, which is
smaller than the significant value of 0.05, the export price of essential oil
in Central Java Province significantly affects the volume of essential oil
exports to the U.S. in Central Java Province.
b) Exchange Rate
The
probability value obtained by the exchange rate variable in this study is 0.2538. From the probability value of 0.2538, which is greater than the significant value
of 0.05. The exchange rate has no significant effect on essential oil exports
to the U.S. in Central Java Province.
c)
GDP
of the country of export destination
The
probability value obtained by this study's GDP variable of export destination
countries (U.S.) is 0.0142. From the
probability value of 0.0142, which is smaller
than the significant value of 0.05, the GDP of the export destination countries
(U.S.) significantly affects the volume of essential oil exports in Central
Java Province.
3. Determinasi Coefisient Test (Adjusted R2 Test)
Based
on the results of the analysis presented, it is known that the value of the
coefficient of determination for the regression model with the variable export
price of essential oil in Central Java Province, exchange rates, and GDP of the
export destination countries is 0.850885. This
value means that 85.0885% of the volume of essential oil exports in Central
Java Province is influenced by the export price of essential oil in Central
Java Province, exchange rates, and the export destination countries' GDP. In
comparison, 14.9115% is influenced by other variables not included in this
research model.
B. Discussion
1. The effect of price on the
export of essential oil in Central Java Province
In
the 1990-2019 time periods, the regression analysis results showed that the
variable export price on the volume of essential oil exports in Central Java
Province had a positive and significant effect at the 5% level with a
coefficient value of 1.015991. This positive
influence can be said that any increase in export prices will also increase
essential oil exports in Central Java Province. It is not following the
hypothesis and not pursuing previous research that export prices negatively
affect export volume. Of course, there are several reasons behind this incident.
The
excellent quality of essential oils in Central Java has led to high demand in
export destination countries and forced destination countries to continue to
import essential oils from Central Java even though the price is increasing.
The
essential oil export price from the other region have risen faster than
Indonesia's, so Indonesia's essential oil export prices have increased. For
example, India's essential oil export price compared with Central Java Province
essential oil export price:
Table 2
India's
Essential Oil Export Price
|
Year
|
Price/Kg (USD)
|
|
India
|
Central Java Province
Indonesia
|
|
2013
|
12,236
|
5,092
|
|
2014
|
19,706
|
6,907
|
|
2015
|
20,02
|
6,781
|
|
2016
|
14,79
|
6,33
|
|
2017
|
17,643
|
6,847
|
Source:
Bank of India
2. The effect of exchange rates
on the export of essential oil in Central Java Province
The
exchange rate has a positive but insignificant effect on essential oil export
in Central Java Province. Based on the calculation results, the value of the
exchange rate coefficient is 0.356042 with a
probability of 0.2538 at a 5% significance
level. This study found the exchange rate variable has an insignificant impact
on the number of essential oil exports in Central Java Province. So if there is
an increase in the exchange rate variable, it is not sure that the volume of
essential oil exports in Central Java Province will also increase.
3. The effect of the GDP of the
export destination countries on the export of essential oil in Central Java
Province
GDP
importing country (U.S.) has a positive and significant effect on essential oil
export in Central Java Province. Based on the calculation results, the US GDP
coefficient value is 1.646675 with a
probability of 0.0142 at the 5% significance
level, which means that every 1 USD increase in per capita income of U.S.
society will increase the export of essential oil in Central Java Province by
1.65 USD.
These
findings are in line with the theory and hypothesis that the per capita income
of the export destination countries will positively affect the increase in
exports of essential oil in Central Java Province. The higher the GDP per
capita of the export destination countries, the demand for essential oils in
Central Java Province will increase.
CONCLUSION
The price variable has a positive and
significant effect. Based on this research, when the price increases, the
number of essential oil exports in Central Java Province will also increase. It
is not following the hypothesis and not under previous research that export
prices negatively affect export volume. Of course, there are several reasons
behind this incident, such as: First, the excellent quality of Central Java Province's
essential oil causes high demand in export destination countries. This
situation forces destination countries to continue importing essential oil from
Central Java even though the export price increases. Second, the essential oil
export price from the other region have risen faster than Indonesia's, so
Indonesia's essential oil export prices have increased.
The exchange rate has a positive effect
and is insignificant on exports. The exchange rate variable has an
insignificant impact on the volume of essential oil exports in Central Java
Province. If there is an increase in the exchange rate variable, it is not sure
that the volume of essential oil exports in Central Java Province will also
increase.
United States (U.S.) per capita income
has a positive and significant effect on non-oil and gas exports in Central
Java. These empirical findings are in line with the theories and hypotheses
proposed in this study. At the same time, the GDP per capita of the export
destination countries is an external factor that will affect the export of
essential oil in Central Java Province. The higher the GDP per capita of the
export destination country, the demand for export products of essential oil in
Central Java Province will increase.
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ANALYSIS OF FACTORS AFFECTING ESSENTIALS OIL EXPORT TO UNITED STATES IN CENTRAL JAVA PROVINCE, 1990-2019