The Relationship Between Indonesia's Gross Domestic

THE RELATIONSHIP BETWEEN INDONESIA’S GROSS DOMESTIC PRODUCT AND INDONESIA-BRIC EXPORT IMPORT

By Giovanni Francis 014200900061

A thesis presented to the Faculty of Economics President University in partial fulfillment of the requirements for Bachelor Degree in Economics Major in Management

January 2013

THESIS ADVISER RECOMMENDATION LETTER

This thesis entitled “THE RELATIONSHIP BETWEEN INDONESIA’S GROSS DOMESTIC PRODUCT AND INDONESIA-BRIC EXPORT IMPORT” prepared and submitted by Giovanni Francis in partial fulfillment of the requirements for the degree of Bachelor Degree in the Faculty of Economic has been reviewed and found to have satisfied the requirements for a thesis fit to be examined. I therefore recommend this thesis for Oral Defense.

Cikarang, Indonesia, 25 January 2013

Acknowledged by, Recommended by,

Irfan Habsjah, MBA, CMA Ir. B.M.A.S. Anaconda B., MT., MSM Head of Management Study Program Thesis Advisor

DECLARATION OF ORIGINALITY

I declare that this thesis, entitled “THE RELATIONSHIP BETWEEN INDONESIA GROSS DOMESTIC PRODUCT AND INDONESIA- BRIC COUNTRIES EXPORT IMPORT” is, to the best of my knowledge and belief, an original piece of work that has not been submitted, either in whole or in part, to another university to obtain a degree.

Cikarang, Indonesia, 25 January 2013

Giovanni Francis

PANEL OF EXAMINERS APPROVAL SHEET

The Panel of Examiners declare that the thesis entitled “THE RELATIONSHIP BETWEEN INDONESIA GROSS DOMESTIC PRODUCT AND INDONESIA-BRIC COUNTRIES EXPORT IMPORT” that was submitted by Giovanni Francis majoring in Management from the Faculty of Economics was assessed and approved to have passed the Oral Examinations on January 2013.

Ir. Erny Hutabarat, MBA Chair-Panel of Examiners

IGNP Luhur Korsika, BSc, MIB Examiner I

Ir. B.M.A.S. Anaconda B., MT., MSM Examiner II

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ABSTRACT

Economic growth has been known as one important factor in determining the country performance. Gross Domestic Product (GDP) can be used to know the economic growth in a country. GDP is actually a number of data collected by the government that shows economic activities in a country within a specific period. One factor inside the GDP is export import. Export and import is a significant indicator in GDP, because export and import is the real activities of selling and buying goods and services across the country. Indonesia has been known as one of the biggest country in export activities. But, now there are some countries that have more power in export. Brazil, Russia, India and China (BRIC) are predicted to be the biggest exporter countries. In this research, the researcher try to analyze the relation between Indonesia’s GDP and export import Indonesia – BRIC countries. The research method in this research is descriptive statistic and simple linear regression method with 32 pairs data. The result of this research shows that there is a significant level of correlation between Indonesia GDP and export import of Indonesia and BRIC countries. The statistical results show a very strong and positive correlation has been happened between Indonesia GDP and export import of Indonesia and BRIC countries.

Keywords: Gross Domestic Product (GDP), Brazil, Russia, India and China (BRIC), Export and Import.

ACKNOWLEDGMENT

First, I do really thanks to God for His never ending bless, love and caring in my life. Especially in made me able to finish this thesis and complete my study in President University. In President University, I have met and worked with a lot people, who always help me through every step in this progress of study and learn. Through the first part of this thesis, I would like to deliver my highly appreciation and thanks to these people:

1. To My parents, grandma and families who always support me in many ways, their caring and love always by my side as always need. 2. To Mr. Ienjo and Mr. Purwanto as my thesis supervisor, Miss Filda and to all lecturers who has given me a lot of useful advice, guidance and encouragement with patience and knowledge. 3. To Evan Dewabrata who always support me in any condition with a bunch of care, patience and understanding. 4. To International Business 2009, especially Andrea, Setiawan, Andi who become my solid team in class and to all class mate during my study in President University. Also to my friends, Ima’a, Yemoy, Cinthia, Jasmine and to International Relation class 2009. 5. To PUSU 2010 and 2011, who helped me to build my self through every experience.To PUSU 2011 Finance member, Echi, Mike and Wahyu as we learned together in team. 6. To my PUCATSO, Dimas, Oktaf, Marina, Pidi as part of President University Catholic Society, and family in President University. Thanks for all sad and happiness. Keep in touch! 7. To President University, to become a place for me not only to study my bachelor degree, but also help me to develop my self through very nice lecturers, friends and environment.

Finally I would like to address my thanks and apology to everyone that I could not mention one by one. May God bless us!

TABLE OF CONTENTS

PANEL OF EXAMINERS APPROVAL SHEET ...... i THESIS ADVISER RECOMMENDATION LETTER...... ii DECLARATION OF ORIGINALITY ...... iii ABSTRACT ...... iv ACKNOWLEDGMENT ...... v TABLE OF CONTENTS ...... vi LIST OF TABLES ...... ix LIST OF FIGURES ...... x

CHAPTER I ...... 1 INTRODUCTION ...... 1 1.1 Background of the study ...... 1 1.2 Problems Identified ...... 3 1.3 Statements of the Problem ...... 4 1.4 Hypothesis...... 4 1.5 Research Objectives ...... 5 1.6 Significance of the Study ...... 5 1.7 Theoretical framework ...... 6 1.8 Scope and Limitations of the study ...... 7 1.8.1 Scope of the study ...... 7 1.8.2 Limitations of the study ...... 7 1.9 Definition of terms ...... 8

CHAPTER II ...... 9 LITERATURE REVIEW ...... 9 2.1 Previous Studies ...... 9 2.2 International Trade ...... 10 2.2.1 The Classical Theory ...... 11 2.2.2 The Modern Theory ...... 12

2.2.3 International Trade Barriers ...... 15 2.3. International Business ...... 18 2.3.1 Export - Import ...... 19 2.3.2 International Investment ...... 22 2.3.3 Other Forms of International Business ...... 23 2.3.4 Advantages and Disadvantages of Different Modes of Entry ...... 23 2.3.5 International Business Causes ...... 25 2.3.6 International Business Consideration ...... 26 2.4 Economic Growth ...... 28 2.5 Gross Domestic Product...... 29 2.5.1 Gross Domestic Product Components ...... 30 2.5.2 Gross Domestic Producs Types ...... 32 2.5.3 Gross Domestic Producs Counts ...... 32 2.6 Brazil, Russia Federation, India and China (BRIC) Countries ...... 33 2.6.1 Brazil ...... 34 2.6.2 Russia Federation ...... 34 2.6.3 India ...... 35 2.6.4 China ...... 36

CHAPTER III ...... 38 REASEARCH METHODOLOGY ...... 38 3.1 Research Method ...... 38 3.2 Research Instrument ...... 38 3.2.1 Instrument for Data Collection ...... 38 3.2.2 Instrument for Data Analysis ...... 39 3.2.3 Types of Data Variables ...... 39 3.3 Research Population ...... 39 3.4 Research Framework ...... 40 3.5 Statistical Treatment ...... 40 3.5.1 Simple Regression Analysis...... 41 3.5.2 Hypothesis Testing ...... 44

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CHAPTER IV ...... 49 ANALYSIS AND INTERPRETATION OF DATA ...... 49 4.1 Research Object Description ...... 49 4.2 Descriptive Statistic ...... 52 4.3 Normality Testing ...... 54 4.3.1 Histogram ...... 54 4.3.2 Normal Probability Plot ...... 55 4.3.3 Scatter Plot ...... 56 4.4 Multicollinearity Testing ...... 57 4.5 Regression Model Result ...... 58 4.5.1 Coefficient of Determination (R2) ...... 58 4.5.2 Regression Model Analysis ...... 59 4.6 Significance of The Model ...... 60 4.6.1 F- Test ...... 60 4.6.2 t-Test ...... 61 4.7 Analysis of Results ...... 62

CHAPTER V ...... 65 CONCLUSIONS AND RECOMMENDATIONS ...... 65 5.1 Conclusions ...... 65 5.1 Recommendation ...... 66 REFERENCES ...... 67 APPENDICES ...... 71

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LIST OF TABLES

Table 2.1 : Advantages and Disadvantages of International Business Form ...... 24 Table 2.2 : Data of Brazil ...... 34 Table 2.3 : Data of Russia Federation ...... 35 Table 2.4 : Data of India ...... 36 Table 2.5 : Data of China ...... 37 Table 4.1 : Descriptive Statistic ...... 52 Table 4.2 : Coefficients ...... 57 Table 4.3 : Collinearity Diagnostics ...... 58 Table 4.4 : Model Summary ...... 58 Table 4.5 : Regression Model Coefficients ...... 59 Table 4.6 : F-Test Table ...... 60 Table 4.7 : t-Test Table ...... 61

LIST OF FIGURES

Figure 1.1 : Theoretical Framework ...... 6 Figure 2.1 : Product Life Cycle Theory ...... 13 Figure 2.2 : Porter’s Diamond ...... 14 Figure 2.3 : Type of Investment ...... 31 Figure 3.1 : Research Framework ...... 40 Figure 3.2 : Research Variable ...... 41 Figure 3.3 : Heteroscedascity ...... 43 Figure 3.4 : t- Test ...... 46 Figure 3.5 : F-test ...... 48 Figure 4.1 : Movement of Indonesia’s GDP January 2004- December 2011 ...... 49 Figure 4.2 : Movement of Indonesia’s Export- Import January 2004- December 2011 ... 50 Figure 4.3 : Indonesia- Brazil’s Export- Import January 2004- December 2011...... 51 Figure 4.4 : Histogram ...... 54 Figure 4.5 : Normal P-P Plot ...... 55 Figure 4.6 : Scatter Plot ...... 56

CHAPTER I

INTRODUCTION

1.1 Background of the Study

The economic growth is one indicator that can be used to analyze the economic condition of a country. The economic condition of a country can be used to determine the health of the country’s economic activities. This also shows the effect of government regulation. The economic growth itself is affected by some conditions that derive from some factors, such as capital, labor, land and technology.

On the other hand, there are also some factors that can affect the economic growth, such as export and import, the government spending and so on. The economic growth in this research does not mean the indicator of the poverty in the country. The rising in the economic growth does not mean any rise in the poverty level in the country.

International trade becomes very popular nowadays. According to Griffin (2005), international trade happens due to the needs of many countries for products is increasing. International trade creates export and import activities. Export is the process of selling goods or products to other country. On the other hand, import is buying goods or products from a country. Naturally, export gives income to the country, while import is country’s expense. International trade happens because of the efficient and effectiveness of the countries. There are some countries that can’t produce some goods or there are some countries that can produce goods at cheaper cost. The opportunity of the producers to expand the market area of their product is also getting bigger, since some countries have been applied free trade area agreement.

According to Griffin (2005), export happens because of some conditions. First, domestic productivity exceeds the domestic needs. For this reason, country needs to export the produced goods to avoid the lost or gain another profit by selling the goods outside the country. Second, demand of goods or services from other country. Some countries also need to import goods that they can not produce by themselves. For example, Singapore imports agriculture output as consequences of the unavailabe land sources in the country.

The third, more profit is received by exporting the goods and services compared with selling goods and services in domestic market. Fourth, there are exports policies based on politics. Export policies are ruled by the goverment mostly to protect the local industries. Furthermore, export is also used to increase country’s income. And another reason to do export is because the country do import, so it is used to balance the economic condition of the country.

Gross Domestic Product (GDP) is the calculation that is used by a country to determine the national economic activities in the country within a period of time. Basically, GDP determines the volume of the production in a country. GDP can be used as indicator to evaluate the economic growth of a country, as well as to learn the economic condition of a country from time to time. GDP counts the value of finished product, not the selling price of finished product, because the product can be sold in several times. GDP nowadays has been used as major health indicator of economic condition in a country. Being one of important indicator of economy, GDP becomes the mirror for investors and traders to invest and trade in the country. GDP can be used to analyze the level of economic health of a country. (McEachern, 2000).

According to Oiconita (2006), in the economic development theory, the level of export success is the impact to country’s economic movement and the citizen welfare. In the macroeconomic theory, export is one of very important indicator to GDP . Export will support the level of country’s income.

Recently, all countries try to compete each other in export and import activities. As stated before, export import will affect the economic growth of the country. There are so many groups of countries trying to win this competition. There are G7, which is consist Canada, France, Germany, Italy, Japan, United Kingdom and USA. But, economists speculated that, there is a group of four countries that will have more power in the world’s economic.

There are Brazil, Russia, India and China (BRIC). These BRIC countries are developed rapidly, since as combined of the four countries, the countries have more than a quarter of the world’s area and 40 percent population (O'Neill, 2005).

The GDP of Indonesia is increasing every year. Acknowledged by Indonesia is producing a lot of commodities, therefore export and import activities have important major role in contributing the GDP of Indonesia. According to the situation, there are some questions about the relationship of the export and import between Indonesia and BRIC countries in the contribution to the GDP of Indonesia.

There are some previous studies that analyze the relationship between export and GDP of Indonesia. One of them is the paper of Ayu, 2011.

1.2 Problems Identified

According to the background of the problem above, the relationship between Indonesia – BRIC countries export and import and the Indonesia’s GDP should be identified, where export and import have an important role in GDP. But, the speculation of BRIC countries leas to a question whether there is any relationship between the export and import and GDP of Indonesia and the BRIC countries or not. BRIC countries are now growing rapidly in term of production and export, this situation can make a shift in Indonesia position, from exporter to importer country.

Export is one of the sources of country’s foreign exchange reserves, it is very important to maintain the export in high level. For this reason, Analysis on the relationship between Indonesia – BRIC countries export and import and the Indonesia’s GDP should be made .

So, in this research, the problem is identified as how the relationship between export and import and the GDP of Indonesia and BRIC countries in the period of 2004 – 2011.

1.3 Statement of the Problem

Based on the background of study that has been stated before, the questions that will be answered through this research are as follows:

1. Is there any relationship between Indonesia’s GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011?

2. How significant is the relationship between Indonesia’s GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011?

1.4 Hypothesis

In this research, researcher assumes hypothesis as follows:

a. Null Hypothesis

H0 = There is no relationship between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

b. Alternate Hypothesis

Ha = There is relationship between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

1.5 Research Objectives

The objectives in this research are

1. To find out the relationship between Indonesia’s GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

2. To measure the significant of the relationship between Indonesia’s GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

1.6 Significance of the Study

This study is expected to give some contributions for:

1. For Government

The obtained information through this study is expected to give a new input for government in determining and analyzing the movement of country’s economic growth which is impacted by export import from and to BRIC countries.

2. For Researcher

This research can be used as a practical learn about the real work of export import in its relation to a country GDP.

3. For Academic Community

This research can give contribution to develop a new theory about both export import and GDP.

4. For the Other Researcher

The next researcher can use the information in this research as the reference to develop the new idea and concept in both of GDP and Export Import.

1.7 Theoretical Framework

Figure 1.1 Theoritical Framework

Figure above shows about the theory and related field which will be explained in more detail in chapter II. GDP has four factors, the Government, Counsumption, Interest and Net Export. GDP and Indonesia- BRIC export import will be the main part in this research. David (2005) explain about the relation of GDP towards export import.

The previous researcher made GDP to be dependent variable of the research and the export import as the independent variable of the research. The result that has been proved from the previous research stated that export import has positive relation towards the GDP.

1.8 Scope and Limitations of the Study

The scope and limitation of the study have purpose to make this research more focused, detailed, and specified and avoid the overload information. Refer to the research title, Analyzing the Relationship Between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

1.9.1 Scope of the Study The Scope of the study is to evaluate the correlation between Indonesia’s GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

1.9.2 Limitation of the Study The researcher use quarterly data in Indonesia’s GDP and Indonesia Export Import to BRIC countries from period January 2004 – December 2011. The terminology will use the net export, the export from Indonesia to BRIC countries minus the import from the BRIC countries to Indonesia.

1.10 Definition of Terms

1. Ad Valorem Tariff : A customs duty whose size is based on the value of the goods being brought into the country. 2. Compound Tariff : A tax on imported goods that is a combination of a fixed amount and an amount based on the value of the goods. 3. Dependent Variable : To be predicted variable. 4. Eigen Value : Any number such that a given square matrix minus that number times the identity matrix has a zero determinant. 5. Export : The process of selling goods and services to another country. 6. Import : The process of buying goods and services from another country. 7. Independent Variable : Characteristic to predict dependent variable. 8. Interest rate : Certain amount of money that should be paid by borrower to lender calculated by the percentage of principal. 9. Regression : Equation that describes the correlation between a independent variable and dependent variable. 10. Specific Tariff :A customs duty assessed on a per unit basis rather than on market value. 11. Variable : Characteristics of items.

CHAPTER II

LITERATURE REVIEW

2.1 Previous Studies

There are two main previous studies that are used in this research. The first previous study is about the causality between export and economic growth. This study explore a little bit about the cause and effect of the export to the economic growth of the country. The second previous study is about relationship between export-import and GDP in Indonesia 1999-2008. The study analyzed the relationship of the country’s trade effects to the country’s economic growth in the specific economic growth indicator as GDP .

In the journal of Aliman and Budi (2001) about the causality between export and economic growth, stated that there are 4 (four) hypothesis which are plausible to determine the relationship between export and economic growth. The hypotheses are export led growth hypothesis, export reducing growth hypothesis, internally generated export hypothesis or growth reducing export hypothesis.

Dini (2011) on the research of the relationship between export-import and GDP in Indonesia 1999-2008, stated some hypotheses in the research. The hypotheses are export led growth hypothesis, export reducing growth hypothesis, internally generated export hypothesis or growth reducing export hypothesis. From the research, Dini (2011) concluded that the relationship between export-import and GDP in Indonesia 1999-2008 is export led growth.

2.2 International Trade

International trade is the key to improve the strategies of the companies and also improve the welfare of the consumer. Through the international trade, companies should compete each other to produce better product with lower cost and selling price. Because of that reason, consumer will have more product choices and lower price product with better quality.

According to Griffin (2005), International trade is voluntary exchange of goods, services, assests or money between one person, organization and another. Because of the condition is voluntary, both parties must believe that both parties will gain from the exchange or else both parties would not complete the activities. The international trade is trade between residents of 2 or more countries. The residents may be individual, firms, non profit organization or the other forms of association.

Samuelson (2003) stated that international trade can be done between individual and government of a country or between government of a country with government of another country. The international trade occur between the boundaries of the country, no matter the buyer or seller as stated and no matter the government or private individual. To clearly compared between domestic and international trade, there are several adjustment:

1. Seller and buyer are separated by state’s barrier. 2. Goods and services loaded and sent to other countries must pass rules from customs office, sources from respective government’s restriction on imported or exported goods and or services. 3. Distinction of language, currency, appraisal and adjustment, commerce law and etc.

There are some theories over this international trade. The theories are classical theory and modern theory. The classical theory shows how the country learn the pattern of export and import. While the modern theory shows how country improving international trade.

2.2.1 Classical Theory

1. The Age of Merchantilism Merchantilism era was began with the autarky, a society that did not trade because of all the needs were met internaly. So, for example a country, the country doesn’t trade at all, the country produce own products. But, as the merchants began exchanging goods, the attractiveness of trade become evident.

As the early 1500, trade was established in Europe, countries try to expand influences in the purpose of constructing a colonial system. In order to do that, country needs more supply in food, clothes, gun and so on. So, the country began the trade. But, to maintain the wealth, these countries only exchange between Europe and merchantilism.

Merchantilism allow trade or exchange but the government has full control for any activities, the government will decide any matters, so the country can maintain the wealth, for example in that time is gold. Gold is the standard of the country’s wealth.

The government will push the export to gain more income and at the same time, they will restric import in huge amount or might be sto it at all. The laws were passed making any activities of bringing out the silver and gold as illegal. The government exercises considerable power and influence on the conduct of trade.

2. Classical Trade Theory There are some theories of clasical trade theory. The first is the theory of absolute advantage by Adam Smith (1776). In the absolute advantage theory, human labor is the key. Adam Smith explained that some countries have fewer labor hours than other countries, assume that the other factors are same.

The second theory come from David Ricardo, the theory of comparative advantage. David Ricardo in the theory stated that even if one country can produce all goods, but specialization in one good will give better result and lower cost. After that, the country can do exchange with the other countries that produce different goods.

In the classical trade theory, can be concluded that there are three points. First is the division of labor from Adam Smith. The second is comparative advantage from Daid Ricardo and the last is Gains from trade as explained by David Ricardo, a country could improve their welfare through international trade.

3. The Factor Proportions Trade Theory The theory of factor proportions by Eli Heckscher and Bertil Ohlin. In this theory, Heckscher-Ohlin considered two factors of production, there are labor and capital. The theory explained that a country might have different level of production factors. For example, China has more labor, therefore China could be better in producing labor needed goods. Therefore, a country is better to have specialization in producing goods.

2.2.2 Modern Theory

1. Country Similarity Theory This theory is useful to explain trade in differentiated goods such as automotives, electronic equipment and personal care products, for which brand names and products reputation play an important role in consumer decision making. This theory suggest that the trade should be lied between similar countries. Means that the country has similar per capita incomes and the intra industry trade should be in common.

2. Product Life-Cycle Theory This theory explain that product has 3 main life cycles. There are new product stage, maturing product stage and also the standardized product stage. In international trade, domestic product and exports begin with the new product stage, and then the highest peak is in the second stage which is maturing product stage. At the standardized product stage, the export country pioneer becomes totally the importer of this product.

Figure 2.1 Product Life Cycle Theory

3. New Trade Theory The new trade theory focuses on economies of scale. The scale begin with the number of production. The scale has a number of sources including the ability to spread fixed costs over large volume and the ability of large volume producers to utilize specialized employees and equipment that are more productive than less specialized employees and equipment.

4. National Competitive Advantage (Porter’s Diamond) The theory of Michael Porter’r diamond is the newest to the international trade modern theory. Porter believes that success in international trade comes from the interaction of four country and firm specific elements,

a. Factor endowments, a nation’s position in factors of production such as skilled labor or the infrastructure necessary to complete in a given industry. b. Demand condition, the nature of home demand for the industry’s product and services. c. Relating and supporting industries, the presence or absence of supplier indutries and related industries taht is internationally competitive. d. Firm strategy, structure and rivalry, the condition governing how companies are created, organized and managed and the nature of domestic rivalry.

Firm Strategy, Stucture and Rivalry

Factor Demand . Condition Condition

Related and Supporting Industries

Figure 2.2 Porter’s Diamond

Source:Michael Porter, International Business, 4th edition, Pearson.

2.2.3 International Trade Barriers There are some barriers in doing international trade as a part of globalization. In this part, the barriers will be discussed.

The existence of globalization and international trade does not close possibilities of barriers to be occurred. Kind of barriers that might be occurred will be discussed in this section. The first barrier is tariffs. Tariff in this case means tax which is placed on a good that is traded internationally. Some tariffs are levied on goods as the goods leave the country, and those kinds of tariffs called export tariff. Tariff when the goods pass through one country is called transit tariff and the last when the goods arrive in the country is defined as import tariff.

There are three forms of import tariffs. The first form is ad valorem tariff. This tariff is assesed as a percentage of the market value of the imported goods. The second is a specific tariff, assesed by a specific dollar amount per unit of weight or other standart measure. And the third is a compound tariff, compound tariff has both an ad valorem tariff and specific tariff. Which tarif is used is depend on the country.

Basically, tariff is charged because of two reason. The first reason is tariff will raise the revenue of the national government. The revenue is also used in the needs of developing the countries. The second reason is a tariff acts as trade barriers. Tariff will raise the price of the imported goods and products and increase the demand of the national product to subtitute the imported goods. The imposition of tariffs will be one way of national product protection.

The other barrier is nontariff barriers. There are some nontariff barriers such as quotas and numerical export control. There are also NonTariff Barrires (NTBs) used by countries, such as product and testing standards, restricted access to distribution networks, public sector and procurement policies, local purchase requirements, regulatory control, currency control and investment control.

The first barrier in not tariff barrier is quotas. Quota is a policy by the government to protect the domestic production. Generally, quota is numerical standard to limit the amount of imported goods and products. This quota policy is used in order to protect domestic industry such as agro industry, automotive and other industry. By limit the amount of the import, the domestic industry need to produce in an amount to cover the national need of the goods and products.

The second nontariff barrier is numerical export control. Numerical export control is policy to limit the amount of goods or products export to another country. This policy used to protect both countries. Protect the need of the home country and also to avoid conflict between country by limit the amount of the export.

Products and testing standard is the next nontariff barrier. This policy allow the government to protect the consumer by testing the goods and products to meet the country standard. Different country might have different goods and products specification. For example, in Malaysia all foods are tested for the Islamic practices on their religion. And sometimes this policy needs time to pass the test as the policy is permitted to be declared.

Restricted access to distribution networks. Some countries have different regulation and policy. This type of regulation allow the foreign product to enter the country with conditions. For example, the goods or products only sold by local distributor, another example, in Thailand, there are only three branches of one bank in the country and only one branch can be located in capital city, Bangkok.

The next nontariff barrier is public sector procurement policies. Public sector procurement policies is important for country that have extensive state ownership in industry. If the national government adopt this policy of public sector procurement policy, then foreigners are locked out of much of the market.

Local purchase requirement is the sixth nontariff barriers. Local purchase requirement is policy by the government to encourage the foreign firm to use or purchase from local suppliers in a specific amount. For example, in Russia, the joint ventures of oil industry must meet at least 70 percent on their equipment locally.

The other nontariff barrier is regulatory control. Regulatory control is conducting health and safety inspections, enforcing environmental regulations, requiring firms to obtain licenses before beginning operation or constructing new plants and charging taxes and fees for public service that affect the ablity of international business to comptete in the host market. Regulatory control is used to protect the environment or everything related to the project by the foreign firm. For example, in some countries such as Indonesia and India, film is checked first before it’s allowed to be consumed by the public, India has the central board of film certification.

Currency controls. The currency control enable the government to push the export to another country. Exporter may exchange in favourable exchange rate and the importer exchange in unfavourable rate. This currency control make the foreign market attractive for domestic producers, then the domestic producers will increase the export amount.

And the last nontariff barrier is investment control. investment control is very common in many countries. Investment control is often considered as the barrier for foreign company to expand their business. This policy use to control the market, the share of the comapny. For example, in Indonesia, foreign ownership of radio, television broadcasting and foresty concessions are limited.

Nontariff barriers are now very important besides the tariff barriers. These policies sometimes more effective than tariff policy only. In one side, there are more barriers to export or import goods and products but on the other hand, it makes the competitiveness from both side, host and home country’s firm to compete each other.

2.3 International Business

International business is economic activities that devised and carried out across the national borders by individual, companies or even organization. The activities of international business take on various forms. The biggest example are export import and foreign direct investment. Through these two activites, people can see directly the across national border activities. There are also other form of international business, such as licensing, franchising and joint ventures business.

International business grows rapidly and offer companies the opportunity of new markets. Through the international business, one company can sell their product or services all around the world. There are also franchising and other business form that goes international in the field of business. For example, even though Carrefour is known as a big wholeseller whose main office in France, Carrefour is also famous and has a lot of stores in Indonesia.

International business is supported by fast growing of technology development. Nowadays, people can see other people around the world in one single time and one place, people can use personal computer, laptop, and other devices. Fast growth of technology supports the business growth. Now people can bargain or do any trustable transactions in very short time through the technology.

International business enable more options in business. Through the international business, customer has more choices of products and services. The worker also has more choices of company’s type. On the other hand, the employers are offered by more choices of land, workers, raw material and facility as well. International business can reduce the cost of production. Therefore, international business gives people, companies and countries more challenges and opportunity.

In international business, there are some forms of the international trade or business. But, there are also the advantages as well as there are the disadvantages of every international business form that will be discussed later on this chapter.

International business also grow global reorientation in production strategies. Through the international business, every producer has more competitors. Because of that reason, the producers should produce more qualify and lower cost product.

International business does not only give the opportunity for producer but also create the possibility for competition to be created. Producers should be able to think smart and create a strategy that can enhance company’s performance. The strategy could be in scope of increasing product quality or saving cost production. For example, decades ago, there is no possibility to produce parts of motorcycle in different countries, but today, every parts could be from different countries, another country only needs to assemble those parts to be a motorcycle and sell it to other countries.

2.3.1 Export – Import

Export is process of selling of products made in one’s own country for use or resale in the other countries. While import is the process of buying products made in other countries for use or resale in one’s own country.

In general export import is divided into two groups. First, group of trade in goods, refers to tangible products such as commodities, coffee, gold, etc. In American English, it is called as merchandise export and imports, while in British, it is called visible trade. Second, group of intangible products such as banking, travel, accounting activities, stocks, etc. In American English, called service export and import and in British, it is called invisible trade.

Export or import can play the vital part of a company or country. This can happen because export and import can be the biggest part of the company. For example, the company such as Boeing’s commercial aircraft sales the product to foreign customer, like Indonesia, etc. 53 percent of it sales is to foreign country. Boeing company creating thousand of work field, factories, as well as the supplier company.

On the other hand, export import or international trade is also important for the country. For example, Netherlands’ GDP shows that 60 percent of it is come from export sector.

Export can be divided into some forms. The first is indirect exporting. Indirect exporting occurs when a firm sells the product to the domestic customer and then the domestic customer sell it abroad in addition with other product. For example, an lcd producers sells the lcd to the television producer. After that, the televisions are sold abroad. It means that the lcd is in indirect export process.

The second form of export is direct export. Direct export just as known before, the producer sells the products and goods to the other country. This kind of export can be happen in two condition, sells the products and goods to the customer abroad or to the distributors abroad, both are direct exporting. Success in selling the product abroad lead the firm to be more aggressive in exploiting new international exporting opportunities as well as new international markets.

The third form of exporting is intracorporate transfer. Intracorporate transfer is the process of exporting within one company in different country. For example, when a British Petroleum transfer oil from British Petroleum in Malaysia to British Pertoleum in Indonesia and sells the oil in Indonesia. Malaysia export the oil and Indonesia import the oil, but still within one company, this is called intracoporate transfer.

There are also options for exporter to market and distribute the goods and products by using one or more intermediaries. Intermediaries are the third party in exports. These intermediaries offer many services, such as handling the transportation and documentation or can be more than that, taking ownership of foreign bound goods or assumed as total responsibility for financing and marketing export.

Beside the export import form, in doing export import between coutries, some traders need intermediaries. There are intermediaries that take advantage for being the intermediate. There are people or institutions that make money from being the intermediaries. There are also institutions that is not make money form being the intermediaries, such as government institutions.

The first type of intermediaries is export management company. Export Management Company (EMC) is a kinf of firm that buy the goods from the exporter and sell the goods in higher price. Most of the Export Management Company (EMC) handle from the shipping, up to the distribution. Export Management Company (EMC) is supported by expertise in the field of operation, such as the logistic, distribution channels and etc.

The second type of export intermediaries is Webb pomerene association.Webb Pomerene association is an intermediaries engages in market research, overseas promotional activities, freight consolidation, contract negotiation and other services for its member. This association is also actively buy the products from the exporter and sell it to the country of the association.

The third type of export intermediaries is international trading company. This type of export intermediaries is directly engages in export and import activities in a wide variety of goods for its account. International trading company engages in almost all activities such as marketing, financing, distribution, customs documentation, market research, international tranportation and etc.

In addition, there are also some export intermediaries that are specialized in one or more activities. For example, manufacturer’s agent, this agent is specifically sells domestic product to foreign markets. There are also export and import brokers. Export and import broker bring the buyers and sellers together, usually for commodities such as cocoa, coffee and grains. The last is freight forwarders, this intermediaries is specifically for transportation of goods, include documentation and transportation services for the clients.

2.3.2 International Investment

International investment is the second major of international business activity. International investment is a capital supplied by other party from other country. There are two categories of international investment, Foreign Direct Investment (FDI) and Portfolio Investment.

Foreign Direct Investment (FDI) is investment made for the purpose of actively controllong property, assests, or companies located in host countries. Host country is the country where the company operates, while home country is the coutry where the parent company’s headquarters is located. For example of the real Foreign Direct Investment (FDI), Ford Motor Company bought all the common stock of Sweden’s Volvo Corporation. After the purchase, Ford has own control of Volvo’s operation and integrated into Ford’s global procurement and marketing programs.

Portfolio investment is purchase of foreign financial assests (stocks, bonds, and certificates of deposit) for a purpose other than control. So, this form of investment is not about controlling the company, but more to get the raise of return rate. For example, Danish pension fund bought 1,000 shares of Sony’s common stock. The purpose of the Danish pension fund is trying to raise income from the raise the rate of return on assets portfolio rather than control Sony’s decision making.

2.3.3 Other Forms of International Business

The other form of international business are licensing, franchising and management contracts. Licensing is a contractual arrangement in which a firm in one country licenses the use of its intellectual property to a firm in a second country in return for a royalty payment. Such as patents, copyrights, trademarks and trade secret.

Franchising is a specialized form of licencing. It occurs when a firm in a country authorizes a firm in a second country to utilize its operating system as well as its brand names, trademarks, and logos in return of royalty payment.

An the last is management contract. Management contract is an arrangement where in a firm in one country agrees to operate facilities or provide other management services to a firm in another country for an agreed upon fee. For example, hotel industry. A big name of hotel industry such as Marriot and Hilton, they often do not have the expensive hotels that bear their name in the world but rather than operated under the management contratcs.

2.3.4 Advantages and Disadvantages of Different Modes of Entry

The simplest mode of the international business activity is export import. There are many others mode of international business as explained on the passages above. There are advantages and disadvantages of each form of the international business. The primary advantages and disadvantages are stated as follow:

Table 2.1 Advantages and Disadvantages of International Business Form

No. Mode Advantages Disadvantages 1 Exporting  Low financial exposure  Vulnerability to tariffs and  Permit gradual market entry NTBs  Acquire knowledge about  Logistical complexities local market  Potential conflicts with  Avoid restriction on foreign distributors investment 2 Licensing  Low financial risks  Limited market  Low cost way assess market opportunities /profits potential  Dependence on licensee  Avoid tariffs, NTBs,  Potential conflicts with restrictions on foreign licensee investment.  Possibility of reating 3 Franchi-  Low financial risks  Limited market sing  Low cost way assess market opportunities /profits potential  Dependence on licensee  Avoid tariffs, NTBs,  Potential conflicts with restrictions franchisee  Maintain more control than  May be creating future licensing competitor  Franchisee provides knowledge of local markets 4 Contract  Low financial risks  Reduced control (may Manufac-  Minimize resources devoted affect quality, delivery turing to manufacturing schedules, etc)  Focus firm’s resources on  Reduce learning potential the other element of the  Potential public relation value chain problem – may need to monitor working condition, etc. 5 Manage-  Focus firm’s resources on its  Potential return limited bt ment area of expertise contract Contracts  Minimal financial exposure  May unintentionally transfer proprietary knowledge and techniques to contractee

6 Turnkey  Focus firm’s resources on its  Financial risks (cost Projects area of expertise overruns, etc)  Avoid all long term  Construction risks (delay, operational risks problems with suppliers, etc) 7 Foreign  High profit potential  High financial and Direct  Maintain control over managerial investments Investment operation  Higher exposure to  Acquire knowledge of local political risk market  Vulnerability to  Avoid tariffs and NTBs restrictions on foreign investment  Greater managerial complexity

Source: Griffin, International Business, Fourth Edition, Pearson. 24

2.3.5 International Business Causes The growth of the globalization and international business in recent years has been very clear and also dramatic. The rapid growth of globalization and international business lead people to find the reasons of these rapid changes

Strategic imperatives, there are some reasons under the strategic imperatives. To leverage core competencies, by utilizing the core competencies in new markets, the firm will able to increase its revenues and profits. For example, Nokia. Nokia tried to increase the revenue and profit by expanding the business to the other country or in another words, find a new market.

To acquire resources and supplies. The other reason to expand the business across the country is the need of acquiring resources (e.g., materials, labor, capital and technology). Some companies might need to expand business to the other country in the purpose of fulfilling material needs. For example, some companies in a non oil availability country try to find oil from the other country by import the oil.

To seek new markets. As the people learn to understand more about the needs, people will be more selective in buying products and services. The competition in the home country might be tighter as people start to choose. Big company that produce an daily-use-product need to expand new markets, the emerging market with huge number of people, such as India, China and Indonesia.

To better compete rivals. The easiest example to explain this situation is Pepsi and Coca cola. There are many ways to compete the rivals, one of them is by control the market. As Pepsi and Coca cola are the biggest in their industry, they try to compete each other, country with huge number of population become the object of their expanding.

The other factor of globalization is environmental change. The first is changes in the political environment. The changes in the political environment is involved in the government policy.

In the first half of twentieth century, firm often frustrate to expand to new market because of the barriers againts foreign trade and investment erected by the national government. However, after the second world war, the policy was reversed. The major trading powers negotiated reductions in tariffs and quotas and eliminated barriers to foreign direct investment.

The second in the changes environment is technological changes. The technology changes in transportation, communication and information processing. The communication became easier as company can do the communication through email, phone, social networking and so on. The transportation also developed with more choices and as they compete each other, the tranportation cost is become cheaper time by time. The process of shipping was also faster. This situation lead the condition into the globalization.

2.3.6 International Business Considerations

In considering international business, there are some factors that should be considered. There are four considerations. There are government policies, marketing concerns, logistical consideration and also distribution issues.

a. Government Policies Begin with the government policies. There are some highlights in government policies consideration, export promotion policies, export financing program, and also other forms of home country subsidization encourage exporting as an entry mode. On the other hand, the host country government also must be the consideration, the taxes, tarriff and nontariff barriers on imported goods. Therefore, understand the government policies for both home ans host country is veri important.

b. Marketing concerns. Marketing concern is very important such as product image, the distribution and also the responsiveness to the customer. In different country with different culture, the company first should do research on how the customer response, what the customer wants and so on. Slow changing on the goods or product might be done in order to match the customer wants. This factor can determine the successful of the product promotion in the host country.

c. Logistical Consideration. Logistical consideration is one of the important factor for export import matter. This logistical consideration is talking about the warehouse for the goods or products, packaging, and the transportation of the goods and products and the cost for all of those activity. However, the cost might be higher than local product, than it must have solution. Therefore, before the export import, many factors should be well prepared.

d. Distribution Issues Last but not least for the consideration is distribution issues. The distibution issues must be done in order to promote the goods or products. Distribution might needs cost, even if the comapny conduct by itself. There are two options for distribution. The first option is by using local distributor service. The disadvatages is there are cost should be paid, may be by increasing the price for the distributor fee. The second option is distribute by the company itself, but it needs time to do research, learn the distribution scheme in the host country.

These four consideration are some factors enter into the decision to export or not for the company. However, there are also many good opportunity by exporting the goods and products, such as having new market, bigger market, more competitor, it means the producers should produce better, in quality and price.

2.4 Economic Growth

Economic growth is economic activities where it causes an increasing in goods and services production. To evaluate the economic growth of a country, GDP is used. To count the national income and its component should use constant price or goods price in the valid year.

Economic growth is the capacity increasing in a long term of the country to provide economic goods for the citizen. There are 6(six) types of economic growth:

1. The output growth rate per capita and high population growth. 2. High level of increase in total productivity factors. 3. High level of social and ideology transformation. 4. High level of economic structure. 5. Tendency of countries to use other countries around the world to market or produce their products. 6. Limited spread of economic growth reaches only a third of the world population.

Accoding to Jhingan (1993), the economic growth is affected by two factors, economic and non-economic factor. The economic factor, such as natural resources, investments, organization to equipped labor, capital and other production factors, technology and so on. On the other hand, non-economic factors are politic situation and nation moral values.

There are some policies that can help to push the economic growth,

1. Holding down the population growth. 2. Developing the technology. 3. Increasing the savings. 4. Increase the efficiency of investment.

2.5 Gross Domestic Product

According to CIA World Factbook on 2012, GDP is the value of all final goods and services produced in a country within a given period. The important thing is the word ‘final’ in GDP statement. It means that GDP doesn’t count the processing goods and services, it makes to ensure that goods and services from that country only count in once.

There is a confusion in calculating the GDP value at the market price of goods and services, because the goods and services sold at the market is added with taxes and fees.

In calculating the GDP , the market value is the price that is considered as the part of GDP , not only the factor cost. Fees and taxes are included. For example, in selling a goods, there are services and it might need some caring, aself administered haircut. These things is called by homemaker’s services.

Related with GDP , there is Gross National Product (GNP). Gross National Product (GNP) is the value of final goods and services produced by domestically owned factors of production in a given period. The difference between GDP and Gross National Product (GNP) arises because some of the output produced within given country is ade by factors of production own by foreign investors. For example, a foreign company invest in Indonesia and it produces goods in Indonesia, it means that the output of the factory goes to the country of the investor as their Gross National Product (GNP).

2.5.1 Gross Domestic Product Components

The total of GDP output is made up from four components:

1. Consumption Spending by Households This factor means all consumption (denoted by C) by the households, such as foods, electricity, water, swimming lesson, ballet lesson and etc. But there is some consumption whch is more likely to be included as investment, such as the spending on durable goods, car, motorcycle, house, etc. The number of the consumption can show hte economic performance of the country in that year. Higher consumption means less investment or it might larger trade deficit.

2. Government Purchases The government purchase (denoted by G) is refer to the government spending on goods and services. For example, the salaries of the government employees, the national defense expenditures, the making of road, the fixing of road by state and local governments.

3. Investment Spending Investment spending (denoted by I) doesn’t mean that the country buy stock from a company or bond from other country. Investment is actually the common activities in the country, for example nuilding a machinery, a housing construction, buying an automobile, inventories adding by stores and factories and also investment in human capital investment in human capital can be an education or training. This education and training are investment in human capital, because through those activities, the workers will have more knowledge and ability to produce more qualifed product and lower cost or maybe time.

Spending on gross private domestic investment or simply investment is divided into 3 major categories:

Business Fixed Investment Spending by firms on new factories, office building and machinery used to produced other goods Residential Investment Spending by households on new housing

Investment Change in Business Investment Spending by firms on inventories/ goods that have been produced but not yet sold during some period.

Figure 2.3 Type of Investment. Source: Glenn Hubbard & Anthony O’Brien (2006). Economic.,p.589

4. Net Export Net export (denoted by NX) is the difference between export and import. Ideally, export is higher than import. Export is income for the country, because it is the process of selling country’s output in production or goods to the other country. While import is the process of buying goods or services from the other country.

In the sum, GDP can be denoted as,

GDP = C + G + I + NX

GDP = Gross Domestic Product G = Government Spending

C = Consumption NX = Net Export

I = Investment

2.5.2 GDP Types

1. Nominal GDP

Nominal GDP is calculating the GDP by valuing all output at current prices. The Nominal GDP will rise when the price is rise, even if there is no increase in the production. In addition, the Nominal GDP changes every year. Because of the different physical output every year and also different market price.

2. Real GDP

Real GDP is calculating a particular year as the base year. By keeping the constant price, the changing in GDP represent the real changes in the quantity of goods and services produced in the country. The Real GDP is used better that Nominal GDP .

2.4.3 GDP Counts

In calculating the GDP , there are several factors should be considered. Those factors are stated as follows:

1. The GDP for a particular year includes only goods and services within the year, sales of items produced in previous ears are explicity excluded

2. Only final goods and services count in the GDP , thus, intermediate goods, a good purchased for resale or for use in producing another goods id excluded.

3. The adjective domestic in the definition of GDP denotes production within the geographic boundaries of the country. Thus, citizens or companies of a country that are living abroad or have offices overseas that produce valuable outputs are excluded.

4. Only goods and services that pass through organized markets count in GDP . Thus, illegal economic activities, house work, and other illegal economic activities are excluded.

2.6 Brazil, Russia Federation, India and China (BRIC) Countries

BRIC is an acronym that refers to the economies of Brazil, Russia, India and China. These four countries are believed to be the major developing economies countries in the world. The acronym was firstly defined by the Goldman Sachs in 2003. The Goldman Sachs forecasted that by 2050, these four countries will be the major economies countries as these four countries would be wealthier than most of the current major economic power.

However, there is also speculation that stated, these four countries have nearly doubled their share of world output and they now account for one fifth of the global GDP. It shows that these four countries are very productive in their economic. There are some supportive fact follow the statement.

Brazil, Russia, India and China countries build very nice relationship in economic power. The example is China and India are the leading countries in the low cost leaders. China is in charge in the manufacturing and production, which India is in service and digital technology.

Therefore, Brazil, Russia, India and China are countries that is forecasted to be the leading countries in years later. The fact that the started point has been start as it can be seen in the countries economic and their specification.

2.6.1 Brazil

According to World Bank Journal 2011, Brazil is the seventh wealthiest economy in the world. Brazil is also known as the largest country in area and population in Latin Amercia and The Caribbean.

In term of economic condition, Brazil has stable economic growth, relatively low inflation rates and well improved in social well being. The poverty in Brazilhas fallen from 21 persent of the population in 2003 to 11 percent of the population in 2009.

Table 2.2 Data of Brazil

Income Level Upper middle income GDP $2.477 trillion in 2011 Total Population 196.7 million in 2011

Source: World Bank, 2012

2.6.2 Russian Federation Russia is the top producer and also the number two oil exporter. When the oil prices plummeted during the crisis, Russia served as a stark reminder of the government over dependence on oil and gas nd the need to diversify. The long term challenge is to sustain high rates of economic growth in spite of declining oil and gas production and a shrinking workforce.

In long term, Russia’s growth will depend on the success of establishing a new growth model that addresses two critical challenges, there are increasing the competitiveness of the economy and fostering innovation to diversify the economy and coping with the demographic change pertaining to Russia’s declining and aging population.

In the economic position, Russia is an upper middle income that strives to move to a high income status. Since 2005, the per capita GDP of Russia doubled to approximately US$ 10,360 in 2010. The poverty rate was at 12.6 percent at the end of 2010 and is projected to drop to 11.6 percent in 2012 as the Russia’s economy continue to recover. On the unemployment side, it also declined to 6.6 percent in the 2011.

Table 2.3 Data of Russia Federation

Income Level Upper middle income GDP $1.858 trillion in 2011 Total Population 141.9 million in 2011

Source: World Bank, 2012

2.6.3 India India has a very huge number of population and also become the largest democracy country in the world. India penetration into the global economy was very success and also known as the impressive economic growth country. India is also one of the world four largest country in purchasing power parity terms.

The poverty condition in India has declined from 37.2 percent in 2005 ato 29.8 percent in 2010. Rural poverty declined by 8 percentage points from 41.8 percent to 33.8 percent and the urban poverty has declined 4.8 percentage points from 25.7 percent to 20.9 percent over the same period.

Table 2.4 Data of India

Income Level Lower middle income GDP $1.848 trillion in 2011 Total Population 1.241 billion in 2011

Source: World Bank, 2012

2.5.4 China China has experiences a remarkable period of rapid growth spanning three decades. The growth of China economy remained strong even during the recent global financial crisis, reflecting massive stimulus and strong underlying growth drives.

With the huge number of population, China also can reached the secod largest economy in 2010. China recently is palying very important and influential role in global economy.

According to the 2011 World Competitiveness Yearbook, China now outranks the UK, Japan, France and Italy for overall economic competitiveness. China has the 12th Five Year Plan in this 2011 up to 2015, comes at a time when the need to rebalance toward a more domestic demand-led, service sector oriented pattern of growth is stronger that before, partly due to the less favourable global outlook. The plan has set five main objectives:

1. Maintaining stable and fast economic growth, with a focus on price stabilization, more job creation, improved balance of payment, and higher quality of growth.

2. Achieving major progress in economic restructuring, with higher share of household consumption and the service sector, further urbanization, more balanced rural-urban development, lower energy intensity and carbon emissions, and better environment. 3. Increasing people's incomes, reducing poverty and improving the living standards and quality of life. 4. Expanding access to basic public services, increasing the educational level of the population, developing a sound legal system, and ensuring a stable and harmonious society. 5. Deepening the reforms in the fiscal, financial, pricing and other key sectors, changing the role of the state, improving governance and efficiency, and further integrating into the world economy.

Table 2.5 Data of China

Income Level Upper middle income GDP $7.318 trillion in 2011 Total Population 1.344 billion in 2011

Source: World Bank, 2012

CHAPTER III

RESEARCH METHODOLOGY

3.1 Research Method

This research uses Quantitative Research Method. Quantitative research is used to analyze the secondary data. The data is structured in the form of numbers. The Quantitative research is the best measurement to prove and observe the fundamental connection between empirical observation and mathematical expression of quantitative relationships (Ross, 1999). On the other hand, the descriptive analysis is used by analyzing graphics and tables. Descriptive analysis is used to present the result of the test in this research. This method is used to simplify the large amount of data in a sensible way. Descriptive statistic will give more simple and clear summary of data rather than use the large amount of data (William, 2006).

3.2 Research Instruments

3.2.1 Instrument for Data Collection

This research uses secondary data which is the data that has been collected by government institution. All the data in this research is retrieved from www.bps.go.id. All data is taken at the end of week closing begin from period January 2004 – December 2011.

3.2.2 Instrument for Data Analysis

The tools and programs that is used to calculate and analyze the data are Microsoft Excel 2007 and SPSS for windows version 16.. Microsoft excel is used by researcher to record and calculate the data while SPSS 16.0 is used as statistic software to provide calculation and data analysis for measuring relationship between export import between Indonesia and BRIC countries and the GDP of Indonesia.

3.2.3 Types of Data Variable

Variables in this research consist of independent variable (X) and dependent variable (Y). The independent variable (X) is export import between Indonesia and BRIC countries and the dependent variable (Y) is GDP of Indonesia. .

3.3 Research Population

This research use quarterly data. The data will be received from www.bps.go.id. The data taken is the data at the end of the week closing in both of export import between Indonesia and BRIC countries and the GDP of Indonesia. Researcher uses the quarterly data from period January 2004 until the end of December 2011.

3.4 Research Framework

Define Problem

Gathering Data

Processing Data

Define Statistical Tools

Assumption Testing Simple Regression F Test Analysis

Statistical Results

Results Interpretation

Figure 3.1 Research Framework

Source: Constructed by researcher based on Cooper, Donald R., Schindler Pamela S. (2006). Business Research Method

3.5 Statistical Treatment

This research is conducted by collecting the raw material data from www.bps.go.id. The data is the secondary data. The data collected is 32 quarterly data; start from January 2004 – December 2011. The data variables in this research consist of 4 independent variables and 1 dependent variable. The research variable could be described as the figure below:

Independent Variable (X) Dependent Variable

1. Brazil – Indonesia Export–Import (Y) 2. Russia- Indonesia Export–Import 3. India- Indonesia Export–Import Indonesia’s GDP 4. China-Indonesia Export–Import

Figure 3.2 Research Variable

Independent variables in this research are the export and import between Indonesia and BRIC countries. And the Dependent variable is Indonesia’s GDP.

3.5.1 Simple Regression Analysis

Simple Regression Analysis is a calculation used in this research to get the equation that shows the relation between the variables. Simple regression analysis is most suitable to be used for two or more variables are thought to be systematically connected by a liner relation. The formula of simple regression analysis:

Y = β0 + β1 X1+ β2 X2+ β3 X3+ β4 X4+ ε

Where: Υ = Indonesia’s GDP

X1= Indonesia – Brazil Export Import

X2= Indonesia – Russia Export Import

X3= Indonesia – India Export Import

X4= Indonesia – China Export Import ε = Random Error

β0 = Y Intercept Value for population

β1-4 = Regression coefficient of the independent variable

Simple Regression Assumption Test a. Normality Testing The Normality testing is to show if the data which is used by the researcher has a normal distribution or not. Normality can be checked through Kolmogorof- Smirnov (K-S) and Shapiro-Wilk method.

In Shapiro-Wilk, the normality will be tested by computing the relation coefficient. If the data is distributed normally, the plot will fall on straight line, whereas if the data from some alternative distribution, the plot will exhibit some degree of curvate. On the other words, if the data fall nearly on a straight line, the relation coefficient will be near unity. But if the plot is curved, the correlation coefficient will be smaller (Ryan Jr.).

This research will check the normality through Graphic Normal P-P of regression standardized residual through SPSS process. The result test of histogram figure should not have skewed to the left or right and Normal P-P Plot has the spots closely to the diagonal line, where indicates the normality of samples used.

b. Heteroscedascity Testing Heteroscedascity is a part of simple regression assumption test. Heteroscedasticity test is used to determine whether there is any deviation of the classical assumption that the inequality of variance heteroscedasticity of residuals for all observations in the regression model. Prerequisites that must be fulfilled in the regression model is the absence of symptoms heteroscedasticity.

Figure 3.3 Heteroscedascity

c. Multicollinearity Testing

Multicollinearity is a test to show if there is any correlation between the independent variables. The best research model do not have multicollinearity between it. To know if there is any correlation between the variables,

 The R2 value from the regression is high, but at the same time the independent variables not significantly impact the dependent variables.  Analysis the correlation between independent variables. If there is any high correlation between independent variables, more than 0.90, then it might have multicollinearity between.  The multicollinearity also can be seen by analyzing the output of the test on VIF section. VIF < 10 shows if there is not significant multicollinearity or the multicollinearity can be ignored.  The Eigen value equals or more than one, independent variables with close-to-zero shows if there is might be any multicollinearity.

3.5.2 Hypothesis Testing a. Coefficient of Determination (r2)

Coefficient of Determination Testing is used to measure the tendency of Independent Variable (X) to explain the variation of the Dependent Variable (Y) (Gujarati, 2003). The formula of Coefficient of determination testing is

Where: r2 = Coefficient of Determination SSR = Regression ( ∑ (fi- f)2 ) SSE = Error Variation (∑ (yi- y)2 ) SST = Total Variation (∑ (yi- y)2 )

 If R2 = 0, indicating that X explains 0% of the variability in Y  If R2 = 1, indicating that every point in sample were on regression line

The value of r2 is between 0 and 1. The less the value of r2 means the ability of independent variable to explain the variation of dependent variable is limited. On the other hand, the more the value of r2 means the ability of independent variable to explain the variation of dependent variable is almost complete. (Imam Ghozali, 2002).

44 b. Testing the Model of Significance

1. t- Test Hypothesis testing by using t-test is used to shows if the independent variables has the significant effect to the dependent variable or not. T-test is used in the research with the condition when the assumptions population is normally distributed and if the condition is not normal, only slightly skewed and large sample (n ≥ 30) is taken. The formula of T-test:

X   t  S n

Where:

: the sample mean

µ : the population size

n : the sample size

S : the sample standard deviation

The result of t- test will affect the tendency to accept or reject the hypothesis. The significant standard or the value of alpha is decided to be 0.05 (α=0.05) in this research. The condition of t-test as follows:

 H0 = There is no relationship between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

 Ha = There is relationship between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.  α : 0.05  df : n-1

The critical value of the research is

Figure 3.4 t-test

The decision is to determine whether to accept or reject the hypothesis are as follows:

- If the significance t is less than alpha (α), H0 is rejected and Ha is

accepted. H0: β1 = 0, if sig. t < 0.05, accept Ha

- If the significance t is more than alpha (α), Ha is accepted and H0 is

rejected. Ha: β 1 ≠ 0, if sig. t > 0.05, accept H0.

2. F-test F-test is used to determine whether the slope in the simple linear regression is statistically significant. F-test is used to measures whether the slope in the simple linear regression is negative or positive. The negative slope shows a negative correlation between variables while the positive slope will bring the positive correlation between variables. F-test is used with the assumptions the research populations are normally distributed. The formula of F-test is

With two sets degree of freedom (V1 = n1-1 and V2 = n2 – 1 )

Where :

S1 : Standard Deviation 1

S2 : Standard Deviation 2

The condition of F-test can be described as follows:

 H0 = There is no relationship between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

 Ha = There is relationship between GDP and Export Import to Brazil, Russia, India and China from period January 2004 – December 2011.

 α : 0.05

 (V1 = n1-1 and V2 = n2 – 1 )  The critical value on the research is

Figure 3.5 F-Test

The decision rule is

 If F > F α, reject H0

 If F < F α, do not reject H0

 If H0: β1 = 0, if sig F > 0.05, accept H0

If Ha = at least there is one β not equal 0, if sig F < 0.05, accept Ha

CHAPTER IV

ANALYSIS AND INTERPRETATION OF DATA

4.1 Research Object Description

The object of this research is Indonesia’s GDP and Indonesia-BRIC export import from January 2004 – December 2011. The value of the Indonesia’s GDP and Indonesia-BRIC export import will be taken quarterly for 32 quarters as the secondary data from www.bps.go.id,

a. GDP GDP is an indicator to measure the country’s economic condition throught the economic activities in the country within a period of time,in this research, the researcher will use the data of quarterly GDP from January 2004 – December 2011. The movement of the Indonesia’s GDP can be seen through this figure below:

GDP 3,000,000

2,000,000 GDP 1,000,000

0 2004 2005 2006 2007 2008 2009 2010 2011

Figure 4.1 Movement of Indonesia’s GDP January 2004 – December 2011

Source: bps.go.id, 2012

b. Export - Import Export- Import is one of four factors that give contribution to the GDP value. Export- Import is the value that consist of the goods and services from and to other countries. In this research, the export-import that will be used are between Indonesia and Brazil, Indonesia - Russia, Indonesia - India and Indonesia - China countries. The movement of the export import of indonesia from and to Brazil, Russia, India and China (BRIC) countries. The export – import of the indonesia from January 2004 – Desember 2011 can be seen through this figure below:

250

200

150 Export Import 100

0 2004 2005 2006 2007 2008 2009 2010 2011

Figure 4.2 Movement of Indonesia’s Export Import from January 2004 – December 2011 (in US$ billion)

Source : bps.go.id

2000 1800 1600 1400 1200 1000 Export 800 Import 600 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011

Figure 4.3 Indonesia-Brazil’s Export Import from January 2004 – December 2011 (in US$ billion)

Source : bps.go.id, 2012

The export import between Indonesia and Brazil as seen on the graphic above, Indonesia’s import is higher than Indonesia’s export to Brazil. The highest import value of Indonesia from Brazil is cane sugar and the highest export of Indonesia to Brazil is rubber granulated.

Indonesia and Brazil have a good relationship in export import. Brazil is a country which also has a big amount of demand for textile and shoes. Export to Brazil from Indonesia could be boosted up by exporting some commodities such as agriculture commodities.

For further information of export import between Indonesia and Russia, India or China as above, can be seen in appendix section.

4.2 Descriptive Statistic The research used descriptive statistic in order to obtain general information of central tendency of data observations. Descriptive statistic result can be used to know whether that data follow normal distribution or not. The data will be described from minimum value, maximum value, mean and standard deviation,

Table 4.1 Descriptive Statistics (in US$)

N Minimum Maximum Mean Std. Deviation

GDP 32 4.E10 7.E10 5.43E10 7.206E9

Brazil 32 173E4 1.E9 1.07E8 2.396E8

Russia 32 617E3 4.E8 9.05E7 9.624E7

India 32 9.E7 3.E9 1.09E9 6.907E8

China 32 2.E7 2.E9 6.42E8 5.429E8

Valid N (listwise) 32

There are 32 data for each variable that is taken from quarterly closing data from period January 2004 – December 2011. From the table, Indonesia’s GDP as the dependent variable has mean 5.43E10 (in US$) with standard deviation 7.206E9 (in US$). The Indonesia’s GDP has minimum value 43billion US$ on first quarter of 2004 and the maximum value is 68billion on the third quarter on 2011.

The Indonesia-Brazil Export Import as Independent variable has mean 1.07E8 (in US$) with standard deviation 2.396E8 (in US$). The minimum value is 1,730 (in US$) which occur on the fourth quarter of 2007 and the maximum value is 1,358,261 (in US$) which occur on the first quarter of 2006.

The Indonesia-Russia Export Import as Independent variable has mean 9.05E7 (in US$) with standard deviation 9.624E7 (in US$). The minimum value is 617 (in US$) which occur on the first quarter of 2004 and the maximum value is 363,636 (in US$) which occur on the second quarter of 2008.

The Indonesia-India Export Import as Independent variable has mean 1.09E9 (in US$) with standard deviation 6.907E8 (in US$). The minimum value is 87061 (in US$) which occur on the first quarter of 2004 and the maximum value is 2,783,090 (in US$) which occur on the second quarter of 2011.

The Indonesia-China Export Import as Independent variable has mean 6.42E8 (in US$) with standard deviation 5.429E8 (in US$). The minimum value is 17041 (in US$) which occur on the first quarter of 2004 and the maximum value is 1,865,571 (in US$) which occur on the second quarter of 2010.

4.3 Normality Testing

4.3.1 Histogram

The histogram figure shows that there is a normal distribution in the data being used. When the histogram is a bell-curve pattern (the curve tend to skews in the center of histogram),meanings there are normal distribution in using the data.

Figure 4.4 Histogram

As seen above the curve, there is normal distribution in using the data.

4.3.2 Normal Probability Plot

The data used in the research can be described as normally distributed if the graphic in normal probability plot, show the pattern of the points spread around the diagonal line and follow the direction of the diagonal line. From the figure below, the normal p-p plot of regression standardized residual with the Indonesia- BRIC countries export import as the independent variable and Indonesia’s GDP as the dependent variable show the spread of the points are around the diagonal line and tend to follow the direction of the diagonal line. The researcher can conclude that the data has followed a liner correlation model and the standardized deviation has followed the normal standardized distribution.

Figure 4.5 Normal P-P Plot

4.3.3 Scatter Plot

Scatter plot is used to test whether the heteroscedasticity is happen or not. Heteroscedasticity show the condition where the variables are not same for all research. A good regression model should not have a heteroscedasticity. If the points in the scatter plot tend to form a certain pattern, the plot can be considered as heteroscedasticity. On the other hand, if the points are spread and there in no pattern created, meanings the heteroscedasticity is not happen and the data is normally distributed. From the following figure, the points are spread randomly and not tend to form a pattern. The figure show that the data are normally distributed and the tendency of heteroscedasticiy is not happen.

Figure 4.6 Scatter Plot

4.4 Multicollinearity Testing

Multicollinearity test is used to describe the relation between independent variables. The best research will have not any relation between the independent variables. In this research, the independent variables are the Indonesia-BRIC countries export import. The result of the multicollinearity test can be seen in table below,

Table 4.2 Coefficients

Unstandardized Standardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 4.360E10 1.290E9 33.806 .000

Brazil .749 2.636 .025 .284 .778 .974 1.027

Russia 17.011 7.729 .227 2.201 .036 .702 1.425

India 7.238 1.076 .694 6.728 .000 .703 1.422

China 1.844 1.253 .139 1.472 .153 .840 1.191

a. Dependent Variable: GDP

From the table above, it can be concluded that the relation between indonesia- BRIC countries export import as the independent variables can be tolerated from the VIF value which are less than 10.

Table 4.3 Collinearity Diagnostics

Variance Proportions Eigenvalu Condition Model Dimension e Index (Constant) Brazil Russia India China

1 1 3.448 1.000 .02 .02 .02 .01 .02

2 .841 2.024 .00 .87 .01 .00 .02

3 .340 3.184 .09 .00 .72 .00 .20

4 .242 3.775 .22 .06 .05 .16 .74

5 .128 5.185 .67 .05 .20 .82 .02 a. Dependent Variable: GDP

The multicollinearity also can be seen by analyzing the eigen value. From the table above, the eigen value are more than 0 which means there are no independent variable was taken from the research.

4.5 Regression Model Result

4.5.1 Coefficient of Determination (R2)

Table 4.4 Model Summary

Adjusted R Std. Error of the Model R R Square Square Estimate Durbin-Watson

1 .893a .798 .768 3.470E9 1.400 a. Predictors: (Constant), China, Brazil, India, Russia b. Dependent Variable: GDP

From the table above, the researcher can see that the value of Adjusted R square (coefficient of determination) for variable is 0.768 or 76.8 % for period January 2004 – December 2011. The value of R2 indicates a very strong linear correlation between Indonesia’s GDP and Indonesia-BRIC countries export import. The value of coefficient of determination (R2) which is 79.8 percent show that the dependent variable (Indonesia’s GDP) can be explained by the variability in the independent variable (Indonesia-BRIC countries export import. The value of R which is 89.3 percent shows the positive correlation between independent and dependent variable. The R value implies that if Indonesia-BRIC countries export import has increased, the Indonesia’s GDP will also tend to increase, while if the Indonesia- BRIC countries exports imports have decreased, Indonesia’s GDP will also tend to decrease.

4.5.2 Regression Model Analysis

The regression model analysis is used to show the formula of relation between dependent variable and the independent variables. In this research, the dependent variable is Indonesia’s GDP and the indepemdents variables are Indonesia and Brazil, Russia, India and China export import. The result of the SPSS test output can be seen on the table below,

Table 4.5 Regression Model Coefficients

Standardized Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 4.360E10 1.290E9 33.806 .000

Brazil .749 2.636 .025 .284 .778

Russia 17.011 7.729 .227 2.201 .036

India 7.238 1.076 .694 6.728 .000

China 1.844 1.253 .139 1.472 .153

a. Dependent Variable: GDP

From the table above, a regression model of correlation between Indonesia’s GDP and Indonesia-BRIC countries export import can be formulated as:

Y = 4.360E10 + 0.749 X1 + 17.011 X2 + 7.238 X3+ 1.844 X4 + ε

The regression model shows that the coefficient of Indonesia-BRIC countries export import has positive relation. The value means that if Indonesia-BRIC countries export import has increased, the Indonesia’s GDP will also tend to increase, while if the Indonesia-BRIC countries export import has decreased, Indonesia’s GDP will also tend to decrease.

4.6 Significance of The Model

4.6.1 F-Test

F-test is used to determine whether the slope in the simple linear regression is statistically significant. The confidence level used for this research is 0.05. From the SPSS output, the ANOVA (Analysis of Variance) table could be described as follow:

Table 4.6 F-Test Table

Model Sum of Squares Df Mean Square F Sig.

1 Regression 1.285E21 4 3.212E20 26.672 .000a

Residual 3.251E20 27 1.204E19

Total 1.610E21 31

a. Predictors: (Constant), China, Brazil, India, Russia

b. Dependent Variable: GDP

The result of F-test show that the value of F is 26.672 with the significance is 0.000 and the value of F in F table with probability 0.05 is 2.1655. The result indicate that F > F(1,32) (26.672 > 2.1655). In addition, the significance value is 0.000 which means less than the confidence level (0.05) (0.000 < 0.05). The result of F-Test indicates that H0 is rejected and accept Ha. Ha show that there is significant level of relation between Indonesia’s GDP and Indonesia-BRIC countries export import.

4.6.2 t-Test The significance value that is got from the table is 0.000 and the value is higher than the confidence level (0.05). While, the unstandardized coefficient beta shows value of 0.749; 17.011; 7.238 and 1.844, that indicate the positive correlation between Indonesia’s GDP and Indonesia-BRIC countries export import.

Table 4.7 t-Test Table

Standardized Unstandardized Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) 4.360E10 1.290E9 33.806 .000

Brazil .749 2.636 .025 .284 .778

Russia 17.011 7.729 .227 2.201 .036

India 7.238 1.076 .694 6.728 .000

China 1.844 1.253 .139 1.472 .153

a. Dependent Variable: GDP

From the result (0.000 < 0.05), H0 is rejected and Ha is accepted. The result concludes that there is a positive and significant level of relation between Indonesia’s GDP and Indonesia-BRIC countries export import.

On the other hand, the standard error and the significant for each variable can be seen from the table. The largest standard error is belong to Russia. It happened because of the number of the export and import between Indonesia and Russia has a big different in some months. Besides, Brazil and China is not significant enough to the Indonesia’s GDP. Then the most significant variable to the Indonesia’s GDP is India and Russia.

4.7 Analysis of Results

From the previous study, some researchers concluded that, GDP has positive relation towards the exchange rater, CPI, export import and etc. In this research, the researcher tries to figure out the relation of the Indonesia’s GDP and Indonesia-BRIC countries export import. The Indonesia GDP in this research is presented by the Indonesia GDP from January 2004 – December 2011 as quarterly data. As well as the Indonesia – BRIC countries export import data is presented from January 2004 – December 2011, quarterly.

The Indonesia GDP is formed by some factors, consumption, government spending, investment and net export. The Indonesia – BRIC countries export import is formed by the export of Indonesia to BRIC countries and also the import from BRIC countries to Indonesia. The researcher use the difference between the export and import between Indonesia and BRIC countries as the representative of the net export in Indonesia GDP. The researcher tries to figure out how strong the relation between the Indonesia GDP to these BRIC countries export import from and to Indonesia.

The result of the research can prove that there is a significant relation between Indonesia GDP and Indonesia – BRIC countries export import. The researcher use SPSS version 16.0 for windows to test the data. The researcher use regression model and the level of significant that the researcher use to test the data is 0.05. From the SPSS output, the regression model result is,

Y = 4.360E10 + 0.749 X1 + 17.011 X2 + 7.238 X3+ 1.844 X4 + ε

The regression model result shows that every added of Indonesia BRIC export import have positive relation to the Indonesia GDP. The highest relation to the Indonesia GDP is the Indonesia – Russia export import, as showed on the regression model result above 17.011. The value of the coefficient of determination (r2) which is 79.8 percent show that the dependent variable (Indonesia GDP) can be explained by the variability in the independent variable (Indonesia – BRIC counries export import) for 79.8 percent.

Meanwhile, the result of the coefficient of correlation (r) is 89.3 percent. This result shows, the null hyphotesis is rejected and the alternate hyphotesis is accepted which there is relationship between GDP and Indonesia export import to BRIC countries from period January 2004 – December 2011. This number also shows a positive strong correlation between the dependent and independent variables. This positive correlation means that if the independent varilables increase then the dependent will also increase and vice versa.

The hypothesis of this research that there is a significant correlation between Indonesia GDP and Indonesia – BRIC export import is accepted. The result of hypothesis testing (F-Test and t-test) through SPSS by using the confidence level 0.05 has shown that a significant correlation has been happened between Indonesia GDP and Indonesia – BRIC export import. The result show that the significant value of F-test and t-test 0.000 is less than 0.05 (0.00 <0.05).

From the SPSS output, can be seen that the most significant relation is contributed by Russia. The highest import value of Indonesia from Russia is steel, machinery and automotive. And the highest export of Indonesia to Russia is crude palm oil. The relation between Indonesia and Russia is contributed most from Indonesia’s import from Russia, steel, machinery and automotive.

On the other hand, the highest export from indonesia is to India. The commodity is crude palm oil. As it is known that one of the famous commodity of export form Indonesia is crude palm oil (CPO). There are two countries that have 90 percent of the world crude palm oil commodity, Indonesia and Malaysia.

In the late years, the highest export from Indonesia is the crude palm oil. According to Roberto (2011), in 2005, Indonesia contributed nearly 40 percent of the crude palm oil production in the world. In 2008, Indonesia has become the biggest exporter of the crude plam oil replacing Malaysia. The production of crude palm oil has reached 23.9 million tons in 2011.

There are some aspects that must be considered to use crude palm oil as the first export commodity. The serious effect to the environment. The residual of the palm processing has serious effect to the environment. Such as, waste liquid, gas and solid waste that can impact to the micro organism and the food chain. Palm also need approximately 30 liters of water per day and this will affect the condition of the soil.

In the competition with the Malaysia’s crude palm oil as well as considered of the crude palm oil effects to the environment, Indonesia can improve the other sector of the commodity and also improve the crude palm oil harm environment prevention.

So, to conclude these paragraphs, Indonesia’s first export commodity as the main source of income in export sector which is crude palm oil, should be formulated and combined with some efforts of preventions to the environment damage. This action might be increasing the cost, but on the other hand, this action will also be a good strategy to win the competition against competitors.

Commodities also can be another key of the export. The others commodities should be considered to maintain the stability of Indonesia’s export, as export is the one important indicator of the nation income. The others export destination countries also should be considered in order to maintain the export stability during the global crisis.

CHAPTER V

CONCLUSION AND RECOMMENDATION

1.1 Conclusion

From the analysis of data and hypothesis testing on the relation between Indonesia’s GDP and Indonesia-BRIC export import, researcher can conclude some statements as follow:

1. The Hypothesis testing through F-test and t-test has shown that there is a significant level of relation between Indonesia’s GDP and Indonesia-BRIC export import.

2. Based on the coefficient of correlation (r), the value of R 89.3 percent show there is a very strong relation Indonesia’s GDP and Indonesia-BRIC export import.

3. The result from the regression testing shows that, the coefficient of the independent variable is positive. This positive correlation means any added to the Indonesia – BRIC export import will add positively to the Indonesia GDP.

5.2 Recommendation

From the conclusion of research above and due to the limitation, researcher can give some recommendations to the related parties below:

 For Government Government should put more concern about the export and import, since export and import have strong enough relation to the GDP. The government should look for any alternatives to take up the Indonesia export potential, especially those sectors that have renewable resources, because those resources might be a potential key to stabilize the economic situation and condition in the future.

 For other researcher To those who want to conduct further study on the Indonesia’s GDP and export import, the researcher recommends the other researcher to add more independent variables, such as G20, South Africa, Indonesia and so on. Researcher could also add a wider time perspective on the research.

Further study also can be done in commodity sector analysis. Indonesia has a lot of potential commodity which have not been explored. A research on commodity which will be a sustainable commodity, environment friendly and also renewable is recommended.

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APPENDICES

APPENDIX 1: DATA OF INDONESIA GDP in US$

JANUARY 2004 – DECEMBER 2011

Tabel of Indonesia’s GDP

Q1 Q2 Q3 Q4

2004 43.003.311.258 44.000.747.703 45.273.659.474 44.662.572.100

2005 45.568.468.276 46.584.170.049 47.916.791.284 46.943.388.165

2006 47.904.828.028 48.882.290.109 50.726.660.970 49.786.477.248

2007 50.805.490.280 52.170.583.209 54.154.347.362 52.695.043.794

2008 53.964.751.122 55.458.662.679 57.534.821.619 55.478.637.043

2009 56.404.187.140 57.752.296.518 59.991.134.373 58.585.665.456

2010 59.739.265.114 61.369.258.705 63.455.351.421 62.588.122.196

2011 63.579.042.940 65.330.591.754 67.552.766.503 66.648.045.289

Source: bps.go.id, 2012

APPENDIX 2: DATA OF NDONESIA-BRAZIL EXPORT IMPORT in US$ JANUARY 2004- DECEMBER 2011

2000

1800

1600

1400

1200

1000 Export Import 800

600

400

200

0 2004 2005 2006 2007 2008 2009 2010 2011

Figure of Indonesia- Brazil Export Import

Source : bps.go.id, 2012

The export import between Indonesia and Brazil as seen on the graphic above, Indonesia import is higher than its export to Brazil. The highest import value of Indonesia from Brazil is cane sugar. And the highest export of Indonesia to Brazil is rubber granulated.

Table of Indonesia- Brazil Export Import

Activity Q1 Q2 Q3 Q4

2004 Export 66.523.189 71.271.655 100.373.670 91.663.560

Import 69.655.845 115.995.696 105.591.493 150.764.084

2005 Export 69.196.193 97.267.069 122.726.190 113.414.891

Import 102.558.887 134.702.563 130.816.926 86.296.997

2006 Export 107.317.821 140.840.585 179.436.180 198.540.971

Import 146.578.879 130.389.241 114.394.366 123.784.050

2007 Export 146.175.178 194.226.044 226.187.867 219.764.169

Import 164.090.916 94.486.585 210.119.869 218.034.169

2008 Export 212.901.233 271.602.751 281.920.633 226.275.052

Import 365.457.778 327.650.791 270.341.539 411.941.187

2009 Export 150.275.202 191.556.469 274.969.269 271.602.314

Import 159.780.221 253.649.127 296.092.516 377.438.725

2010 Export 284.799.394 367.331.930 399.657.189 476.452.474

Import 270.295.522 297.835.626 356.214.922 793.127.549

2011 Export 427.112.441 452.920.697 442.790.957 412.083.834

Import 391.072.947 314.938.944 537.379.482 654.673.397

Source: bps.go.id, 2012

APPENDIX 3: DATA OF INDONESIA-RUSSIA EXPORT IMPORT in US$ JANUARY 2004 – DECEMBER 2011

1800

1600

1400

1200

1000 Export

800 Import

600

400

200

0 2004 2005 2006 2007 2008 2009 2010 2011

Figure of Indonesia- Russia Export Import

Source : bps.go.id, 2012

The export import between Indonesia and Russia as seen on the graphic above, Indonesia import is higher than its export to Russia. The highest import value of Indonesia from Russia is steel, machinery and automotive. And the highest export of Indonesia to Russia is crude palm oil.

Table of Indonesia- Russia Export Import

Q1 Q2 Q3 Q4

2004 Export 37.553.328 32.252.497 38.551.428 45.232.793

Import 38.170.527 33.251.017 40.349.082 47.260.336

2005 Export 49.635.963 99.418.629 52.215.130 52.521.419

Import 54.604.717 93.389.679 82.347.242 107.249.522

2006 Export 50.271.593 61.908.246 58.785.788 102.228.908

Import 104.059.510 104.492.212 126.450.508 80.963.818

2007 Export 65.166.955 107.293.362 88.310.508 77.073.367

Import 83.935.971 156.562.898 115.426.202 83.653.814

2008 Export 91.971.690 93.468.227 89.729.117 67.142.830

Import 304.071.129 457.104.359 286.037.345 277.937.102

2009 Export 46.924.021 90.421.768 82.348.588 96.438.479

Import 30.097.751 57.907.566 128.708.038 242.040.539

2010 Export 127.104.662 114.967.675 154.768.014 212.626.875

Import 317.438.829 222.846.708 278.034.912 257.886.020

2011 Export 215.160.366 203.003.605 233.582.404 211.738.148

Import 350.158.597 360.791.815 469.748.168 500.168.258

Source: bps.go.id, 2012

APPENDIX 4: DATA OF INDONESIA- INDIA EXPORT IMPORT in US$ JANUARY 2004 – DECEMBER 2011

16000

14000

12000

10000

8000 Export Import 6000

4000

2000

0 2004 2005 2006 2007 2008 2009 2010 2011

Figure of Indonesia- India Export Import

Source : bps.go.id, 2012

The export import between Indonesia and India as seen on the graphic above, Indonesia import is higher than its export to India. The highest import value of Indonesia from India is steel, machinery and automotive. And the highest export of Indonesia to India is crude palm oil.

Table of Indonesia- India Export Import

Q1 Q2 Q3 Q4

2004 Export 428.966.977 413.335.056 669.428.911 658.775.819

Import 341.905.603 284.231.566 245.128.560 231.166.034

2005 Export 2.076.579.857 653.800.014 759.250.596 845.006.960

Import 331.325.131 273.646.792 215.506.511 231.681.565

2006 Export 609.859.219 667.591.668 887.901.289 1.225.438.054

Import 318.216.346 449.053.442 313.416.684 326.737.370

2007 Export 940.086.232 1.328.923.523 991.368.570 1.683.527.652

Import 404.049.744 443.294.850 327.002.519 435.259.703

2008 Export 1.664.465.669 1.866.467.387 1.883.605.512 1.748.797.664

Import 682.515.622 808.688.013 857.736.454 552.912.148

2009 Export 1.577.819.683 1.885.654.960 1.809.014.288 2.160.403.593

Import 470.094.145 519.349.482 560.729.141 659.183.919

2010 Export 2.084.494.137 2.163.728.654 2.697.838.047 2.968.978.105

Import 682.628.488 861.309.995 775.330.093 975.493.594

2011 Export 2.655.921.427 4.017.243.498 3.614.316.553 3.047.224.986

Import 1.070.993.257 1.234.153.384 1.002.329.750 1.014.526.853

Source : bps.go.id, 2012

APPENDIX 5: DATA OF INDONESIA- CHINA EXPORT IMPORT in US$ JANUARY 2004 – DECEMBER 2011

30000

25000

20000

15000 Export Import

10000

5000

0 2004 2005 2006 2007 2008 2009 2010 2011

Figure of Indonesia- China Export Import

Source : bps.go.id, 2012

The export import between Indonesia and China as seen on the graphic above, Indonesia import is higher than its export to China. The highest import value of Indonesia from China is steel, machinery and automotive. And the highest export of Indonesia to China is crude palm oil.

Table of Indonesia- China Export Import

Q1 Q2 Q3 Q4

2004 Export 946.436.455 1.158.226.372 1.135.428.354 1.364.641.928

Import 929.394.551 903.436.368 1.152.827.200 1.115.672.977

2005 Export 1.278.979.122 1.467.860.995 1.850.200.874 2.065.312.814

Import 1.412.289.371 1.785.839.109 1.339.069.640 1.305.664.393

2006 Export 1.753.326.595 1.978.328.894 2.369.865.285 2.242.050.563

Import 1.401.483.241 1.528.229.489 1.929.589.283 1.777.593.098

2007 Export 2.230.798.485 2.364.654.635 2.424.181.658 2.655.877.945

Import 1.797.866.096 2.153.463.744 2.355.565.247 2.250.982.034

2008 Export 3.223.059.045 3.069.506.870 3.204.691.821 2.139.245.985

Import 3.285.179.246 3.791.810.982 4.668.249.676 3.501.929.023

2009 Export 1.979.157.866 3.062.793.776 2.932.764.929 3.524.610.690

Import 2.906.194.606 3.100.848.756 3.726.681.087 4.268.446.056

2010 Export 3.331.303.992 3.335.519.538 3.545.596.453 5.480.191.120

Import 4.240.330.132 5.201.091.083 5.380.060.308 5.602.736.721

2011 Export 3.997.560.037 5.633.243.699 6.187.371.873 7.122.829.320

Import 5.384.319.862 7.030.070.217 6.837.645.553 6.960.151.731

Source: bps.go.id, 2012

APPENDIX 6: COMPLETE SPSS OUTPUT FOR THE CORRELATION BETWEEN INDONESIA’S GDP AND INDONESIA – BRIC COUNTRIES EXPORT IMPORT

Table of Descriptive Statistic

N Minimum Maximum Mean Std. Deviation

GDP 32 4.E10 7.E10 5.43E10 7.206E9

Brazil 32 1730000 1.E9 1.07E8 2.396E8

Russia 32 617199 4.E8 9.05E7 9.624E7

India 32 9.E7 3.E9 1.09E9 6.907E8

China 32 2.E7 2.E9 6.42E8 5.429E8

Valid N (listwise) 32

Figure of Normality Testing

Fgure of Normal Probability Plot

Figure of Scatterplot

Table of Coefficient

Unstandardized Standardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta T Sig. Tolerance VIF

1 (Constant) 4.360E10 1.290E9 33.806 .000

Brazil .749 2.636 .025 .284 .778 .974 1.027

Russia 17.011 7.729 .227 2.201 .036 .702 1.425

India 7.238 1.076 .694 6.728 .000 .703 1.422

China 1.844 1.253 .139 1.472 .153 .840 1.191 a. Dependent Variable: GDP

Table of Collinearity Diagnostic

Variance Proportions Condition Model Dimension Eigenvalue Index (Constant) Brazil Russia India China

1 1 3.448 1.000 .02 .02 .02 .01 .02

2 .841 2.024 .00 .87 .01 .00 .02

3 .340 3.184 .09 .00 .72 .00 .20

4 .242 3.775 .22 .06 .05 .16 .74

5 .128 5.185 .67 .05 .20 .82 .02 a. Dependent Variable: GDP

Table of Model Summary

Adjusted R Std. Error of the Model R R Square Square Estimate Durbin-Watson

1 .893a .798 .768 3.470E9 1.400 a. Predictors: (Constant), China, Brazil, India, Russia b. Dependent Variable: GDP

Table of Regression Analysis

Standardized Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 4.360E10 1.290E9 33.806 .000

Brazil .749 2.636 .025 .284 .778

Russia 17.011 7.729 .227 2.201 .036

India 7.238 1.076 .694 6.728 .000

China 1.844 1.253 .139 1.472 .153 a. Dependent Variable: GDP

Table of F – Test

Model Sum of Squares Df Mean Square F Sig.

1 Regression 1.285E21 4 3.212E20 26.672 .000a

Residual 3.251E20 27 1.204E19

Total 1.610E21 31 a. Predictors: (Constant), China, Brazil, India, Russia b. Dependent Variable: GDP

Table of t-Test

Standardized Unstandardized Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) 4.360E10 1.290E9 33.806 .000

Brazil .749 2.636 .025 .284 .778

Russia 17.011 7.729 .227 2.201 .036

India 7.238 1.076 .694 6.728 .000

China 1.844 1.253 .139 1.472 .153 a. Dependent Variable: GDP