Competitiveness and the Impact of Government Policy on the Clove

INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH, VOLUME 9, ISSUE 01, JANUARY 2020 ISSN 2277-8616

Competitiveness and The Impact of Government Policy on The Clove Farming Business in Getasan Sub-District, Semarang Regency Nila Indriyani, Sucihatiningsih Dian Wisika Prajanti, Yoris Adi Maretta

Abstract— The purpose of this study is to analyze the comparative and competitive advantages (competitiveness) and the impact of government policies on clove farming. Significant increase in clove imports after the enactment of the Minister of Trade Regulation of the Republic of Indonesia Number 75 of 2015 had an impact on the decline in domestic clove prices and farmers' incomes, triggered by a decline in production yields. Declining production encourages low clove productivity. The data analysis method in this study uses the Policy Analysis Matrix (PAM). Data sources include primary data and secondary data. The research period was 2018 in Getasan Subdistrict, Semarang Regency. The results showed that clove farming has a comparative advantage and competitive advantage (competitiveness) that is efficient in conditions without divergence and the application of efficient policies and farm profits above normal to be able to expand. On the other hand, government policies are disincentives to output, no protection policies for inputs, ineffective government incentive policies and no additional producer surpluses. However, overall, government policies have provided incentives to producers and the prevailing policies have been able to reduce production costs. Suggestions: 1) Optimizing the use of farmer input costs by farmers; 2) Facilitation of farmers through a program to improve clove productivity by the government, the implementation of an incentive policy towards outputs, the application of an input protection policy, the implementation of an effective government incentive policy and a policy that provides an additional surplus to producers.

Index Terms— Cloves, Competitiveness, Impact of Government Policies —————————— ◆ ——————————

1 Introduction agricultural sector in it is plantation crops are the agricultural sub-sector with the largest contribution to GDP. The following The agricultural sector including food crops, horticulture, Table 1 Value of Gross Domestic Product at plantations, animal husbandry, agricultural and hunting Constant Prices 2010, shows the large contribution of GDP of services is a subsector that contributes to the largest Gross plantation crops to the agricultural sector as a whole and an Domestic Product (GDP) compared to the forestry and fisheries increase in 2015-2018 ie GDP reaches Rp. 387,502 Billion in sectors (Badan Pusat Statistik, 2019). The 2018.

Table 1. Gross Domestic Product of the Agriculture Sector at the Constant Prices 2010 and the Contributions of Each Subsector in 2015-2018 (Billion Rupiah)

Value of Gross Domestic Product Explanation

2015 2016 2017 2018

Agriculture, Forestry and 1,171,446 1,210,956 1,257,876 1,307,026 Fisheries 906,806 936,357 969,774 1,005,441 Agriculture (77.41) (77.32) (77.10) (76.93) a. Food Crops 280,019 287,217 293,858 298,201 b. Horticultural Plants 127,110 130,832 135,647 145,134 c. Plantation Crops 345,165 357,138 373,054 387,502 d. Animal Husbandry 136,936 143,037 148,357 155,152 Agriculture e. 17,575 18,134 18,858 19,452 and Hunting Services 60,624 60,002 61,251 62,944 Forestry and Logging (5.18) (4.95) (4.87) (4.82) 204,017 214,597 226,851 238,641 Fishery (17.42) (17.72) (18.03) (18.26)

Information: Figures in () Indicate Share of the Subsector to the Agriculture Sector (Percent) On the other hand, Indonesian plantation crops are dominated Ministry of Trade, the national export mainstay of Community by Community Plantation (Perkebunan Rakyat) which absorbs plantation crops including cloves, cocoa, coconut, coffee, labour, which are generally small scale and managed by rubber, oil palm and tea (Badan Pusat Statistik, 2015). The relatively poor farmers. Community Plantation needs supportive following is Table 2, namely the land area, production, and government policies for sustainability of production to meet productivity of the Community Plantation crops in 2015-2018 domestic needs, stabilize commodity prices and increase which are Indonesia's main export commodities. productivity to compete in export markets. According to the

Table 2. Land Area, Production and Productivity of Community Plantation Crops Year 2015-2018

Years Plantation Crops 2015 2016 2017 2018 Clove 527 536 552 553 Cocoa 1,667 1,679 1,616 1,635

Coconut 3,549 3,618 3,438 3,440

Coffee 1,183 1,199 1,192 1,194

Ha)

Rubber 3,076 3,092 3,103 3,113 Area

Palm Oil 4,535 4,739 5,698 5,812

Tea 54 52 52 52

Thousand

Land

( Clove 138 138 111 122 Cocoa 562 630 559 561

Coconut 2,888 2,872 2,821 2,867 )

s Coffee 602 632 686 686

Ton

Rubber 2,569 2,755 3,050 3,005 Palm Oil 10,528 11,576 13,191 14,000

Tea 50 48 49 49

Thousand

Production

( Clove 261 257 202 220 Cocoa 337 375 346 343 Coconut 814 794 821 833

Coffee 509 527 576 575

Rubber 835 891 983 965

Palm Oil 2.321 2.442 2.315 2.409

Tea 925 910 933 944

Kg/Ha)

Productivity

(

Source: Central Bureau of Statistics, 2019

The addition of the land area of each Community Plantation crop development of the value of clove imports after the stipulation of was relatively low in the period of 2015-2018, so that production the Minister of Trade of the Republic of Indonesia Regulation and productivity also did not experience a significant increase. Number 75 (Permendag Number 75) Year 2015 Concerning Table 2 shows that clove plantation crops as an export Revocation of the Decree of the Minister of Industry and Trade commodity, have the lowest productivity, which only reached of the Republic of Indonesia Number 528 of 2002 concerning 220 Kg/Ha in 2018. Clove plants based on their concession Provisions for Cloves Import, so that practical imports begin to status, namely Community Plantation accounted for 98% of the be done freely (Kementerian Perdagangan, 2017). Table 3 land area, but continued production to meet domestic needs as shows the development of the value import of Indonesian clove well as contributions to national exports need to be considered plantation crops significantly, namely the value of clove imports because of the low productivity of plants (Badan Pusat Statistik, reaching US $ 105,330 in 2018 compared to the import value of 2015). The decline in productivity is in line with the significant US $ 127.2 in 2015.

Table 3. Production, Import Volume, and Import Value of Cloves of the Year 2015-2018

105330 107065 Nilai Impor (Ribu $US) 61112.4 127.2 13318 12797 Volume Impor (Ton) 6571 11 121600 111300 Produksi (Ton) 137600 137700

0 20000 40000 60000 80000 100000 120000 140000 Produksi (Ton) Volume Impor (Ton) Nilai Impor (Ribu $US) 2018 121600 13318 105330 2017 111300 12797 107065 2016 137600 6571 61112.4 2015 137700 11 127.2

Source: Central Bureau of Statistics, 2019 (processed) Domestic clove demand is 110,000 tons per year. Domestic the farmer level triggered by the decreasing production results clove production based on Table 3 shows production which (Sekjen Asosiasi Petani Cengkeh Indonesia, 2019). Table 4 exceeds the portion of domestic needs, 93% is absorbed by shows an increase in the land area of clove in Java provinces in cigarette factories and 7% is used for commercial and spices 2015-2018, while production and productivity declined. The (Ketua Umum Asosiasi Petani Cengkeh Indonesia, 2016). lowest clove productivity is in Central Java and productivity Import significantly impacts on the decrease in clove prices at declined in 2015-2018.

Table 4. Land Area, Production and Productivity of Clove Crops of Community Plantations

According to the Province of Java Year 2015-2018

Year Provinces Land Area (Ha) Production (Ton) Productivity (Kg/Ha) East Java 33,769 6,898 374 Banten 12,957 3,320 425 Central Java 42,348 6,608 265 2015 D.I. Yogyakarta 3,150 450 277 East Java 45,474 9,879 392 Java 137,698 27,155 197 East Java 34,440 6,985 365 Banten 12,739 3,196 412 Central Java 42,281 6,448 262 2016 D.I. Yogyakarta 3,058 439 270 East Java 45,902 10,769 411 Java 138,420 27,837 201 East Java 35,112 6,506 350 Banten 12,795 4,875 642 Central Java 42,047 5,064 219 2017 D.I. Yogyakarta 3,054 472 268 East Java 45,824 10,874 403 Java 138,832 27,791 200 East Java 35,684 6,749 362 Banten 12,903 3,197 411 Central Java 42,042 2,522 109 2018 D.I. Yogyakarta 3,053 488 276 East Java 45,963 11,442 397 Java 139,645 24,398 175

Source: Ministry of Agriculture, 2019

The ideal level of productivity of clove crop plantations is to reach passed the economic age in production, will result in decreased 500-600 Kg/Ha (Direktur Jenderal Perkebunan, 2013). Five productivity. In the following Table 5 shows the production and regencies / cities in Central Java seen from the land area of the productivity of cloves which has decreased namely the Community Plantations, Semarang Regency contributes the production of 178.91 tons with productivity reaching only 86.53 lowest clove production and productivity compared to other kg / ha in 2016. The decline in production and productivity of districts including Wonogiri Regency, Pemalang Regency, cloves in Semarang Regency was also followed by the same Kebumen Regency, and Batang Regency. The land area of conditions in 2017, namely production of 146.68 tons with damaged plants reaches 307 Ha. The higher the land area of the productivity reaching only 74.06 kg / ha. Meanwhile, clove damaged crop, the lower the clove productivity will be. Semarang production in 2018 showed a decline in production of 142.71 tons Regency has a clove area of 3,167 Ha. Clove plants that have with productivity reaching only 80.36 Kg/Ha.

Table 5. Land Area, Production and Productivity of Community Plantation Cloves in Semarang Regency and State of the Plants Year 2015-2018

Land Area (Ha) No. Subdistrict Production (Ton) Productivity (Kg/Ha) TBM TM TR Number 1 Jambu 85.22 242.72 12.52 340.46 21.36 88.00 2 Suruh 22.00 229.56 41.22 292.78 14.46 63.00 3 Ungaran Barat 99.42 196.46 5.54 301.42 17.29 88.00 4 Tuntang 36.90 172.90 - 209.80 14.70 85.00 5 Banyubiru 101.60 170.30 8.80 280.70 14.99 88.00 6 Tengaran 30.00 140.00 9.00 179.00 12.74 91.00 7 Susukan 111.00 111.00 21.00 243.00 9.95 89.64 8 Ambarawa 17.00 90.00 53.77 160.77 7.20 80.00 9 Sumowono 12.00 82.00 15.00 109.00 5.99 73.00 10 Getasan 109.00 76.00 45.23 230.23 1.52 20.00 11 Pabelan - 68.00 10.00 78.00 5.78 85.00 12 Bawen 6.00 65.00 5.00 76.00 5.53 85.00 13 Bergas 82.60 60.00 25.00 167.60 5.46 91.00 14 Bandungan 25.12 41.10 1.65 67.87 3.33 81.00 15 Ungaran Timur 3.63 17.00 - 20.63 1.50 88.00 16 Pringapus 1.30 10.40 31.63 43.33 0.65 62.74 17 Kaliwungu 5.00 2.00 - 7.00 0.17 85.00 18 Bringin - 1.45 - 1. 45 0.10 71.72 2018 747.79 1,775.89 285.36 2,809.04 142.71 80.36 2017 790.56 1,980.63 478.77 3,249.96 146.68 74.06 2016 747.46 2,067.51 401.06 3,216.03 178.91 86.53 2015 711.70 2,148.18 307.15 3,167.03 222.00 103.34

Source: Department of Agriculture, Fisheries and Food 2019

Getasan Subdistrict has the lowest clove productivity compared 2015). The competitiveness of a commodity can be measured to other districts and productivity below the average clove through indicators namely comparative advantage and productivity in Semarang Regency. The lowest clove competitive advantage (Kurniawan, 2011). Competitiveness in productivity in Getasan Subdistrict, namely productivity only this case determines the position of a commodity in the reaches 20.00 Kg /Ha and productivity is less than 80.36 Kg/Ha. competitive market (Syaukat & dkk, 2015). One of the Meanwhile, the total area of clove plantations produces (TM) indicators of competitiveness is market share (Martin & Van, only 76.00 Ha and clove production was 1.52 tons in 2018. 1991). An increase in commodity market share indicates an Clove Plantation in Getasan Subdistrict, Semarang Regency increase in the competitiveness of the commodity. needs to be optimized in the future as a business attraction to Competitiveness can also be done through a market share and produce higher production so as to encourage increased clove market growth approach (Syaukat & dkk, 2015). productivity. Competitiveness is the ability of a producer to produce a Competitiveness explains the ability of a country to produce commodity using a relatively lower cost so that the production high-quality commodity units with relatively lower production activity is profitable at the price level that occurs in the costs compared to social costs from other alternatives (Asian international market. The approach that can be used to Development Bank, 1992). The competitiveness approach measure the competitiveness of a commodity is the level of used is the level of financial and economic benefits generated profit generated and the efficiency of the commodity business. and the efficiency of farming business (Badan Pusat Statistik, The level of producer’s profit can be seen from the private profit 3176 IJSTR©2020 www.ijstr.org INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH, VOLUME 9, ISSUE 01, JANUARY 2020 ISSN 2277-8616 and social profit, while the efficiency of commodity farming commodity (Asian Development Bank, 1992). Competitiveness business can be seen from the level of comparative advantage analysis for comparative advantage using calculated indicator and competitive advantage (Badan Pusat Statistik, 2015). that is Domestic Resource Cost Ratio (DRCR). DRCR is a comparison between the economic costs of domestic factors Comparative advantage proposed by David Ricardo (1917) and added value in economic prices, where the DRC explains when discussing trade between two countries. In that theory, the economic or social benefits to measure comparative Ricardo proved that if there are two countries that trade with advantage (Agustian & dkk, 2014). each other and each country concentrates itself on exporting goods which for the country has a comparative advantage, then Competitive Advantage measures the competitiveness of an both countries will get benefit (Tarigan, 2005). Comparative activity based on actual economic conditions. The concept of advantage developed by David Ricardo is to explain the competitive advantage is based on the assumption that an efficiency of open resource allocation, where production costs economy without distortion is hard to find in the real world, and are stated in economic or social analysis (Krugman & Obstfeld, the comparative advantage of an economic activity seen from 2000) in (Kariyasa, 2003). the point of view of individuals with direct interests. Competitive advantage is defined as the ability to supply goods at the time, If the sector which has a comparative advantage for a region is place, and shape desired by consumers, both in the domestic known in advance, the development of that sector can be and international markets at the same price or better than those carried out immediately without waiting for the pressures of the offered by competitors to obtain a minimum profit as much as market mechanism which often runs slowly. The concept of the opportunity cost of resources (Badan Pusat Statistik, 2015). comparative advantage is often used to explain the Competitive advantage explains private profit (private specialization of a country in producing goods and services. In profitability) which is calculated based on market prices and addition, this concept can also be applied to smaller areas such currency exchange rates (Asian Development Bank, 1992). as provinces. Indicators of competitive or competitiveness advantage are used in explaining a country's success in competitiveness in In the model stated that even if a country experiences an global markets (Asian Development Bank, 1992). absolute loss or disadvantage in producing a commodity Competitiveness analysis for competitive advantage uses a compared to other countries, mutually beneficial trade could still calculated indicator that is Private Cost Ratio (PCR). PCR is a take place. Countries that are less efficient will specialize in measure of financial or efficiency competitiveness to measure producing and exporting commodities that have a comparative competitive advantage (Agustian & dkk, 2014). Competitive is advantage, otherwise these countries will import commodities defined as being competitive, or able to compete with others that have a greater absolute advantage. From these (Badan Pusat Statistik, 2015). commodities, the countries will suffer comparative losses (Salvatore, 1997). 2 METHOD

The Ricardian model also assumes that labour is the only factor The type of research in this study was quantitative using a case of production, which states that the value or price of a study research design. This study used the application of the commodity can be obtained based on the amount of time spent Policy Analysis Matrix (PAM) method to answer research producing commodities. In this case, it implies that only the questions. The agricultural sector policies can be approached factors of labour production are used in the same proportion in through macroeconomic policies, pricing policies and the production of all commodities, as well as homogeneous investment policies. Meanwhile, the price policies and labour. In 1933, Heekscher and Ohlin (H-O) developed the investment policies can be analyzed using research design of concept of comparative advantage of the Ricardian Model, Policy Analysis Matrix (PAM) method. which is based on the mutual influence of differences in resources between countries or regions. Through this model, it The population in this study included all clove farmers in is stated that international or regional trade is influenced by Getasan Subdistrict, Semarang Regency which consisted of differences in resources between countries or regions (Syaukat 638 real clove farmers in Getasan Subdistrict (Dinas Pertanian, & dkk, 2015). Perikanan dan Pangan, 2018). The research sample to represent the population was 42 clove farmers. It was H-O theory assumes that each country will export commodities calculated based on the Slovin formula technique so that a that have relatively abundant and inexpensive production minimum sample size was found to be representative to the factors, and import commodities that have relatively rare and study population. The percentage of accuracy tolerance for expensive production factors. The use of Ricardian theory and errors used by researchers was 15% or 0.15 and the calculation H-O is usually based on a simple model with assumptions: 1) result was rounded up to achieve compatibility. there are only two countries, two commodities, and use one or two factors of production; 2) there is no factor mobility in The variables of this study included primary and secondary data production; 3) fixed factor offerings; 4) balance of payment; and variables. Primary data variables consisted of the 5) there are no intermediate and non-traded goods (Salvatore, characteristics of the clove farmers (age, last education level, 1997). farming experience, land area, land ownership status, activities outside farming business, types of seeds and sources of Comparative advantage has indicators used in explaining capital), price, revenue, total production, production costs economic advantages to expand the production and trade of a (tradable inputs and domestic factors) in terms of private and social prices as well as private and social benefits. Secondary 3177 IJSTR©2020 www.ijstr.org INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH, VOLUME 9, ISSUE 01, JANUARY 2020 ISSN 2277-8616 data variables consisted of imported clove prices (US $ / Ton), The method of primary data collection was obtained from international fertilizer prices (US $ / Ton), shipping or freight and questionnaire data collection technique or and interview data insurance value (% FOB or CFR) and an exchange rate of IDR collection technique. This study used the Policy Analysis Matrix / $ US. (PAM) method, with the Single Period developed by Monke and Pearson (1995). The PAM model is shown in the formulation as in Table 6 below. Table 6. Policy Analysis Matrix (PAM)

Cost Explanation Revenue Domestic Profit Tradable Input Factors Financial Value (Private Price) A B C D = A – B – C Economic Value (Social Price) E F G H = E – F – G Divergence / Impact of Policies and (OT) I = A – E (IT) J = B – F (NT) L = D – H = (FT) K = C – G Market Distortion NPCO = A/E NPCI = B/F I – J – K; PC = D/H

Source: Monke & Pearson, 1995

Where:

A = Clove farming business revenue at private prices

B = Total cost of tradable input of clove farming business at private prices

C = Total cost of domestic factor of clove farming business at private prices

D = Level of profit of clove farming business at private prices

E = Clove farming business revenues at social prices

F = Total cost of tradable input of clove farming business at social prices

G = Total cost of domestic factor of clove farming business at social prices

H = Level of profit of clove farming business at social prices

I = Output transfer

J = Input transfer

K = Factor transfer

L = Net transfer

The PAM approach in this study is able to measure the and efficient policy implementation. H ≤ 0 means that clove competitiveness of farming business. The PAM indicators farming business is not able to compete without government among others: assistance and intervention.

A. Competitive Advantage: Domestic Resource Cost Ratio (DRCR) = G/(E – F),DRCR < 1 Private Profitability= D, D > 0 shows that clove farming business shows that clove farming business has a comparative gains profits above normal which has implications that farming advantage. DRCR ≥ 1 shows that clove farming business does business is able to expand. D ≤ 0 shows that clove farming not have a comparative advantage. business receives profit under normal, which means that farming business has not been able to expand. C. The Impact of Policies on Output Output Transfer (OT) = A – E, a positive OT shows the Private Cost Ratio (PCR) = C/(A – B), PCR < 1 shows that clove existence of transfers from the public (consumers) to farming business has a competitive advantage. PCR ≥ 1 producers. Negative OT indicates there is no transfer from the indicates that clove farming business has no competitive public (consumers) to producers. advantage. Nominal Protection Coefficient on Output (NPCO) = A/E, NPCO B. Comparative Advantage: > 1 means that government policies are protective to output, the Social Profitability = H, H > 0 means that there is efficiency from greater the value of NPCO the higher the level of government clove farming business in the absence condition of divergence 3178 IJSTR©2020 www.ijstr.org INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH, VOLUME 9, ISSUE 01, JANUARY 2020 ISSN 2277-8616 protection to output. NPCO ≤ 1 means that government policy Profitability Coefficient (PC) = D/H, a positive PC means that is disincentive, causing private prices to be lower than social overall government policy provides incentives for producers. A prices. negative PC means that overall government policy does not provide incentives to producers. D. Impact of Policies on Inputs Input Transfer (IT) = B – F, IT > 0 shows there is a transfer from Subsidy Ratio to Producer (SRP) = L/E, a positive SRP means producer farmers to tradable input producers. IT ≤ 0 indicates that government policies that have been in force so far have the transfer from tradable input producers to producer farmers caused producers to spend more on production costs than the Nominal Protection Coefficient on Tradable Input (NPCI) = B/F, costs to produce. A negative SRP meaning that government NPCI < 1 means that government policies are protective to policies that have been in effect so far do not cause producers inputs / there is a policy of subsidies to tradable inputs. NPCI ≥ to spend more on production costs than the balance of 1 means there is no protection policy against inputs / no subsidy production. policy on tradable inputs. 3RESULTS AND DISCUSSIONS Transfer Factor (FT) = C – G, TF > 0 indicates a transfer from Based on the results of the competitiveness analysis using the producer farmers to non-tradable input producers. TF ≤ 0 Policy Analysis Matrix (PAM) method with a Single Period, that indicates there is no transfer from producer farmers to non- the clove farming business in Getasan Subdistrict, Semarang tradable input producers. Regency has been competitive or has a comparative or

competitive advantage. This is indicated by the value of E. The Impact of Policies on Input Output Domestic Resource Cost Ratio (DRCR) and the value of Private Effective Protection Coefficient (EPC) = (A – B) / (E – F), EPC Cost Ratio (PCR), each of which is less than one. Comparative > 1 means that government policies are effective, the greater advantage is shown by the value of Social Profitability and the the value of the EPC means the higher the government's value of DRCR, while competitive advantage is indicated by the protection to clove farming business. EPC ≤ 1 means that value of Private Profitability and the value of PCR. The PAM government incentive policies are ineffective. There is no results are used to analyze comparative advantage (economic government protection against clove farming business. efficiency), competitive advantage (financial efficiency) and the

divergence or impact of government policies and market Net Transfer (NT) = D – H, NT > 0 shows the producers’ surplus distortions on the clove farming business in Getasan addition caused by government policies on inputs and outputs. Subdistrict, Semarang Regency. The following Table 7 shows NT ≤ 0 indicates there is no producers’ surplus addition due to the results of PAM based on primary data for the year 2019. government policies on inputs and outputs.

Table 7. The Result of Policy Analysis Matrix (PAM) (IDR/Ha)

Cost Explanation Revenue Profit Tradable Input Domestic Factors

Financial value (Private Price) 48,380,400 8,275,881 17,235,504 22,869,015

Economic value (Social Price) 63,546,840 4,628,149 15,745,586 47,801,254

Divergence / Impact of Policies and Market Distortion (15,166,440) 3,647,732 1,489,918 (24,932,239)

Source: Primary data, 2019 (processed) 1. Analysis of Comparative and Competitive Advantages

The results of the competitiveness analysis show that clove DRCR is a comparison between the economic costs of domestic farming business in Getasan Subdistrict, Semarang Regency is factors with added value in economic prices, where the DRCR profitable to be carried out because it receives financial (private) explains the economic or social benefits to measure the benefits above normal which implies that the farming business comparative advantage. The comparative advantage of clove is capable of doing expansion. In addition, farming business can farming business in this study shows that clove farming survive seen from economic (social) benefit that is efficient in business in Getasan Subdistrict, Semarang Regency has been conditions without divergence and efficient policy competitive or has a comparative advantage as indicated by the implementation. Clove farming business in Getasan Subdistrict, value of Social Profitability (SP>0) which is Rp. 47,801,254 and Semarang Regency has comparative advantages and the value of Domestic Resource Ratio (DRCR <1) that is equal competitive advantages. to 0.267242631. These social benefits indicate that there is

3179 IJSTR©2020 www.ijstr.org INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH, VOLUME 9, ISSUE 01, JANUARY 2020 ISSN 2277-8616 efficiency from clove farming business in the absence condition Clove farming business also has a competitive advantage. In of divergence and efficient policy implementation in Getasan this case, competitive advantage is based on the assumption Subdistrict, Semarang Regency. that an economy without distortion will be difficult to be found and the comparative advantage of an economic activity seen PCR is a measure of financial or efficiency competitiveness to from the point of view of individuals with direct interests. measure competitive advantage. Competitive means the same Competitive advantage is also defined as the ability to supply as competitive or able to compete with others. The competitive goods at the time, place, and form according to the wishes of advantage of clove farming business in this study shows that consumers, both in the domestic and international markets at clove farming business in Getasan Subdistrict, Semarang the same price or better than those offered by competitors so as Regency has been competitive or has a competitive advantage to obtain a minimum profit as much as of the cost of use as indicated by the value of Private. Profitability (PP>0) which is (opportunity cost). Rp. 22,869,015 and the value of Private Cost Ratio (PCR <1) that is equal to 0.429764636. The private profit indicates that the The problem in the clove farming business in Getasan clove farming business in Getasan Subdistrict, Semarang Subdistrict, Semarang Regency is the low clove productivity, Regency gains profit above normal which implies that the even though the farming business has comparative and farming business is capable of doing expansion. Based on the competitive advantages. The clove productivity in Getasan theories of comparative advantage and competitive advantage, Subdistrict only reaches 20.00 kg / ha and the productivity is less it should be endeavoured to produce export-competitive cloves than 80.36 kg / ha. Meanwhile, the total area of clove plantations compared to importing cloves in order to meet domestic needs produced (TM) only 76.00 Ha and the production of cloves was and improve exports. 1.52 tons in 2018. The clove plantations in Getasan Subdistrict need to be optimized in the future as a business attraction to The clove farming business in Getasan Subdistrict, Semarang produce higher production thereby encouraging increased clove Regency has comparative and competitive advantages, but productivity. does not show conformity with the theory of competitiveness. Competitiveness explains the ability of producers to be able to The clove farming business in Getasan Subdistrict, Semarang produce commodities with relatively lower production costs Regency has comparative and competitive advantages, but still compared to the social costs of other alternatives, so that faces problems in the aspect of production, namely low crop production activities are profitable at the price level that occurs productivity. This is due to the poorly maintained cropping in international markets. Competitiveness in this case conditions by farmers, a large proportion of old / damaged clove determines the position of a commodity in the competition trees and the presence of pest attacks and diseases (Interview, market. Meanwhile, the costs of clove farming business 2019). Moreover, the influence of agro-climate which is not (domestic factors and tradable inputs) are financially higher than suitable with clove farming business including climate, altitude, social costs although farming business is superior comparatively soil, air and rainfall (Dinas Pertanian, Perikanan dan Pangan, and competitively. 2019). Some of these factors affect the results of production as well as clove productivity. The dominant proportion of plants with Comparative advantage put forward by David Ricardo (1917) low productivity results in overall clove productivity in Getasan when discussing trade between two countries. In that theory, Subdistrict, compared to other districts in Semarang District Ricardo proved that if there are two countries that trade with being low. each other and each country concentrates on exporting goods which for that country have a comparative advantage, then both Therefore, the rejuvenation or rehabilitation of clove plants is countries will get benefit. comparative advantage developed by needed where replacing clove plants with low productivity with Ricardo is explaining the efficiency of open resource allocation, plants with high productivity. The increase of clove production to where production costs are stated in economic or social improve clove productivity in the short term can be done by analysis. Based on this theory, the clove farming business in improving soil structure and plant conditions from pests and Getasan Subdistrict, Semarang Regency which has a diseases. Fertilization aims to improve land productivity. The comparative advantage will benefit if it concentrates on export rejuvenation of damaged plants with new plants will require a activities. minimum time of 7 years for the land to be productive again. Another alternative considering the inappropriate agro-climate Knowledge related to comparative advantage can be used by conditions in Getasan Subdistrict, Semarang Regency is to the government in encouraging changes in the regional switch from clove farming business to other commodity farming economic structure towards sectors that have comparative businesses that are in accordance with agro-climate as a source advantages. If the sector that has a comparative advantage can of livelihood for farmers. be known then the development of the sector can be implemented before there is a market mechanism pressures 2. Analysis of the Impact of Government Policies on which run slower. In the model, it is stated that even if a country Farming Business experiences an absolute loss or disadvantage in producing a commodity when compared to other countries, but mutually Government policies on the clove farming business consist of beneficial trade can still take place. Countries that are less the impact of policies on output, the impact of policies on inputs efficient will specialize in the production and export commodities and the impact of policies on input output. Analysis of the impact which have a comparative advantage. In this case, it becomes of government policies on outputs in this study can be shown an opportunity for domestic cloves for export activities because by the value of Output Transfer (OT) which is negative in the the commodity has a comparative advantage. 3180 IJSTR©2020 www.ijstr.org INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH, VOLUME 9, ISSUE 01, JANUARY 2020 ISSN 2277-8616 amount of Rp. 15,166,440 and the value of Nominal Protection costs. Coefficient on Output (NPCO) is less than equal to one (NPCO ≤ 1) in the amount of 0.761334474. A negative OT value Besides the import tariff policy, a policy in the form of import indicates that there is no transfer from the public (consumers) quota is also applied to clove imports. The policy of import to producers, while an NPCO value less than 1 indicates that quota limits the number of commodities and importers who can government policies are disincentive, causing private prices to import clove commodities domestically. The policy of clove be lower than social prices. Based on the impact theory, the import by the Ministry of Trade is implemented based on the import tariff policy is intended that the volume of imports can be Regulation of the Minister of Trade of the Republic of Indonesia reduced or domestic clove selling prices become higher, so that Number 75 (Permendag Number 75) Year 2015 concerning domestic clove commodities are more competitive and farming Revocation of the Decree of the Minister of Industry and Trade business will receive higher income at the farmer level. of the Republic of Indonesia Number 528 of 2002 concerning import significantly after the enactment of the policy has an Meanwhile, the impact of government policies on inputs is Petani Cengkeh Indonesia, 2019). The production results indicated by the value of Input Transfer (IT> 0) which is Rp. decrease due to low rejuvenation or rehabilitation of damaged 3,647,732 and the Nominal Protection Coefficient on Input crops because farming business is neglected by farmers, (NPCI≥1) value is 1,788162179. A positive IT value indicates mainly as a result of decreased clove prices impact on the that there is a transfer from producer farmers to tradable input decline in clove prices at the farmer level triggered by declining producers, whereas the NPCI value is more than equal to one production output (Sekjen Asosiasi. indicating that there is no protection policy for inputs or no subsidy policies for tradable inputs. Transfer Factor Value (TF), Provisions for Importing Cloves. The Minister of Trade that is Rp. 1,489,918 or TF value> 0, indicating a transfer from Regulation No. 75 of 2015 encourages import practices begin producer farmers to non-tradable input producers to be done freely (Kementerian Perdagangan, 2017). Clove The restriction of import quota aims to protect domestic clove In addition, the impact of government policy as a whole on the producers. This is due to based on the results of this study that output and input of the clove farming business in Getasan import tariff policies have not been able to protect the clove Subdistrict, Semarang Regency can be seen from the value of farming business in Getasan Subdistrict, Semarang Regency. Effective Protection Coefficient (EPC), Net Transfer (NT), It is expected that the import tariff limitation will increase the Profitability Coefficient (PC) and Subsidy Ratio to Producer selling prices of cloves in the domestic market and increase (SRP). The impact of government policy on input output is farming business income. Based on the input policy analysis, shown by the EPC value ≤1 namely 0.680675662 which is less there is no protection policy to input / no subsidy policy for than equal to one, indicating that government incentive policies tradable inputs. Government policies are set to increase are ineffective, there is no government protection to the outputs exports or as an effort to protect domestic products. Policies are and inputs of clove farming business. applied to outputs and inputs which cause a difference between output prices and input prices (private prices) and actual prices The resulted NT value is negative equal to Rp. 24,932,239 (social prices). which shows there is no producer surplus addition caused by government policies on the output or input of the clove farming Policies on a commodity are subsidies and trade barriers. business. This means that the government policies as a whole Subsidy policy consists of positive and negative (tax) subsidies, do not support clove farmers to develop production. This is in while trade barriers are tariffs and quota. According to Monke line with the value of NPCO≤ 1, meaning that the price of cloves and Pearson (1989), trade policies with subsidies differ in three received by farmers is lower than the actual price so that aspects namely government budget, alternative types of policy government policy does not support clove production. and the level of ability to apply the policy. Payments from the government are called positive subsidies and payments to the government are called negative or tax subsidies. Subsidies aim In addition, the PC value> 0 which is 0.478418725, indicating to protect consumers or producers by creating domestic prices that the government policies as a whole have provided in order to differ from international prices. producers with incentives as well as a negative SRP value indicates that current government policies do not cause One of the trade policies in the form of trade barriers is a quota producers to incur greater production costs. Clove farming that is applied with the aim that producers do not sell all of their business has been comparatively and competitively superior products on the international market. This is caused by prices that is efficient in conditions without divergence and the on the international market are higher so that it will harm application of efficient policies and farming business profits domestic consumers because of the reduced availability of above normal to be able to do expansion. Government policies goods in the country. The government subsidy policy can be are disincentives to output, there are no protection policies applied to any tradable or non-tradable commodity, while the against inputs, government incentive policies are ineffective, trade policy only applies to internationally traded goods and and there is no producers’ surplus addition. However, overall, does not apply to non-tradable goods. government policies have provided incentives to producers and Suggestions given related to the results of the study are: 1) the prevailing policies have been able to reduce production

Optimization of the use of clove farming business input costs businesses as farmers' livelihoods; 2) The government needs (domestic factors and tradable inputs) is needed by producer to implement policies that are incentives to output, policies to farmers as well as farmers facilitation for farming business protect inputs, effective government incentive policies and activities through rejuvenation and coaching programs by the policies that provide additional surpluses to producers. Subsidy government in order to increase clove productivity. Another policies by the government need to be continued so that in the alternative based on less suitable agro-climate conditions is by future it will provide benefits at the level of domestic farmers switching from clove farming business to other farming and farmers' income.

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