Skip to main navigation menu Skip to main content Skip to site footer
FrancoAngeli Journals

Regular Articles

Early View

Simultaneous Equation of Concentration, Efficiency, and Competitiveness of Indonesia's CPO Industry: Impacts and Policies

DOI
https://doi.org/10.3280/ecag2025oa18605
Submitted
ottobre 4, 2024
Published
2025-04-03

Abstract

This study simultaneously analyzed the industrial concentration measured using CR4, technical efficiency measured using Stochastic Frontier Analysis (SFA), and competitiveness using the Revealed Comparative Advantage (RCA) approach of the CPO industry in Indonesia. The study uses time series data from 2001 to 2020, sourced from the Central Statistics Agency (BPS), the World Bank, and UN Comtrade. This study uses a simultaneous model approach of Two Stage Least Squares (2SLS). The results show that the efficiency of the technique has a negative and significant impact on industrial concentration.
The market concentration measured by CR4 shows a positive and significant relationship with competitiveness. Large companies that dominate the market are able to create price stability and encourage innovation, which ultimately improves the profitability and quality of CPO. RSPO policy is negatively correlated with concentration levels, the high cost of certification can be a barrier for new companies to enter the market. Biodiesel policy opens up new opportunities, the push to meet domestic demand can reduce the pressure to innovate.

References

  1. Abdul, I., Wulan Sari, D., Haryanto, T., & Win, T. (2022). Analysis of factors affecting the technical inefficiency on Indonesian palm oil plantation. Scientific Reports, 12(1), 1-9. Doi: 10.1038/s41598-022-07113-7.
  2. Aigner, D., Lovell, C. A. K., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6(1), 21-37. Doi: 10.1016/0304-4076(77)90052-5.
  3. Ali, H., Karimi, S., & Febriamansyah, R. (2019). Analysis of export performance and export competitiveness trade of crude palm oil industry in Indonesia with RSPO in India and United States markets. International Conference of Bio-Based Economy and Agricultural Utilization, 497. Doi: 10.1088/1755-1315/497/1/012043.
  4. Alii, H., Karimi, S., & Febriamansyah, R. (2021). Export performance and export competitiveness of Indonesia’s CPO industry with RSPO in China and EU markets. IOP Conference Series: Earth and Environmental Science, 741(1). Doi: 10.1088/1755-1315/741/1/012073.
  5. Anam, M. K., & Suhartini, S. (2020). Efficiency of Palm Oil Companies in Indonesia: A DEA Approach. Habitat, 31(2), 55-63. Doi: 10.21776/ub.habitat.2020.031.2.7.
  6. Anyamvu, C. N., Sharma, V. K., Braccio, G., Nanna, F., & Akubuo, C. O. (2005). Palm oil (elaeis guiniensis) plantations: A potential feedstock for biodiesel production, in Nigeria. International Energy Journal, 6(2), 69-82.
  7. Battese, G. E., & Coelli, T. J. (1992). Frontier production functions, technical efficiency and panel data: With application to paddy farmers in India. Journal of Productivity Analysis, 3(1-2), 153-169. Doi: 10.1007/BF00158774.
  8. Bela Ballasa (1965). Trade Liberalization and Revealed Comparative Advantage. The Manchester School, 33(2), 92-193. Doi: 10.1111/j.1467-9957.1965.tb00050.x.
  9. Bikker, J. A., & Haaf, K. (2002). Competition, concentration and their relationship: An empirical analysis of the banking industry. Journal of Banking and Finance, 26(11), 2191-2214. Doi: 10.1016/S0378-4266(02)00205-4.
  10. Boyle, S. E. (1973). The Average Concentration Ratio: An Inappropriate Measure of Industry Structure. Journal of Political Economy, 81(2, Part 1), 414-426. Doi: 10.1086/260036.
  11. Chelminski, K. (2018). Fossil Fuel Subsidy Reform in Indonesia. The Politics of Fossil Fuel Subsidies and Their Reform, 193-211. Doi: 10.1017/9781108241946.013.
  12. Cho, D. S., & Hwy Chang Moon. (2003). Evaluasi Teori Daya Saing from Adam Smith to Michael Porter (Erly Suandy (ed.); First). Salemba Empat.
  13. Choiruzzad, S. A. B., Tyson, A., & Varkkey, H. (2021). The ambiguities of Indonesian Sustainable Palm Oil certification: internal incoherence, governance rescaling and state transformation. Asia Europe Journal, 19(2), 189-208. Doi: 10.1007/s10308-020-00593-0.
  14. Coelli, T. J., Rao, D. S. P., O’Donnell, C. J., & Battese, G. E. (2005). An Introduction to Efficiency and Productivity Analysis.
  15. Crouzet, N., & Eberly, J. C. (2019). Understanding Weak Capital Investment. NBER Working Paper, May(25869), 1-65.
  16. Damanor Gujarati. (1993). Ekonometrika Dasar (3rd ed.). Erlangga.
  17. Darmawan, D. P. (2016). Pengukuran Efisiensi Produktif Menggunakan Pendekatan Stochastic Frontier. In Elmatera. Elmatera. -- https://erepo.unud.ac.id/id/eprint/9059/.
  18. Degli Innocenti, E., & Oosterveer, P. (2020). Opportunities and bottlenecks for upstream learning within RSPO certified palm oil value chains: A comparative analysis between Indonesia and Thailand. Journal of Rural Studies, 78(October 2019), 426-437. Doi: 10.1016/j.jrurstud.2020.07.004.
  19. Delorme, C. D., Kamerschen, D. R., Klein, P. G., & Voeks, L. F. (2002). Structure, conduct and performance: A simultaneous equations approach. Applied Economics, 34(17), 2135-2141. Doi: 10.1080/00036840210135836.
  20. Destiarni, R. P., Triyasari, S. R., & Jamil, A. S. (2021). The Determinants of Indonesia’s CPO Export in Non - Traditional Market. E3S Web of Conferences, 232, 1-12. Doi: 10.1051/e3sconf/202123202017.
  21. Dey, S., Reang, N. M., Das, P. K., & Deb, M. (2021). A comprehensive study on prospects of economy, environment, and efficiency of palm oil biodiesel as a renewable fuel. Journal of Cleaner Production, 286, 124981. Doi: 10.1016/j.jclepro.2020.124981.
  22. Dominick Salvatore. (2017). Ekonomi internasional (Muhammad Marsykur (ed.); 9th ed.). Salemba Empat.
  23. Farrel M. J. (1957). the Measurement of Productive Efficiency. The Industrial Study of Economic Progress, 120(3), 16-35. Doi: 10.2307/j.ctv5rdxd5.7.
  24. Fatma, T., Yulhar, M., & Darwanto, D. H. (2019). Farmers ’ Willingness To Accept A Compensation To Protect Agricultural Land Sustainability In Peri-Urban Areas Of Pekalongan City. Agro Ekonomi, 30(2). Doi: 10.22146/ae.49014.
  25. Food and Agriculture Organization of the United Nations. (2019). Oil Palm Import. Our World in Data. -- https://ourworldindata.org/grapher/palm-oil-imports.
  26. Gan, P. Y., & Li, Z. D. (2014). Econometric study on Malaysias palm oil position in the world market to 2035. Renewable and Sustainable Energy Reviews, 39, 740-747. Doi: 10.1016/j.rser.2014.07.059.
  27. Gaskell, J. C. (2015). The Role of Markets, Technology, and Policy in Generating Palm-Oil Demand in Indonesia. Bulletin of Indonesian Economic Studies, 51(1), 29-45. Doi: 10.1080/00074918.2015.1016566.
  28. Hadiguna, R. A., & Tjahjono, B. (2017). A framework for managing sustainable palm oil supply chain operations: a case of Indonesia. Production Planning and Control, 28(13), 1093-1106. Doi: 10.1080/09537287.2017.1335900.
  29. Hafiz, N., Azmi, K. M., Nimfa, D. T., Latiff, A. S. A., & Wahab, S. A. (2021). COVID-19 and Its Implications to the Assessment of Sustainable Palm Oil Supply Chain Management: An Indonesian Perspective. Frontiers in Sustainability, 2(January), 1-13. Doi: 10.3389/frsus.2021.738985.
  30. Halimatussadiah, A., Nainggolan, D., Yui, S., Moeis, F. R., & Siregar, A. A. (2021). Progressive biodiesel policy in Indonesia: Does the Government’s economic proposition hold?. Renewable and Sustainable Energy Reviews, 150(July), 111431. Doi: 10.1016/j.rser.2021.111431.
  31. Hamulczuk, M., Makarchuk, O., & Kuts, T. (2021). Time-Varying Integration of Ukrainian Sunflower Oil Market with the EU Market. Agris On-Line Papers in Economics and Informatics, 13(3), 35-47. Doi: 10.7160/aol.2021.130304.
  32. Harahap, F., Silveira, S., & Khatiwada, D. (2019). Cost competitiveness of palm oil biodiesel production in Indonesia. Energy, 170, 62-72. Doi: 10.1016/j.energy.2018.12.115.
  33. Heckscher, E. F., & Bertil Ohlin. (1991). Heckscher-Ohlin Trade Theory. The MIT Press.
  34. Hidayat, A., Robiani, B., Marwa, T., & Suhel, S. (2023). Competitiveness, Market Structure, and Energy Policies: A Case Study of the World’s Largest Crude Palm Oil Exporter. International Journal of Energy Economics and Policy, 13(3), 111-121. Doi: 10.32479/ijeep.14199.
  35. Hidayat, A., Robiani, B., Marwa, T., Suhel, S., Susetyo, D., & Mukhlis, M. (2024). A Crude Palm Oil Industry Concentration and Influencing Factors: A Case Study of Indonesia as the World’s Largest Producer. Agris On-Line Papers in Economics and Informatics, 16(1), 49-66. Doi: 10.7160/aol.2023.160105.
  36. Hidayat, N. K., Offermans, A., & Glasbergen, P. (2018). Sustainable palm oil as a public responsibility? On the governance capacity of Indonesian Standard for Sustainable Palm Oil (ISPO). Agriculture and Human Values, 35(1), 223-242. Doi: 10.1007/s10460-017-9816-6.
  37. Ichsan, M., Lockwood, M., & Ramadhani, M. (2022). National oil companies and fossil fuel subsidy regimes in transition: The case of Indonesia. Extractive Industries and Society, 11(May), 101104. Doi: 10.1016/j.exis.2022.101104.
  38. Islamiya, H., Wulan Sari, D., Zeqi Yasin, M., Restikasari, W., Shaari, M. S., & Devis Susandika, M. (2022). Technical Efficiency and Productivity Growth of Crude Palm Oil: Variation across Years, Locations, and Firm Sizes in Indonesia. Economies, 10(12). Doi: 10.3390/economies10120303.
  39. Kadarusman, Y. B., & Herabadi, A. G. (2018). Improving Sustainable Development within Indonesian Palm Oil: The Importance of the Reward System. Sustainable Development, 26(4), 422-434. Doi: 10.1002/sd.1715.
  40. Kharina, A., Searle, S., Rachmadini, D., & Kurniawan, A. A. (2018). The potential economic, health and greenhouse gas benefits of incorporating used cooking oil into Indonesia’s biodiesel. White Paper, The International Council on Clean Transportation, September. -- https://theicct.org/sites/default/files/publications/UCO_Biodiesel_Indonesia_20180919.pdf.
  41. Khatiwada, D., Palmén, C., & Silveira, S. (2021). Evaluating the palm oil demand in Indonesia: production trends, yields, and emerging issues. Biofuels, 12(2), 135-147. Doi: 10.1080/17597269.2018.1461520.
  42. Kinseng, R. A., Nasdian, F. T., Mardiyaningsih, D. I., Dharmawan, A. H., Hospes, O., Pramudya, E. P., Putri, E. I. K., Amalia, R., Yulian, B. E., & Rahmadian, F. (2023). Unraveling disputes between Indonesia and the European Union on Indonesian palm oil: from environmental issues to national dignity. Sustainability: Science, Practice, and Policy, 19(1), 1-13. Doi: 10.1080/15487733.2022.2152626.
  43. Kumar, S., Shrestha, P., & Abdul Salam, P. (2013). A review of biofuel policies in the major biofuel producing countries of ASEAN: Production, targets, policy drivers and impacts. Renewable and Sustainable Energy Reviews, 26, 822-836. Doi: 10.1016/j.rser.2013.06.007.
  44. Lim, C. I., Biswas, W., & Samyudia, Y. (2015). Review of existing sustainability assessment methods for Malaysian palm oil production. Procedia CIRP, 26, 13-18. Doi: 10.1016/j.procir.2014.08.020.
  45. Lipsey, R. (1990). Pengantar Ilmu Ekonomi. Rineka Cipta.
  46. Mai, L. (2024, May). Palm Oil Powerhouses: Why the EU’s Deforestation-Free Regulation Does Not Work in Southeast Asia. Center for Strategic and International Studies. -- www.csis.org/blogs/new-perspectives-asia/palm-oilpowerhouses-why-eus-deforestation-free-regulation-does-not.
  47. Maier, T. (2013). Sources of Microbrewery Competitiveness in the Czech Republic. Agris On-Line Papers in Economics and Informatics, 5(4), 135-142. Doi: 10.7160/aol.2016.080409.
  48. Manjunatha, A. V., Anik, A. R., Speelman, S., & Nuppenau, E. A. (2013). Impact of land fragmentation, farm size, land ownership and crop diversity on profit and efficiency of irrigated farms in India. Land Use Policy, 31, 397-405. Doi: 10.1016/j.landusepol.2012.08.005.
  49. Martin, S. (1989). Industrial Economics (Maxwell Ma). Macmillan Publishing Company.
  50. Martin, S. (1994). Indutrial Economics. Prentice Hall.
  51. McCafferty, M., & Bhuyan, S. (2012). An Analysis of Market Power in the U.S. Brewing Industry: A Simultaneous Equation Approach. In SRRN Paper (Issue June). Doi: 10.2139/ssrn.2126695.
  52. Meeusen, W., & van Den Broeck, J. (1977). Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error. International Economic Review, 18(2), 435. Doi: 10.2307/2525757.
  53. Munasinghe, A., Cuckston, T., & Rowbottom, N. (2021). Sustainability certification as marketisation: Rainforest Alliance in the Sri Lankan tea production industry. Accounting Forum, 45(3), 247-272. Doi: 10.1080/01559982.2021.1893053.
  54. Murti, W. (2017). The influence of crude oil price in biodiesel and its implication on the production of palm oil: The case of Indonesia. European Research Studies Journal, 20(2), 568-580. Doi: 10.35808/ersj/659.
  55. Nupueng, S., Oosterveer, P., & Mol, A. P. J. (2018). Implementing a palm oil-based biodiesel policy: The case of Thailand. Energy Science and Engineering, 6(6), 643-657. Doi: 10.1002/ese3.240.
  56. Nur, H., Hamidi, A., Khalid, N., Karim, Z. A., & Zainuddin, M. R. K. V. (2022). Technical Efficiency and Export Potential of the World Palm Oil Market. Journal Agriculture, 12(1918), 1-16. Doi: 10.3390/agriculture12111918.
  57. Nurcahyani, M., Masyhuri, M., & Hartono, S. (2018). The Export Supply Of Indonesian Crude Palm Oil (CPO) To India. Agro Ekonomi, 29(1), 18. Doi: 10.22146/ae.29931.
  58. Oosterveer, P. (2015). Promoting sustainable palm oil: Viewed from a global networks and flows perspective. Journal of Cleaner Production, 107, 146-153. Doi: 10.1016/j.jclepro.2014.01.019.
  59. Ostfeld, R., & Reiner, D. M. (2024). Seeing the forest through the palms: developments in environmentally sustainable palm oil production and zerodeforestation efforts. Frontiers in Sustainable Food Systems, 8(June), 1-7. Doi: 10.3389/fsufs.2024.1398877.
  60. Othman, N., Yusop, Z., & Ismail, M. M. (2023). Environmental Policies and Trade Competitiveness: the Malaysian Palm Oil Downstream Industry. International Journal of Business and Society, 24(1), 184-201. Doi: 10.33736/ijbs.5611.2023.
  61. Othman, N., Yusop, Z., Ismail, M. M., & Afandi, S. H. M. (2021). Energy tax and the downstream palm oil trade competitiveness nexus in malaysia: An application of gmm approach. International Journal of Energy Economics and Policy, 11(5), 593-599. Doi: 10.32479/ijeep.11558.
  62. Parsons, S., Raikova, S., & Chuck, C. J. (2020). The viability and desirability of replacing palm oil. Nature Sustainability, 3(1), 412-418. Doi: 10.1038/s41893-020-0487-8.
  63. Pilorgé, E. (2020). Sunflower in the global vegetable oil system: Situation, specificities and perspectives. OCL - Oilseeds and Fats, Crops and Lipids, 27(1). Doi: 10.1051/ocl/2020028.
  64. Porter, M. (1990). The Competitive Advantage of Nations. The MacMillan Press Ltd. Doi: 10.17576/JEM-2020-5401-3.
  65. Pratama, B. R., Tooy, D., & Kim, J. (2023). Price Competition and Shifting Demand: The Relation between Palm and Coconut Oil Exports. Sustainability, 16(1), 101. Doi: 10.3390/su16010101.
  66. Procházka, P., & Hönig, V. (2018). Economic analysis of diesel-fuel replacement by crude palm oil in Indonesian power plants. Energies, 11(3). Doi: 10.3390/en11030504.
  67. Pye, O. (2019). Commodifying sustainability: Development, nature and politics in the palm oil industry. World Development, 121, 218-228. Doi: 10.1016/j.worlddev.2018.02.014.
  68. Rafael, G. C., Fonseca, A., & Jacovine, L. A. G. (2018). Non-conformities to the Forest Stewardship Council (FSC) standards: Empirical evidence and implications for policy-making in Brazil. Forest Policy and Economics, 88(June 2017), 59-69. Doi: 10.1016/j.forpol.2017.12.013.
  69. Ramadhani, T. N., & Santoso, R. P. (2019). Competitiveness analyses of Indonesian and Malaysian palm oil exports. Economic Journal of Emerging Markets, 11(1), 46-58. Doi: 10.20885/ejem.vol11.iss1.art5.
  70. Ricardo, D. (1817). On the Principles of Political Economy and Taxation. John Murray.
  71. Rifin, A., Feryanto, Herawati, & Harianto (2020). Assessing the impact of limiting Indonesian palm oil exports to the European Union. Journal of Economic Structures, 9(1). Doi: 10.1186/s40008-020-00202-8.
  72. Rodrigues, A. C. C. (2021). Policy, regulation, development and future of biodiesel industry in Brazil. Cleaner Engineering and Technology, 4, 100197. Doi: 10.1016/j.clet.2021.100197.
  73. Rosyadi, F. H., Mulyo, J. H., Perwitasari, H., & Darwanto, D. H. (2021). Export intensity and competitiveness of Indonesia’s crude palm oil to main destination countries. Agricultural Economics (Czech Republic), 67(5), 189-199. Doi: 10.17221/371/2020-AGRICECON.
  74. Saswattecha, K., Kroeze, C., Jawjit, W., & Hein, L. (2015). Assessing the environmental impact of palm oil produced in Thailand. Journal of Cleaner Production, 100, 150-169. Doi: 10.1016/j.jclepro.2015.03.037.
  75. Scherer, F. M. (1980). Industrial Market Structure and Economic Performance. Houghton Mifflin.
  76. Schouten, G., Padfield, R., & Kraamwinkel, D. (2023). Contested representations: A comparative analysis of palm oil sustainability in Malaysian and Dutch media. World Development Sustainability, 3(May), 100075. Doi: 10.1016/j.wds.2023.100075.
  77. Setyadewanta, A., Arfani, R. N., & Erfita, E. (2016). Elasticity and competitiveness of Indonesia’s palm oil export in India market. Economic Journal of Emerging Markets, 8(2), 148-158. Doi: 10.20885/ejem.vol8.iss2.art7.
  78. Shahida, S., Hafizuddin-Syah, B. A. M., & Fuad, S. H. (2018). The effect of sustainability certification for export on operational profitability of Malaysian palm oil companies. Jurnal Ekonomi Malaysia, 52(2). Doi: 10.17576/jem-2018-5202-5.
  79. Sun, Y., Gao, P., Raza, S. A., Shah, N., & Sharif, A. (2023). The asymmetric effects of oil price shocks on the world food prices: Fresh evidence from quantile-onquantile regression approach. Energy, 270(May 2022), 126812. Doi: 10.1016/j.energy.2023.126812.
  80. Supriyono, J. (2016). Sawit adalah anugerah Tuhan YME bagi Indonesia. GAPKI. -- https://gapki.id/news/2016/06/07/sawit-adalah-anugerah-tuhan-yme-bagiindonesia/.
  81. Tandra, H., Suroso, A. I., Syaukat, Y., & Najib, M. (2022). The Determinants of Competitiveness in Global Palm Oil Trade. Economies, 10(6), 132. Doi: 10.3390/economies10060132.
  82. The Economic Times (2024). Cheap sunflower oil from Russia, Ukraine rattles palm oil market. Economic Times. -- https://economictimes.indiatimes.com/news/economy/foreign-trade/cheap-sunflower-oil-from-russia-ukraine-rattles-palm-oilmarket/articleshow/104340305.cms?from=mdr.
  83. Tremblay, V. J. (2012). New Perspectives of Industrial Organization. Springer. Doi: 10.1007/978-1-4614-3241-8.
  84. Uckert, G., Hoffmann, H., Graef, F., Grundmann, P., & Sieber, S. (2015). Increase without spatial extension: productivity in small-scale palm oil production in Africa – the case of Kigoma, Tanzania. Regional Environmental Change, 15(7), 1229-1241. Doi: 10.1007/s10113-015-0798-x.
  85. Un Comtrade (2023). Trade Data. Un Comtrade. -- https://comtradeplus.un.org/TradeFlow.
  86. UN Trade & Development (2024). Revealed Comparative Advantage. UN Trade & Development. -- https://unctadstat.unctad.org/EN/RcaRadar.html#:~:text=TheRCAmetrics&text=When a country has a,or below the world average.
  87. Yanita, M., Napitupulu, D. M., & Rahmah, K. (2020). Analysis of Factors Affecting the Competitiveness of Indonesian Crude Palm Oil (CPO) Export in the Global Market. Indonesian Journal of Agricultural Research, 2(3), 97-110. Doi: 10.32734/injar.v2i3.2857.

Metrics

Metrics Loading ...