UNIVERSITI PUTRA MALAYSIA

AN ECONOMETRIC ANALYSIS OF THE JAPANESE DEMAND FOR INDONESIAN TUNA

YUARY FARRADIA

FEP 1995 1

AN ECONOMETRIC ANALYSIS OF THE JAPANESE DEMAND

FOR INDONESIAN TUNA

By

YUARY F ARRADIA

Thesis submitted in Partial Fulfillment of the Requirements for the Degree of Master of Science

in The Faculty of Economics and Management Universiti Pertanian Malaysia

June 1995

ACKNOWLEDGEMENTS

Thanks to the almighty God "Allah S.W.T" without whose blessing this study

would not have been possible.

I would like to express my sincerest gratitude and appreciation to the people

and institutions behind the completion of this piece of work.

Thanks are due Dr. K. Kuperan, my chairman for his guidance and intellectual

support throughout the course of the study. Thanks are also due to the other members

of my supervisory committee, Prof. Dr. Ishak Hj. Omar and Assoc. Prof. Dr. Nik

Mustapha Raja Abdullah for their valuable comments and suggestions in improving th.e

quality of the manuscript.

My appreciation and sincere gratitude go to all of my lecturers at the faculty of

Economics and Management, Universiti Pertanian Malaysia for providing me much

knowledge and guidance throughout my study in pursuing the Master's degree in

Fisheries Economics.

I would like to express my gratitude to Ir. Mas Tri Djoko Sunarno M.Sc. for his

help in collecting the data in Indonesia, Malaysia and Thailand as well as providing the

references. My sincere thanks are also given to Dr. Soempeno, Ir. Bachtiar Gafa, and

Ms. Fatima Ferdouse for their useful information and advice. In addition, the staff of

INFOFISH, Malaysia were very helpful.

ii

My regards are due to Mr. Abdul Aziz Bahsir and Ms. Fadzlon Yusof, of

Graduate School, UPM for editing the thesis fonnat. My sincere thanks are also due to

my classmates, my friends and relatives in Indonesia as well as Malaysia.

Finally, my sincere appreciation goes to my parents, Papa Ir. H. Rtislan Effendi

and Mama Hj. E. Kusuma Pertiwi, my brothers: Ricko and Rinno; my lovely grand rna,

and my close friend Joy for their continous prayers, encouragement and patience.

Without them, it would have been impossible to complete the study.

iii

TABLE OF CONTENTS

ACKNOWLEDGEMENTS..................................................................... ii

LIST OF TABLES ................................................................................... vii

LIST OF FIGURES................................................................................. ix

LIST OF ABBREVIATIONS ................................................................. xi

ABSTRACT............................................................................................ .xii

ABS1RAK ............................................................................................. . xiv

CHAPTER

I INTRODUCTION ......................................................................... ....... 1

Statement of the Problem.................................................................... 3

Significance of the Problem............... ..... ............... ......... .............. ...... 7

Objectives of the Study....................................................................... 9

II TIJNA TRADE IN INDONESIA..................................................... 10

Fisheries in Indonesia................................ ....... .................................. 10

Tuna as an Export Commodity.............. ................ ............................ 13

Tuna Characteristics................... ................. .... ........ ............. .............. 17

Tuna Production.............................................. .................................... 19

Potential Resources of Tuna in Indonesia ...................... ..... ...... 20

Global Supply Trend................................................................... 21

Global Demand Trend................................................................ 23

Tuna Export Performance........................ ........... .... ........... . . . . . ............. 24

Tuna Marketing System..................................................................... 26

iv

Development of Tuna Trade in Indonesia. . . . . . . . . . . . . .. . ... . . . .... . . ... . ......... 29

Tuna Enterprises under the Smallholder Fishery (PIR) System........ 30

III ECONOMICS OF TUNA TRADE.. . . . . . . . . . . . . . . . . .. . .. ...... . . . . . .. . . . . . . . . . . ..... 32

International Trade Theory . ............. . ....... ...... . . ........ . ......................... 32 Demand Theory.. ......... . . . ..... . . . . . . . . ...... . . .......... . . . . . . . . ...... ............ .... 35 Export Theory.............. . ...... . . . . . . . . ....... . . ............... ............. ...... ..... 38

Market and Marketing System. . . . ..... ....... . . ...... . . ....... ......... ... .... ........ 41

Marketing Channels..... .. .. . . ....... . . . . ....... .... ............ ..... . . ................. . . .. . 42

Sashimi Tuna.. ...... . . . . .. . . . . ....... . .... . . ... . . . . . . . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . .. . . . . . . .. . . 46

IV TUNA MARKET CHARACTERISTICS..... . .. .............................. 54

Indonesian Market...... .. ... .. .. . .... ... . . . . . . . . . . . . . . . . . . ....... . . . . . . . . . ...... . . . ........... 54 Market Structure. . . . ..... ... . . . .... . ......... . . . . . . . .. . ... ..... .. ................. .. . .... 54 Bariers to Entry ... . . . . . .. . . . . . .. . . .. . . . .............. . . .. . ..... . . . . . ......... .......... . . . Market Conduct. . ...... .... . . . . ... . . . . . . . . . . . . . . . . . . . . . .... . . . . . . .. . .. ... . . .... ... ..... .

57 58

Japanese Market.. . . . . . ......... . . . . . . . .. . . . . ......... . . . .. . ...... . . . . . . . . .. .. . . .. . . . . .... . . . ... 59 Characteristics of Japanese Consumption.. . . . . . . .. ...... . . . ........... ... 59 Characteristics of Species Preferences. . . ... . ....... ..... . ..... . ..... .. ..... 6 1

Consumer Segmentation. ........ . . . . . .. . . . . . . . ...... . ... .... ...... . . .. ... .. .. ...... 61 Marketing ChanneL. .... . ........ .... . ........... ..... ..... ... ..... .... . . . . . .. .. .... . .. 62 Market Structure ........................................................... ,. . ... ....... 65 Market Conduct.... . . .. ....... . . . . . . . .......... ....... ..... ......... ....... .............. 68

V THEORETICAL FRAMEWORK....... . ... . . . ... .......... . . . . . . .. ..... . . . . .... . . 70

International Trade... ..... . . . . .. ......... .... ...... . . . ... . . .......... . . . .... . ......... . .... . . 70

Empirical Model..... ....... . . . . . . . .. . . . . . . . ... . . . . ... . . . . . ....... . . . ... . . . .. . ........... . . . . . . 76

Model Identification..... .... . . . . . . . . . . .. . . . ... . . . . . . . . . . . . . . . . . . .. . . . .......... . . . ...... . 78

Data Analysis. .. . . .. . . . . . ... . . . . .... .... . . . . . .. . . . . . . . . .. . . . ...... . . . . . . . . . . . .. . . ...... . . . . .... 79

Data Collection. . . ....... . . .. . . . . .. . . . . .. . ... . ... . . . . .. . . . . . . . . . . . ... . . . . . ..... ..... . . .. . . . . . . 82

v

VI STATISTICAL RESULTS AND DISCUSSION.......................... 84

Estimated Fresh Yellowfin Export Demand. ................................. 90

Estimated Fresh Bigeye Export Demand....................................... 95

Estimated Frozen Bigeye Export Demand. ......................... .. . . . . . . . . . 100

VII SUMMARY, CONCLUSION .. AND POLICY IMPLICATION. 104

Summary of the Main Findings............ ........... . . . . . . . . . . .. . . . . ...... . . . ... . . . . . 104

Conclusion...... ....................... ......... . . . . . . . . . . . . . . . . . . . . . .. ... . . . . . .. . . . . ...... . . . . . . . . . 108

Policy Implication ... ............................................. ...................... ........ 109

Limitations and Suggestion for Future Study...... ... ....... ..... . .... . . . . . . . . . . 1 1 1

BIBLIOGRAPHy........................................................................................... 113

APPENDICES................................................................................................ 121

BIOGRAPHICAL SKETCH........................................................................ 142

vi

LIST OF TABLES

Table

1 Fisheries Production, 1987-1992 (thousands of tons)................................ 1

2 Fisheries Output at Current and 1983 Constant Market

Prices (billion rupiahs) ...................... ,.......................................................... 2

3 Fisheries Production (thousand of tons) by Sub sectors of Fishery,

1989-1993 ......................................... .......................................................... 12

4 Export Volume and Value of Main Fisheries Products, 1989-1993 ........ ... 13

5 Potential of Tuna and Skipjack Resources and Their Distribution in Indonesia.............................................................................. 14

6 Tuna and Tuna Like Species Exports in Different Product

Fonns (1987-1991) ....................................... ................................................. 16

7 Habitat and Geographical Distribution of Some Tunas................................ 17

8 Tuna/Skipjack Fishing Season in Indonesian Waters................................ 18

9 Fishing Seasons of Some Big Tuna in Indonesian Waters.......................... 19

10 Indonesian Tuna Production (ton), 1985-1991........................................... 19

11 World Tuna Catch (thousands of metric tons) by Main

Producing Countries. ................ . . ............. .. ............ ... .... . ... ..... . .... . ..... .... ....... 22

12 Export Volume of Tuna/Skipjack (ton) by Country of Destination ..... . 25

13 The Number of Private Tuna Enterprises ............................................... 56

14 Enterprises Share in Tuna Export....... ......... ......... ....... ... . . . . . ............... . . . ... 56

15 Some Barriers to Entry Into the Tuna Industry............... .... ..................... 58

16 Species Wise Utilisation by Type of Restaurant (%) .............................. 59

17 Seasonal Consumption Pattern.................. ............ ................................... 60 vii

18 Percentage ofTorro and Akami by Species............................................. 61

19 Central Market Characteristic....................... . . . . . . . .. . . ..... . . . . . . . ... . . . . . . . . . . . . . . .... 66

20 Percentage Share Among Trading Company........................................... 68

21 Endogenous Variables........ ..................................................................... 78

22 PredetenninedlExogenous Variables....... .... . . . . . . . . . . . . . . . . . . . . ....... . . . . . . . . . .. . . ... . . 79

23 Estimated Linear Equations For Tuna Export Demand . . . . . . . . . . . . . .. ... . . . . . . . . . 86

24 The Values of Price and Income Elasticities for Tuna............................. 89

25 The Values of Cross Price Elasticities for Tuna............ . . . . . ......... . . . .... .. . .. 89

26 Different Values of Tuna Elasticities....................................................... 91

27 The Values of Price and Income Elasticity for Tuna.............................. 111

28 Low Price Data........................................................................................ 123

29 High Price Data............ ....................................... .................................... 126

30 Demand for Fresh Bigeye using World Price......................................... 136

31 Demand for Fresh Bigeye using other Country's Price......................... 136

32 The Main Differences between Bigeye and Yellowfm........................... 138

viii

LIST OF FIGURES

Figure

1 Export and Import Volume of Fisheries Production 1987-1991.............. 4

2 Export and Import Value of Fisheries Production, 1987-1991................. 5

3 Price Fluctuation of Fresh Yellowfin (YF) and Bigeye (BE)..................... 6

4 Tuna and Skipjack Distribution in Indonesia................ .... ......... ... .... ... ..... 15

5 Distribution of Tuna and Skipjack Caught by Fishermen and Medium Scale Fishing Finns ................................................................ 26

6 Local Distribution System of Tuna and Skipjack Caught by Large Fishing Firms ................................... ..................... '" ................ ................... 27

7 Distribution System of Fishermen's Tuna and Skipjack for Export Market.............................................................................................. 28

8 Distribution System of Tuna and Skipjack Caught by Medium and Large Scale Fishing Firms for Export Market...... ................ ................ 28

9 The Marketing Channels for Indonesian Tuna.... ... ........................... . . ........ 29

10 International Supply and Demand .............................................................. 38

11 Marketing Barriers. ......... ....... ........... ........................................................... 40

12 Marketing System for a Final Customer Group Located Some Distance from Producer.................... ............. ... .................. .............. ............ 41

13 Marketing Channels of Seafood in Taiwan................................................ 43

14 Fresh Fish Distribution from Bangkok Wholesale MarkeL................ ...... 44

15 Schematic Diagram of Fish Marketing Channels in Indonesia.................. 44

16 Flow Chart for Tuna Grading................................................................... 47

17 Japan's Import Volume of Tuna................................................................ 49

ix

18 Import Volume of Fresh Tunas................................................................. 50

19 Import Volume of Frozen Tunas................ .... ..... ........................... ........... 51

20 Distribution Channels for Fisheries Products .......................................... , 52

21 Distribution Routes for Chilled Tuna.... ............. ....... ............ .............. ....... 63

22 Distribution Routes for Frozen Shasimi........... ...... ......... .................. ........ 64

23 Effect of Trading on the Production, Consumption and Price Shown by the Demand and Supply Curve......................... .............. .... .............. .... 71

24 Indifference Curve............... ............. .................. ........... ................ .............. 73

x

LIST OF ABBREVIATIONS

ADB : Asian Development Bank

CIC : Capricorn Indonesia Consultant Inc

EEZ : Economic E:\.1ended Zone

FAD : Fish Aggregating Device

FAO : Food and Agriculture Organization

JETRO : Japan External Trade Organization

MSY : Maximum Sustainable Yield

PIR : Perikanan Inti Rakyat

REPELITA : Rencana Pembangunan Lima Tahun

TPI : Tempat Pelelangan Ikan

xi

Abstract of thesis submitted to the Senate of Universiti Pertanian Malaysia in partial fulfillment of the requirements for the degree of Master of Science.

AN ECONOMETRIC ANALYSIS OF JAPANESE DEMAND FOR

INDONESIAN TUNA

By

YUARY FARRADIA

June 1995

Chairman: Dr. K. Kuperan

Faculty: Economics and Management

The objective of this study was to evaluate the Japanese demand far Indonesian

tuna Tuna which consisted of two species (Yellowfin and Bigeye) were observed in

terms of fresh and frozen form at two price levels. Secondary data were collected from

the institution as related to tuna information as well as references. In addition,

interview with experts in tuna was also conducted. The data were then analysed using

2SLS method to construct a demand model.

Tuna market in Indonesia is mostly controlled by four state owned companies.

The marketing channel starts with fisherman and ends with the broker or exporters.

However, some companies exported tuna directly or indirectly. The price of tuna

export follows the international price in Japan, which is determined by a grading

system based on 'torro' content and freshness.

Statistical analysis using 2SLS shows a relationship among tuna species in

terms of fresh and frozen forms at low and high price, respectively. The Japanese

xii

demand for fresh yellowfin in general, is determined by its previous demand, its own

price and per capita income. However, at low price level, it is also determined by price

of frozen yeUowfin and price of shrimp; whilst at high price level, fresh yellowfin is

determined by price of fresh bigeye.

The Japanese demand for fresh bigeye at low price level is determined by its

previous demand, its own price, price of frozen bigeye, price of shrimp and per capita

income which has negative sign. For high price level, fresh bigeye demand is

determined by its previous demand, its own price, price of shrimp and per capita

Income.

The Japa..'1ese demand for frozen bigeye at low price is determined by its

previous demand, its own price, price of frozen yellowfin and price of shrimp.

However, for high price level, it is determined by its previous demand, price of shrimp

and per capita income, which has negative sign.

In terms of elasticity, price elasticity for the overall tuna species in this study is

inelastic. Income elasticities are, however, elastic.

xiii

Abstrak tesis yang dikemukakan kepada Senat Universiti Pertanian Malaysia sebagai memenuhi sebahagiaan daripada syarat untuk Ijazah Master Sains

SUATU ANALISIS EKONOMETRIK PERMINTAAN JEPUN UNTUK TUNA INDONESIA

Oleh

YUARY FARRADIA

June 1995

: Dr. K. Kuperan Pengerusi Fakulti : Ekonomi dan Pengurusan

Tujuan kajian ini adalah untuk meninjau permintaan Jepun untuk ikan tuna

Indonesia. Tuna yang dikaji mengandung dua jenis species ikan tuna ('yellowfin' dan

'bigeye') dalam bentuk segar dan beku yang mempunyai dua tingkat harga. Data

sekunder dikumpulkan dari institusi-institusi yang berhubungan dengan maklumat

mengenai ikan tuna dan rujukan lainnya. Temubual dengan pakar-pakar tuna juga telah

dilakukan. Data dianalisis dengan menggunakan metode 2SLS untuk membentuk suatu

model permintaan untuk ikan tuna Indonesia di negara Jepun.

Pada amnya, pasaran tuna di Indonesia dikuasai oleh empat buah perusahaan

kerajaan. Saluran pasar dimulai daripada nelayan, dilanjut- kan ke perantara atau

pengeksport. Akan tetapi, perusahaan boleh dapat mengeksport tuna secara Jangsung

ataupun tidak langsung. Harga ikan tuna eksport adalah mengikut harga antarbangsa di

Jepun yang ditentukan oleh suatu sistem seleksi yang berpedoman kepada kandungan

'torr�' dan kesegaran ikan.

xiv

Analisis statistik yang menggunakan 2SLS memperlihatkan perhubungan

daripada beberapa jenis tuna segar dan beku pada masing-masing tingkatan harga

rendah dan tinggi. Pada amnya permintaan Jepun untuk ikan 'yellowfin' segar

mempunyai pengaruh daripada permintaan pada masa lalu, harga daripada ianya dan

pendapatan per kapita. Pada harga rendah, ia juga dipengaruhi oleh harga 'yellowfin'

beku dan harga udang. Sementara pada harga tinggi, ikan 'yellowfm' segar dipengaruhi

oleh harga ikan bigeye segar.

Permintaan Jepun untuk ikan 'bigeye' segar pada harga rendah mempunyai

pengaruh ke atas permintaan ianya pada masa lalu, harga ianya sendiri, harga 'bigeye'

beku dan udang dan pendapatan per kapita, yang mana ianya mempunyai tanda negatif.

Pada harga tinggi, ikan 'bigeye' segar mempunyai pengaruh keatas permintaan ianya

pada masa lalu, harga ianya sendiri, harga udang dan pendapatan per kapita.

Permintaan Jepun untuk ikan 'bigeye' beku pada harga rendah mempunyai

pengaruh ke atas permintaan ianya pada masa lalu, harga ianya sendiri, harga ikan

'yellowfm' beku dan udang. Akan tetapi, pada harga tinggi, ia mempunyai pengaruh ke

atas permintaan ianya pada masa lalu, harga daripada udang dan pendapatan per kapita

yang ianya mempunyai tanda negatif. Keanjalan harga untuk semua jenis tuna adalah

tak anjal. Keanjalan pendapatan adalah anjal.

xv

CHAPTER I

INTRODUCTION

Indonesia is the largest archipelagic nation in the world, consisting of more

than 17,000 islands and 82,600 km2 of coastline. The seas surrolU1ding Indonesia cover

two major continental shelves, i.e the SlU1da and the Sahul - shelves with an area of

about 775,000 km2 (ADB, 1993). In addition, there are also large areas of inland open

waters. One of the natural resources which can be exploited from the seas and inland

waters is fish.

Fishery products are all kinds of fish gathered from the seas and inland waters,

including products processed with simple methods (dried and salted fish). The data on

quantity and value of production can be seen in Tables 1 and 2.

Source

Sea Inland Salted fish

1987

20 17.4

653.1

626.9

Table 1

Fisheries Production, 1987-1992

(thousands of tons)

1988

2 169.6

7 1 1.6

590.7

1989

2272.2

765.0

660.4

1990

2370.l

792.4

725.8

(Source: Central Bureau Statistic of Indonesia, 1993)

1

1991

2505.0

807.0

797.6

1992

2647.0

82 1.2

876.5

Source

Table 2 Fishery Output at Current and 1983 Constant Market Prices

(billion rupiahs)

1987 1988 1989 1990 1991

2

1992 ---------------�------------------------------------------------------------------------------------------

At current market prices :

Sea 1242.7 1483.1 1737.9 1912.2 2178.9 2436.5 Inland 875.3 998.8 1186.6 1302.6 1448.9 1579.7 Salted fish 61S.9 639.7 841.9 971.2 1126.1 1327.8 Total 2733.9 3121.6 3766.4 4186.0 4753.9 5344.0

At 1983 constant market prices:

Sea 825.7 888.0 930.0 970.0 1025.2 1083.6 Inland 568.4 619.4 665.8 690.2 702.4 714.8 Salted fish 454.3 428.1 478.7 526.0 578.1 635.3

Total 1848.4 1935.S 2074.5 2186.2 230S.7 2433.7

(Source: Central Bureau of Statistics, 1993)

The latest data from Central Bureau of Statistics (1993) on the Indonesian

economy showed an increase in gross domestic product of 6.29% (at 1983 constant

market prices). This rate of growth was a little lower than the proceeding year's rate of

6.90%. Export perfonnance in 1992 was as follows. Oil and gas exports in US dollar

decreased by 2. 1 %, while non-oil and gas exports increased by 27.7%. The fishery

sub-sector as a part of non-oil and gas sub-sector increased by 5.08%.

Indonesian fishery development policy emphasizes increasing exports and

decreasing imports of fishery products. Consequently, during 1987 - 1991 export of

fishery products increased by 30.76% per annum, (140,378 mt in 1987 as compared to

3

409,043 mt in 1991). In terms of value, the increase was 28.10% per annum, from USS

475,523 million to US$ 1,255,663 million during the same period (see Figure 1 arxl

Figure 2). Shrimp and tuna /skipjack are important contributors to the total export

Other fishery commodities are fresh/chilled, frozen and canned fish, frog legs, jelly

fish, sea weed, coral and other shells, fat and oil fish, ornamental fish, snail, shrimp,

crackers and pearls.

Statement of the Problem

Tuna is an important source of income for Indonesia after shrimp. It is

exported mainly to Japan, The United States of America, Europe and other Asian

countries (Thailand and Taiwan). Indonesian tuna has the capability to compete in the

international market due to its resource availability as well as its quality. However, its

contribution to international world market remains small at only about 4.67% in 1989.

Furthermore tuna share in the world import is still relatively low (3.4% of total world

imports) (Martono, 1991).

Japan is a potential market for Indonesian tuna. About 9.8% of Japan's import

of tuna is from Indonesia, which is equivalent to 90% of Indonesia's export of big tunas

(fresh and frozen). Consequently, this high volume of tuna export to Japan have made

I.ndonesia too dependent on Japan. On the other hand, although Indonesian tuna has a

lower price fluctuations are found in the tuna export market (Figure 3). For instance,

the price of exported tuna to Japan between August and October 1993 decreased by up

500 0-S ,.. -c 400 0 -

.5 Q) E 300 ::s

'0 > 1: &. 200 .5 " c IS 100 1: �

W o lliB11111111111II11J11111111111111111111111111Bm1111111111111111111111111111111111111111.111111111111111\11111111111111111111111111.1111111111111111)111111111111111111111IIIIIalll!IIII!III!IIII,IIIIII!IIIIIIIIIIIIUIIUlIllV

1987 1988 1989 1990 1991 _ Export: _ Import Year

Figure 1 Export and Import Volume of Fisheries Production 1987 - 1991

-J::>.

1400

-

g 1200 0 --

�1000 :;) .s (I) 800 � � -e 600 0 0. .E "0 400 c: cu -e 200 0 c. �

0 1987 1988 1989 1990

• export • import Figure 2

1991 Year

Export and Import Value of Fisheries Production 1987 - 1991

Vl

16

--; 14 "d I=l � 12 ;j 0

.cl 10 E-o '-"

E-o 8 � '" A rn 6 �

I=l 4 .....

(l) ;j ..... 2 a:l

>

0 1989 1990 1991 1992 1993

- Prlo. of tr..h YF -t- Prlo. of fr •• h BE

Figure 3

Price Fluctuation of Fresh Yellowfin (YF) and Bigeye (BE)

1994 Year

0\

7

to 50%. (Tempo, 1993). Since Indonesia is dependent on Japan's market, it is

imperative to understand Japan's market behaviour. Hence there is a need to

understand the Japanese demand for Indonesian tuna as a basis for better management

of the tuna trade.

In addition, due to the government policy and abundant resources of tuna, and

comparative advantage in tenns of cost and production, Indonesia is interested in

increasing tuna exports, in particular to Japan. Therefore a better understanding of the

export demand for tuna by the Japanese will help the government to plan and formulate

effective policies for tuna trade.

Significance of the Problem

Indonesia like most developing countries is trying to increase the exports of

non-oil and gas commodities to countries such as Japan, USA, Europe and other Asian

countries. Fisheries products are one of the important non oil and gas export

commodity which can be used to increase foreign exchange and national income.

Increasing the production and export of fishery commodities is often seen as an

important activity for helping the rural poor and in achieving economic growth. This is

based on the fact that the level of fisheries resource exploitation is generally low, about

30 - 55% of the natural resource potential (Naamin and Hardjamulia, 1990).

8

One of the exported fishery commodities which has good prospects for eaming

foreign exchange is tuna. Based on both the resource availability and cost of

production, there is good potential for further development in tuna trade. Tuna is

abundant in the adjacent areas of Indonesian waters throughout the year. Cost of

production of tuna, is relatively cheap compared to other tuna exporters in the region,

especially in terms of labour cost. Labour costs in the tuna industry is cheap with a

wage rate of about US $ 1.50 per day. Therefore, Indonesia has a comparative

advantage over the other countries in the development of the tuna industry.

Another important evidence of the potential for developing the tuna industry is

the increase in the volume of Indonesian tuna exports in the international market.

Indonesian tuna exports have been able to penetrate markets in Japan, USA, and

Europe (particularly fresh tuna).

Another important aspect of Indonesian's development strategy is to increase

the marketing efficiency of fishery products. Market information, networks and

intelligence are important ingredients for improving market performance (Supamo et

ai, 1992 and Putro and Artaty, 1992). This study on the export demand for tuna hopes

to generate useful information for the further understanding of the tuna trade.

9

Objectives of the Study

The overall objective of the study is to analyse the Japanese demand for

Indonesian tuna and its prospects for the Indonesian economy. The specific objectives

are:

1. to exarrJne the Japanese demand for Indonesian tuna.

2. to describe the marketing channels and practices of tuna exports.

3 . to estimate the export demand equation and obtain price elasticities for Indonesian

tuna.

4. to provide some policy options for developing the tuna trade