Assessment the Impact of ASEAN Free Trade Area (AFTA) on Exports of Indonesian Agricultural Commodity

Abstract

This paper focuses on investigation whether Indonesian membership on ASEAN Free Trade Area (AFTA) increased export of agriculture commodity. The panel augmented gravity model data from 33 major partner countries over the period of [2000][2001][2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014] has been applied to analyze the factors affected Indonesian agricultural exports. The overall finding showed that Indonesian agricultural exports were positively correlated with the size of economy and partner countries population, while they are negatively correlated with the appreciation of currency exchange rate and the enrollment on free trade agreement. Moreover, the Indonesian membership on AFTA does not gave significant impact and profitable on Indonesian agricultural exports.

An Analysis of Factors Influencing Indonesia’s Leading Agricultural Commodities Export to India

“…Exports do not depend on the level of the national income of the exporter, but the national income of trade partners. This result is in accordance with research of Gul andYasin (2011), Wahyudi et al (2015), Gururaj et al (2016) and Akhmadi (2017) . It can be seen in India's economy which continues to improve causing increased purchasing power of its people so as to increase the value of exports of leading agricultural commodities from Indonesia to India.…”

“…In a long time, depreciation indirectly made producers spend more cost in production so that it has an impact on the increase of export goods prices. Consumers would decrease the number of purchase if the price of goods increased (Kahfi, 2016;Lubis, 2016;Akhmadi, 2017;Riyani et al, 2018).…”

“…The economic relations between Indonesia and India are of great benefit to both countries. This can be seen from Indonesia's trade balance which experienced a surplus during the -2017period (World Bank, 2018. However, the non-oil and gas sector showed a higher value than oil and gas, which showed a negative trend (-0.1%).…”

“…This is an indication that Indonesia's export commodities are highly competitive (Boansi, 2014;Hong, 2016). An increase in the income of the export destination country can also increase the purchasing power of the country so that it can positively affect the increase in export demand (Gul and Yasin, 2011;Wahyudi et al, 2015;Gururaj et al, 2016;Akhmadi, 2017;Cheng et al, 2019).…”

The Effects of Tax and Promotion on Rubber Medical Devices Export

“…However, in this sub-sample, the result of distance is a significant positive, which is unusual in gravity model estimations. This is similar to Dreyer (2014) and Akhmadi (2017), where a specific product, in a smaller time period is investigated, and a large number of sample countries are not neighbouring countries. Meanwhile, out of the three separate categories of EPAs comprising participation in foreign trade fairs, trade missions by Malaysian delegations to target destinations, and the presence of MREPC overseas offices, only the presence of MREPC overseas office (OFFICEijt) has shown significance.…”