The Analysis of New Market Potentials and Determinants of Indonesian Export Commodities in the South Asian Region

Abstract

Indonesia's trade performance with traditional countries in the last five years experienced a deficit. This condition has an impact on the emergence of the national trade balance deficit. Ministry of Trade of the Republic of Indonesia in anticipating this implies a Market Diversification strategy. Through this strategy, Indonesia is expected to be able to develop its export performance in several developing countries that have significant market potential to explore. South Asia is one of the regions that have the potential to become Indonesia's new market destination. This study aimed to analyze new export markets, potential export commodities, and Indonesian export determinants in the South Asian region. The analytical methods used in this study included Revealed Comparative Advantage (RCA), Export Product Dynamic (EPD), Intra Industry Trade (IIT), Trade Complamantarity Index (TCI), and Gravity Model. The results show that five countries in the South Asian region have the potential to become Indonesia's new export market, namely India, Pakistan, Bangladesh, Sri Lanka, and Maldives. Indonesia's potential export commodities in each country are in the position of a rising star, falling star, and lost opportunity markets that are potential to be developed. Exports determinants that affect Indonesia's potential commodity exports in South Asia are importers GDP, differences in GDP per capita, geographic distance, commodity prices, real exchange rates, tariff barriers, and non tariff barriers. This results can be used as an insight for the government to create a relevant trade policy in the South Asian region.