The predictors of indonesia’s palm oil export competitiveness: A gravity model approach

Abstract

Indonesia, the largest palm oil-producing country, has a great potential to market this product domestically and internationally. Thus, the important factors that affect exports must be considered to maintain palm oil as the comparative advantage and major export commodity in the global market. This study aims to analyze Indonesia's palm oil export competitiveness in selected leading destination countries, including China, the United States, India, the Netherlands, and Spain, and to identify the determinant that affected the export of palm oil from Indonesia to the selected main partner countries for 2000 – 2019 by means of gravity model approach. The methods used in this study is the Revealed Competitiveness Advantage (RCA) Index and panel data regression. This study finds that Indonesia's palm oil export is strongly competitive in main partner countries, namely the United States, China, India, the Netherlands, and Spain. Furthermore, the substantial predictors of Indonesia's palm oil export are economic distance, real GDP per capita of partner countries, Free Trade Agreement (FTA), Non-Tariff Measurements (NTMs), and real exchange rate. Therefore, the gravity model used in this study indicates no essential barriers limiting the export of Indonesia's palm oil to main destination countries. Furthermore, there is a need for Indonesia to strengthen its bilateral cooperation and trade diplomacy.