Economic diplomacy and exports: The case of Indonesia

SEPRIZA TRIASANDITYA, Professor Renee Fry-McKibbin

2015 | Tesis | S2 SAINS ILMU EKONOMI

This paper investigates the effectiveness of Indonesia's economic diplomacy with its 145 trading partners in the years 2012, 2013, and 2014. In this case, cross-section regressions within a gravity model framework are employed as a workhorse to examine the effectiveness of embassies, consulates, official foreign offices (PTRI), technical attaches (TA), and Indonesia's Trade Promotion Centre (ITPC) on Indonesia exports. The results show that exports are more intense between Indonesia and other countries which share common language ethnically and historical colonial background. Holding other factors constant, the most significant diplomatic posting of Indonesia's foreign representative is technical attaches. In particular, relating to the top ten and top two goods product in which Indonesia has a comparative advantage in the world market, each additional posting of technical attache drives up top ten Indonesia's Revealed Comparative Advantage (RCA) exports in the period of estimation, but not significantly affect the top two RCA export commodities. However, it shows overestimated result so that only the benchmark models result that is used for conclusion. In conclusion, Indonesia exports are affected by the destination country's market size, income of its citizen, historical past, and mainly because of the existence of free trade agreement.

This paper investigates the effectiveness of Indonesia's economic diplomacy with its 145 trading partners in the years 2012, 2013, and 2014. In this case, cross-section regressions within a gravity model framework are employed as a workhorse to examine the effectiveness of embassies, consulates, official foreign offices (PTRI), technical attaches (TA), and Indonesia's Trade Promotion Centre (ITPC) on Indonesia exports. The results show that exports are more intense between Indonesia and other countries which share common language ethnically and historical colonial background. Holding other factors constant, the most significant diplomatic posting of Indonesia's foreign representative is technical attaches. In particular, relating to the top ten and top two goods product in which Indonesia has a comparative advantage in the world market, each additional posting of technical attache drives up top ten Indonesia's Revealed Comparative Advantage (RCA) exports in the period of estimation, but not significantly affect the top two RCA export commodities. However, it shows overestimated result so that only the benchmark models result that is used for conclusion. In conclusion, Indonesia exports are affected by the destination country's market size, income of its citizen, historical past, and mainly because of the existence of free trade agreement.

Kata Kunci : economic diplomacy, exports, Indonesia, gravity model, free trade agreement