The Determinants of Indonesia’s CPO Export in Non – Traditional Market

Abstract

Countries in Europe, China and USA are the main destination of Indonesia's CPO exports so that in order to avoid more significant declining in value and export volume because of trade war and the existance of CPO black campaign, Indonesia must take a diversified step, especially for export market diversification. This study illustrates the condition of Indonesian CPO competitiveness in non-traditional markets, measures the position of Indonesia CPO export market attractiveness, and analyzes factors influence CPO exports. Data used are secondary data obtained from various resources. The time series and cross sections data consecutively consist of variables from 2002 to 2017 and 11 nontraditional importing countries. Time series variables consist of volume export of Indonesia CPO, exchange rate, export price, Indonesia GDP, importers GDP, and economic distance. X–model product export potential and gravity model were used to address the objectives. Indonesian CPO has optimistic market development potential because Indonesia CPO has strong competitiveness and in a rising star position.The analysis result with gravity model showed the factors affecting Indonesian CPO export to nontraditional countries was exchange rate, Indonesia GDP, importers GDP, and economic distance. Government role is important to initiate a long term trade agreement which benefits both parties.