| Summary: | This study applies three analyses for studying Indonesian trade. Gravity
model is used to investigate the determinants of Indonesian trade flows. To
examine the pattern of Indonesian comparative advantage from time to time,
normalized revealed comparative advantage (NRCA) index is calculated.
Indonesian trade potential analysis aims to provide an illustration about the
condition of Indonesian trade with its partners.
Panel data of forty largest Indonesian trade partners during the period 1995-
2011 is employed for the gravity model analysis of Indonesian trade flows.
Dummy variables of free trade agreement (FTA), membership of the WTO and
ASEAN, as well as Trade Freedom Index (TFI), are included in this research to
capture Indonesia�s trade policy.
The NRCA index proves that Indonesia has comparative advantage in low
technology embedded commodities. The opposite fact is evident for high
technology embedded products. This result can be considered as a sign for the
Indonesian government to give their best effort for developing industry that
produces high technology embedded products.
The analysis of Indonesian unrealized trade potential shows that for export,
Indonesia is under trade with thirteen countries. On the other hand, in the case of
import, Indonesia is under trade with twenty countries, most of which are located
in Europe.
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