Estimation of Indonesia’s Trade with USA and India

  • Kumara Jati Ministry of Trade of Republic of Indonesia

Abstract

This research estimates Indonesia’s trade with the United States of America (USA) and India using the Structural Time-Series Model (STSM). STSM is a model that can assess and estimate trade data in a more structured and accurate with a decomposition process. This is important because USA and India are Indonesia’s second and fifth biggest export destination countries in 2020. The focus of the research is the balance of trade between Indonesia, the USA, and India.

Based on Descriptive Analysis, the total trade between Indonesia and USA for January-May 2021 period compared to the same period in 2020 increased by 25%. Changes in Indonesia’s non-oil and gas exports to the USA in January-May 2021 compared to the same period in the previous year increased by 30%. Textile and textile products, rubber and rubber products, and footwear are the three main export commodities from Indonesia to the USA. There are two products whose exports will increase significantly in 2021, namely: jewelry/gems (HS code 71), palm oil, and its derivative products (HS code 15).

Among ASEAN countries, bilaterally, Indonesia is India’s number one trading partner in terms of total trade. The total trade between Indonesia and India for January-May 2021 period compared to the same period in 2020 increased by 44%. Changes in Indonesia’s non-oil and gas exports to India in January-May 2021 compared to the same period in the previous year increased by 22%. Coal, palm oil products, and iron and steel products are Indonesia’s three main export commodities to India. Changes in imports of Indonesian non-oil and gas products from India in January-May 2021 compared to the same period in 2020 decreased by 85%.  Sugar, mineral fuels, and iron and steel are the three biggest imported products from India. The type of imports that experienced the largest increase was wheat (HS code 10) in the January-May 2021 period.

For this research, data will be collected from Indonesian Statistics (BPS), 113 monthly export and import data (Indonesia with the USA, and Indonesia with India in value and quantity of trade) on the period M1-2012 until M5-2021. We will utilize some statistical methodologies such as (a) stationarity test using Augmented Dicky Fuller (ADF), and (b) the Structural Time-Series Model (STSM).  

The Structural Time-Series Model (STSM) estimates that the value and volume of Indonesia’s non-oil and gas exports to the USA and India from 2022 to 2023 will be stable with an increasing trend. Indonesia’s export and import policies need to consider the cycles, seasonal, and irregularity patterns.  The stakeholders must consider if there are irregularities such as economic crisis and COVID-19 pandemic in 2020 and 2021. Currently, the rise in international commodity prices helps increase Indonesia’s trade surplus with USA and India. However, more can be done to increase the value-added products that are exported from Indonesia to India and USA.

Based on the Structural Time-Series Model (STSM) estimation, Indonesia’s import and export to USA and India will increase in the next two years.  Indonesia’s export to the USA is expected to increase around 10% in the next two years. Similarly, Indonesia’s export to India is estimated to increase by around 9.6%. In terms of Indonesia, imports from USA and India will increase around 14.5% and 5.1% in 2023. Hopefully, the increase in export and import can help these three countries' business and economic growth.

Published
2022-03-23
How to Cite
JATI, Kumara. Estimation of Indonesia’s Trade with USA and India. Proceedings of Indonesia Focus, [S.l.], v. 1, n. 1, p. 8, mar. 2022. ISSN 2475-4005. Available at: <https://www.indonesiafocus.net/index.php/PIF/article/view/58>. Date accessed: 01 dec. 2022.