One objective of the AFTA implementation is to reduce trading constraints by reducing import
tariffs among ASEAN’s members with the assumption that if tariffs are lower or zero, there
should be an increase in intra-trading value among ASEAN members. This study examines
whether the implementation of the AFTA has had any impact on Indonesia’s export
performance and ‘behind the border’ constraints contribution in Indonesia’s exports such as
customs administrations. The study uses the gravity model approach with a stochastic
frontier analysis which is different from previous research about Indonesia’s trading
performance that uses OLS estimation. The results show that, empirically, GDP, distance,
population, exchange rate, and membership in ASEAN significantly affect Indonesia’s trading
with partner country. Furthermore, stochastic frontier analysis’ results show that ‘behind the
border’ constraints decrease overtime. However, Indonesia’s exports is under trade with all
ASEAN countries which indicates the low utilisation of AFTA. On the other hand, Indonesia’s
exports are over trade with China and almost at optimal level of exports with the US, Japan,
and the Netherlands. The implication of this study is that the Indonesian government should
promote more exports with ASEAN countries to accomplish the objectives of the AFTA
declaration two decades ago.
Keywords: Indonesia, FTA, Trading Performance, Gravity Model, Stochastic Frontier
Analysis
Buletin Ilmiah Perdagangan, Vol 8. No. 01 Juli 2014