Do Export Promotion Agencies Matter? Evidence from Indonesia’s Export to Main and Non-Traditional Markets

Abstract

Indonesia’s economic growth faces persistent challenges, particularly due to the slowdown in export growth caused by commodity price volatility, global trade tensions, and the COVID-19 pandemic. In response, Indonesia has utilized Export Promotion Agencies (EPAs) as part of its export-led growth strategy. This study examines the effectiveness of EPAs in promoting Indonesia’s agricultural and manufacturing exports, particularly in main and non-traditional export markets. Using a panel dataset covering 38 partner countries over the period 2000–2021, the study employs a gravity model estimated through the Poisson Pseudo-Maximum Likelihood (PPML) approach. The analysis incorporates several control variables, including Foreign Direct Investment (FDI), partner-country GDP, real exchange rates, geographical distance, and Free Trade Agreements (FTAs). The findings indicate that EPAs generally exert a positive and statistically significant effect on Indonesia’s exports, although the magnitude of the effects varies across sectors and market groups. The strongest EPA effects are observed in agricultural exports to main markets and manufacturing exports to non-traditional markets. Meanwhile, the effects of FTAs appear relatively limited and less consistent across model specifications, suggesting that institutional export promotion mechanisms may play a more direct role in facilitating market access and reducing informational barriers. Consistent with the gravity model framework, partner-country GDP positively affects exports, whereas geographical distance negatively influences trade flows. Overall, the results highlight the importance of EPAs as strategic instruments for export diversification and market expansion, particularly in emerging and less-established export markets. The study also emphasizes the need for more targeted export promotion policies tailored to sectoral characteristics and destination-market conditions.