Factors Influencing Indonesian Cocoa Export to the European Union

Abstract

One of plantation commodity which is potentially developed in Indonesia is cocoa. Indonesia is the third largest exporter of cocoa bean after Ivory Coast and Ghana. Even though Indonesia is one of the biggest cocoa producer countries but only 1.07 percent of cocoa bean and 7.79 percent of cocoa butter and oil can enter European Union Market as the biggest cocoa consumer in the world. Based on that problem this paper will analyze what factors which can influence cocoa export of Indonesia to European Union and what policy implication can be conducted regarding to this condition. Data processing was conducted by using stata which used panel data analysis with gravity model panel data. There are three models which can be estimated in panel data. This study deals with the flows of trade between Indonesia and Countries in European Union. Therefore the Fixed Effects will be a more appropriate model than random specification. The eleven importer countries are selected for the period 1996 - 2011. Based on econometric results there are four significant variables that influence trade flows of cocoa code 1801 from Indonesia to European Union. Those are GDP of exporting country, population of exporting country, exchange rate and export tax. There is no significant variable which can explain trade flows of cocoa, code 1804 from Indonesia to European Union. It would be concluded that in this case gravity model is not the best model. The next research should consider the other variable which can explain the trade flows well.