This seminar will discuss two studies on export diversification at the sub-regional level in Indonesia. The first study scrutinizes the impact of natural resource exports on export diversification of non-resource export basket by utilizing Indonesian data at provincial level. Using instrumental variable strategy by exploiting sub-regional exposures on resource exports, namely coal and palm oil – two largest export commodities from Indonesia – we show evidence of Dutch disease. This paper finds that increased natural resource export increases the export concentration of manufacturing products while decreasing product and product-country variations of export baskets. Furthermore, we discover that the impact is greater in the resource-based manufacturing sector, implying a direct de-industrialization effect.

The second study elaborates policy options by investigating the determinants of export diversification at the sub-regional level in Indonesia. Using the static panel estimation technique, our study finds that road infrastructure, domestic credit distribution, and the mean years of schooling are the key factors of export diversification, implying that local governments should prioritize these factors to improve their export performance.

Speakers: Deasy Pane, Hilda Rohmawati, Firdaussy Yustiningsih, Indra Muhammad and Bekti Setyorani (BAPPENAS)