Commercial Diplomacy on Export Performance Case Study of Indonesian Trade Promotion Centre (ITPC)

Promoting export is a central issue to boost country’s competitiveness. To attain this purpose, many countries including Indonesia implement commercial diplomacy (CDC). Nevertheless, scholars have been debating about the role and efficacy of CDC instruments. Some empirical evidences are being presented to support pro’s and contra’s. This paper attempts to investigate the impact of one of Indonesian CDC instruments, Indonesian Trade Promotion Center (ITPC) on export performance, in essence of whether it presence generates higher trade value. In order to reach the impact analysis, I use the gravity model of international trade and employ panel data for 19 years observations over 62 countries of Indonesian export destinations. The empirical estimation yields a positive correlation between the existences of ITPC to Indonesian export performance. ITPC indeed gives a growing effect on exports, even though the magnitude of its impact is less sound. A further discussion is conducted to explore the challenges of CDC instruments of Indonesia in performing export promotion using qualitative interviews. In the finding, the interferences comes from internal as well as external factors. The internal issue such as limited budget, lack of staff, and coordination problem are hampering their activities. Whereas, in the external aspects, the preparedness of Indonesian industry and the channel of export distribution bring tremendous deterrents in boosting Indonesian exports. Hence, this research serves as a policy recommendation for the government in supporting export strategy by strengthening the commercial diplomacy instruments.