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Indonesian Textile Exports in the Presence of Bilateral Foreign Aid

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  • Joko Mariyono

Abstract

This study aims to analyze Indonesia's export of textiles after the abolishment of the quota system from a gravity model perspective. The textile industry is selected because of its growth trend in Indonesia. Bilateral foreign aid is included as a proxy of the close friendship between Indonesia and its trading partners. Data were compiled from various sources, comprising target-export countries during 1999-2009, and a linear regression model was used to estimate the significance of gravity. The results show that the presence of foreign aid leads to higher volumes of textile exports. As expected, distance has a negative impact at a decreasing rate, and Indonesia's income per capita has a negative impact as well. This indicates that an increase in Indonesia's income per capita leads to higher domestic consumption. Similarly, the income per capita in export-target countries has a positive impact, wherein international demand for textile increases, leading to an increase in the export of Indonesian textiles. Increases in the price of textiles and the exchange rate lead to a lower volume of exports. Indonesia should increase investment in the textile industry to fulfill domestic demand and reduce its dependency on imported raw materials.

Suggested Citation

  • Joko Mariyono, 2012. "Indonesian Textile Exports in the Presence of Bilateral Foreign Aid," Asia Pacific Journal of Public Administration, Taylor & Francis Journals, vol. 34(2), pages 171-186, December.
    • Handle: RePEc:taf:rapaxx:v:34:y:2012:i:2:p:171-186
    DOI: 10.1080/23276665.2012.10779393
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    References listed on IDEAS

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    1. Inmaculada Martinez-Zarzoso & Felicitas Nowak-Lehmann D & Florian Johannsen, 2012. "Foreign Aid, Exports and Development in Euromed," Middle East Development Journal, Taylor & Francis Journals, vol. 4(2), pages 1250007-121, January.
    2. Herzer, Dierk & Nunnenkamp, Peter, 2012. "The effect of foreign aid on income inequality: Evidence from panel cointegration," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 245-255.
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