Export performance and export demand of Indonesian forest products

Abstract

<p>Indonesian forest product exports have been growing significantly from a yearly average of U.S. 0.4 billion in 1970/74 to U.S. \2.4 billion in 1985/89. Using the constant market share (CMS) model, the results indicate that the impressive growth of Indonesian forest product exports over the period 1970/74-1985/89 attributed to the world trade effect and to the competitiveness effect was 50 and 82 percent, respectively. The commodity composition effect and market distribution effect were somewhat unfavorable; it was -29 and 1 percent, respectively. The CMS results suggest that, to obtain more benefit from the world trade in forest products, Indonesian export strategy must shift gradually to the commodities which are highly demanded, in particular paper and paperboard, newsprint, printing and writing papers. Further investigation revealed that the static demand for export model seems to explain better than the dynamic model in relation to the behavior of the Indonesian sawn wood and plywood exports to various markets. In addition, the results for the sawn wood demand for exports are richer statistically than that of plywood. In the world market, the share of Indonesian sawn wood exports was far less compared with that of plywood. The estimated price elasticities of the static demand for Indonesian sawn wood exports revealed that 9 out of 17 export markets under investigation have elasticities greater than one (>1.0), and are significant statistically. This suggests that an active pricing policy may increase the export penetration to those markets. For the plywood, however, only 6 out of 17 export markets have the estimated price elasticities greater than one (>1.0), and are significant statistically. This suggests that Indonesian plywood export pricing policy might not have a large impact to increase the export revenues.</p>