The Economic Impact of Indonesia-Bangladesh Preferential Trade Agreement

This study aims to review the economic impact of PTA and arrange indications of product requests/offers. The methods used are Revealed Comparative Advantage, Trade Complementary Index, and Partial Equilibrium. The study found that the TCI for Indonesia is 18.4 while Bangladesh is 3.31. Here, Indonesia can fulfill better the demand from Bangladesh. Based on RCA analysis, Indonesia has a better advantage on animal; vegetable; foodstuffs; mineral; plastic/rubber; and wood product. Meanwhile, Bangladesh has a better advantage on raw hides, skins, leather and furs; textile; and footwear/headgear. From Partial Equilibrium simulations show that the reciprocal decline in import tariffs between the two countries will increase Indonesia’s export by USD 138.4 million, meanwhile Indonesia’s import will increase by USD 94.7 million. Both countries will obtain welfare in the form of consumer surpluses, for Indonesia is USD 10.4 million and Bangladesh USD 8.2 million. Potential loss of Indonesia’s revenue was due to a reduction in tariffs of USD 8.9 million and potential loss of Bangladesh’s revenue of USD 66.5 million. We suggest for the initial stages of trade cooperation between Indonesia and Bangladesh to form the PTA with an indication of Indonesia’s requests of 145 post tariffs and offers of 180 post tariffs. Keywords— Partial Equilibrium, PTA, Request/Offer