Indonesian Rubber Tire Export Potential in International Markets: A Stochastic Frontier Gravity Model Approach

Background: The transformation of Indonesia’s rubber exports from raw materials to higher value-added downstream products has become a critical challenge in enhancing the country’s international trade competitiveness. Although Indonesia is the world’s second-largest exporter of natural rubber, its rubber tire (HS 4011) exports continue to account for a relatively small share of the global market despite steadily increasing international demand. Objective: This study aims to analyze the factors affecting export inefficiency and to estimate the export potential of Indonesian rubber tires in the international market. Methods: The study employs panel data from 68 export destination countries over the period 2015-2024 and applies the Stochastic Frontier Gravity Model (SFGM). Results: The results indicate that exports are positively influenced by the economic size of destination countries, while geographical distance negatively affects trade. Export inefficiency decreases with real exchange rate depreciation and an increase in government effectiveness, but increases with import tariffs and landlocked destinations. Robustness checks confirm the stability of the main findings across model specifications, with Model 3 selected as the preferred specification after controlling for area and year effects. The estimated export potential reveals substantial unrealized opportunities, particularly in China (US$1.26 billion), India (US$535.76 million), Germany (US$210.21 million), Japan (US$201.93 million), and France (US$178.87 million). Conclusion: These findings show uneven market utilization and support a market-prioritization strategy centered on destinations with the largest unrealized export gaps, while consolidating high-efficiency markets and addressing market-access and logistics constraints in underutilized destinations.