Geographic scope of the global value chain for Indonesian coffee

Abstract

Through the global value chain (GVC), the coffee sector is expected to meet one of the UN’s targets in the SDGs, which is to increase exports from developing countries to help them integrate into the multilateral trading system and benefit from it. Understanding the geographic scope of Indonesian coffee is essential, given that coffee is a pivotal global commodity for Indonesian coffee development. This study aims to analyze the geographic scope of Indonesia’s green coffee beans trade and the key factors that determine the flow of this trade. The analytical approach employed is Gereffi’s GVC analysis and Gravity Model. The panel data analysis uses bilateral coffee trade flows of 13 trading partners from 2002 to 2021. Analysis shows Indonesia exports most of its coffee to Global North countries, which also function as lead firms. Indonesia’s coffee GVC is concentrated at the upstream stages, while complex processing activities occur in advanced countries. According to the gravity model, the significant variables that affect Indonesia’s coffee trade flow are the importing country’s real GDP per capita, the importing country’s population, Indonesia’s real exchange rate against the local currency, Indonesia’s coffee competitiveness, and the non-tariff measurements for coffee. The potential countries to increase the Indonesian coffee trade are existing coffee markets.