The Impact of ASEAN-India Free Trade Agreement  on Palm Oil Export Performance: A Comparative Study of ASEAN-3

Fadhlan Zuhdi; Sri Milawati Asshagab; Achmad Subchiandi Maulana; Jay Shankar Kumar; Resti Prastika Destiarni; Erika Safira; Eristya Puspitadewi Irwanto

doi:10.21512/jas.v13i2.12932

Authors

Fadhlan Zuhdi National Research and Innovation Agency https://orcid.org/0000-0003-2683-2836
Sri Milawati Asshagab Corvinus University of Budapest, Hungary https://orcid.org/0000-0001-6466-6272
Achmad Subchiandi Maulana University of Timor https://orcid.org/0000-0003-2007-6355
Jay Shankar Kumar University of Antwerp
Resti Prastika Destiarni University of Trunojoyo https://orcid.org/0000-0002-5864-3370
Erika Safira University of Malikussaleh
Eristya Puspitadewi Irwanto National Research and Innovation Agency (BRIN)

DOI:

https://doi.org/10.21512/jas.v13i2.12932

Keywords:

Gravity model, palm oil, AIFTA

Abstract

India is the world’s largest importer of palm oil, with a significant share sourced from ASEAN-3 countries—Indonesia, Malaysia, and Thailand. The ASEAN-India Free Trade Agreement (AIFTA), implemented in 2010, aimed to strengthen trade ties by reducing tariffs on palm oil. However, previous studies have produced mixed results regarding AIFTA’s effectiveness, highlighting the need for further analysis. This study examined the impact of AIFTA on the palm oil export performance of ASEAN-3 countries by evaluating their competitiveness in the Indian market using Revealed Comparative Advantage (RCA), Export Product Dynamics (EPD), and Ordinary Least Squares (OLS) gravity models. Utilizing secondary data from 2007 to 2021 sourced from UN Comtrade, the World Bank, and CEPII, the study assessed competitiveness, identified export trends, and explored trade creation and diversion effects. Findings from the RCA and EPD analyses indicate declining competitiveness for Indonesia and Malaysia, while Thailand shows notable improvement. Despite tariff concessions under AIFTA, the gravity model reveals no significant trade creation effect, suggesting that non-tariff factors—such as India’s domestic production policies, export duties, and geographic proximity—play a more influential role. The study concludes that AIFTA’s impact on the palm oil trade remains limited. To enhance export performance, ASEAN-3 countries must pursue product diversification, sustainability initiatives, and strategic trade reforms. These insights offer valuable guidance for policymakers aiming to optimize FTA outcomes and navigate evolving market dynamics.

Dimensions

References

Akbar, M. F., & Widyastutik. (2022). Analisis daya saing, dinamika, dan determinan penawaran ekspor komoditas unggulan Indonesia ke United Kingdom. Jurnal Ekonomi dan Kebijakan Pembangunan, 11(2), 108–131. https://doi.org/10.29244/‌jekp.‌11.2. ‌‌2022.108-131

Arsyad, M., Amiruddin, A., Suharno, S., & Jahroh, S. (2020). Competitiveness of palm oil products in international trade: An analysis between Indonesia and Malaysia. Caraka Tani: Journal of Sustainable Agriculture, 35(2), 157-167. https://doi.org/10.20961/ carakatani.v35i2.41091

ASEAN. (2012, October 15). ASEAN – India free trade area. ASEAN Secretariat. https://asean.org/asean-india-free-trade-area/

Balassa, B. (1965). Trade Liberalisation and Revealed Comparative Advantage. The Manchester School, 33(2), 99–123. https://doi.org/10.1111/j.1467-9957.1965.tb00050.x

Barbiero, O. (2021). The valuation effects of trade (Federal Reserve Bank of Boston Research Department Working Papers No. 21-11). https://doi.org/10.29412/res.wp.2021.11

Cho, S.-W., & Choi, H. (2025). Unlocking the impact of US free trade agreements on industries with a synthetic control approach. Canadian Journal of Economics/Revue canadienne d'économique, 58(2), 716–746. https://doi.org/10.1111/caje.70002

Correia, S., Guimarães, P., & Zylkin, T. Z. (2020). Fast Poisson estimation with high-dimensional fixed effects. The Stata Journal, 20(1), 95–115. https://doi.org/10.1177/ 1536867X20909691

Das, R. B., & Borkakoty, A. (2022). India-ASEAN trade relations (2008-2018): A decade of redefining bilateral ties. Management Journal for Advanced Research, 2(6), 46–54. https://doi.org/10.54741/mjar.2.6.8

Destiningsih, R., Sugiharti, R. R., Togar Laut, L., Nur Safiah, S., & Achsa, A. (2020). Competitiveness identification of fisheries export in Indonesia. IOP Conference Series: Earth and Environmental Science, 530(1). https://doi.org/10.1088/1755-1315/ 530/1/ 012017

Dixon, P. B., Jerie, M., & Rimmer, M. T. (2018). Trade theory in computable general equilibrium models. Springer Singapore.

Faujan, M. R., & Bachtiar, A. (2024). Analysis of the competitiveness and export performance of Indonesian coconut shell charcoal briquettes (HS 4402) in Saudi Arabia : RCA , EPD , and XModel. International Journal of Economics and Management Research, 5(1), 649–661. https://doi.org/10.55606/ijemr.v5i1.730

Firdausy, C. M., Zuhdi, F., Rambe, K. R., Nugraheni, R. D., Erwidodo, & Azhahari, D. H. (2025). Readiness of the European trading countries toward carbon border adjustment mechanism: Evidence from Indonesia. Sustainable Futures, 9, 100597. https://doi.org/ 10.1016/j.sftr.2025.100597

Fontagne, L., Rocha, N., Ruta, M., & Santoni, G. (2023). The economic impact of deepening trade agreements. The World Bank Economic Review, 37(3), 366-388. https://doi.org/ 10.1093/wber/lhad005

Food and Agriculture Organization. (2023). Palm Oil Production. Faostat. Retrieved August 1, 2025, from https://www.fao.org/faostat/en/#data/QCL

FTA Support Center. (2010, Jan 1). AIFTA. Ministry of Trade of Republic Indonesia. https://ftasupportcenter.kemendag.go.id/aifta

Glorius, G., Akhmadi, H., & Widodo, A. S. (2021). Impact of ASEAN-India free trade area on Indonesian palm oil export: A gravity model approach. Proceedings of the 4th International Conference on Sustainable Innovation 2020–Social, Humanity, and Education, 518, 476–480. https://doi.org/10.2991/assehr.k.210120.163

Grzelakowski, A. S. (2024). Transport systems and their impact on trade facilitation, logistics performance and competitiveness: An analytical approach. European Research Studies Journal, 27(2), 20–34. https://doi.org/10.35808/ersj/3369

Hafner, K. A., Kleinert, J., & Spies, J. (2023). Endogenous transport costs and international trade. World Economy, 46(3), 560–597. https://doi.org/10.1111/twec.13337

Husin, S., Wijaya, C., Ghafur, A. H. S., Machmud, T. M. Z., & Mardanugraha, E. (2023). Palm oil downstream strategy: Enhancing Indonesia’s bargaining position in international palm oil trade. Migration Letters, 20(5), 678–689. https://doi.org/10.59670/ml. v20i5.4057

Ijirshar, V. U. (2022). Trade facilitation and economic growth among middle-income countries. arXiv. https://doi.org/10.48550/arXiv.2204.11088

Ikasari, H. (2024). Dynamic competitiveness of Indonesian commodities in major export destination. Jurnal Ekonomi dan Studi Pembangunan, 16(1), 1-15. https://doi.org/ 10.17977/um002v16i12024p001

International Trade Centre. (n.d.-a). List of Palm Oil Importers. Trade Map. Retrieved August 1, 2025, from https://www.trademap.org/Country_SelProduct_ TS.aspx?nvpm= 1%7C%7C%7C%7C%7C1511%7C%7C%7C4%7C1%7C1%7C1%7C2%7C1%7C2%7C2%7C1%7C1

International Trade Centre. (n.d.-b). List of supplying markets for a product imported by Indonesia. Trade Map. Retrieved August 1, 2025, from https://www.trademap.org/Country_ SelProductCountry_TS.aspx?nvpm=1%7C699%7C%7C%7C%7C151110%7C%7C%7C6%7C1%7C1%7C1%7C2%7C1%7C2%7C1%7C1%7C1

International Trade Centre. (n.d.-c). List of supplying markets for a product imported by India. Trade Map. Retrieved August 1, 2025, from https://www.trademap.org/Country_ SelProductCountry_TS.aspx?nvpm=1%7C699%7C%7C%7C%7C151190%7C%7C%7C6%7C1%7C1%7C1%7C2%7C1%7C2%7C1%7C1%7C1

Irshad, A., Hussain, A., & Ahmad, J. (2025). India-ASEAN agricultural trade: An RCA analysis. Saudi Journal of Economics and Finance, 9(5), 154–162. https://doi.org/10. 36348/sjef.2025.v09i05.001

Jagdambe, S., & Kannan, E. (2020). Effects of ASEAN-India Free Trade Agreement on agricultural trade: The gravity model approach. World Development Perspectives, 19(1), 1–8. https://doi.org/10.1016/j.wdp.2020.100212

Kanupriya. (2025). Renegotiating India’s trade pacts: A study with reference to India’s comprehensive economic partnership agreements with Japan and South Korea. The Indian Economic Journal, 73(5), 911–916. https://doi.org/10.1177/00194662251332883

Kopecky, J. (2023). Growing older and growing apart? Population age structure and trade. Journal of Economic Studies, 50(8), 1694–1709. https://doi.org/10.1108/JES-10-2022-0506

Kozlovskyi, S., Pasichnyi, M., Lavrov, R., Ivanyuta, N., & Nepytaliuk, A. (2020). An empirical study of the effects of demographic factors on economic growth in advanced and developing countries. Comparative Economic Research, 23(4), 45–67. https://doi.org/ 10.18778/1508-2008.23.27

Lakshmi, B. T., Shivakumar, K. M., Kumar, D. S., Mahendran, K., & Suresh, J. (2022). Trade competitiveness of palm oil export from ASEAN countries. Asian Journal of Agricultural Extension, Economics & Sociology, 40(11), 1-7. https://doi.org/10.9734/ajaees/2022/ v40i111679

Lakshmi, B. T., Shivakumar, K. M., Kumar, D. S., Mahendran, K., & Suresh, J. (2024). Impact of ASEAN-India Free Trade Agreement (AIFTA) on palm oil trade. Journal of Experimental Agriculture International, 44(11), 187–194. https://doi.org/10.9734/jeai/ 2022/v44i112066

Lal, M., Kumar, S., Pandey, D. K., Rai, V. K., & Lim, W. M. (2023). Exchange rate volatility and international trade. Journal of Business Research, 167. https://doi.org/10.1016/j.jbusres. 2023.114156

Luhur, E. S., Mulatsih, S., & Puspitawati, E. (2019). Competitiveness analysis of Indonesian fishery products in ASEAN and Canadian markets. Signifikan: Jurnal Ilmu Ekonomi, 8(1), 105–120. https://doi.org/10.15408/sjie.v8i1.7301

Mahdi, T. (2023). India’s strategy in reducing palm oil import and its impacts to bilateral trade with Indonesia. Airlangga Journal of Innovation Management, 4(1), 20–30. https://doi.org/10.20473/ajim.v4i1.43417

Mao, H., Cui, G. H., Hussain, Z., & Shao, L. (2024). Retracted: Investigating the simultaneous impact of infrastructure and geographical factors on international trade: Evidence from asian economies. Heliyon, 10(1), 1–21. https://doi.org/10.1016/j.heliyon. 2023.e23791

Maulana, F. R., Sukiyono, K., Nusril, & Sriyoto. (2023). Analysis of Indonesian palm Oil competitiveness in the main export destination countries. Indonesian Journal of Agricultural Research, 6(2), 68–78. https://doi.org/10.32734/injar.v6i2.11420

Ministry of Agriculture of India. (2011). Guidelines for special programme on Oil Palm Area Expansion (OPAE).

Ministry of Commerce and Industry of India. (2023). Trade agreements.

National Food Security Mission. (2011). Special programme on Oil Palm Area Expansion (OPAE) under RKVY.

Obradovic, L. (2012). The role of bilateral and regional trade agreements in the modernisation of taxation and revenue policy in developing economies. World Customs Journal, 6(2), 73–92.

Ornelas, E., Turner, J. L., & Bickwit, G. (2021). Preferential trade agreements and global sourcing. Journal of International Economics, 128. https://doi.org/10.1016/j.jinteco. 2020.103395

Patel, N., Choudhary, H., & Goswami, S. S. (2024). Pathways and strategy for accelerating growth in edible oil towards goal of Atmanirbharta. NITI Aayog.

Pratiwi, I. E. (2021). The predictors of indonesia’s palm oil export competitiveness: A gravity model approach. Journal of International Studies, 14(3), 250–262. https://doi.org/10. 14254/2071-8330.2021/14-3/16

Quiroz Villanueva, M. J., Guglielmi, F., De Fabiis, F., & Coppola, P. (2025). Social and economic impacts of transportation multi-modal and multi-service hub development. Sustainability, 17(4), 1–26. https://doi.org/10.3390/su17041767

Ramaswamy, S., Choutagunta, A., & Sahu, S. K. (2021). Evaluating Asian Free Trade Agreements: What does gravity model tell us? Foreign Trade Review, 56(1), 60–70. https://doi.org/10.1177/0015732520961330

Rosyadi, F. H., Mulyo, J. H., Perwitasari, H., & Darwanto, D. H. (2021). Export intensity and competitiveness of Indonesia’s crude palm oil to main destination countries. Agricultural Economics, 67(5), 189–199. https://doi.org/10.17221/371/2020-AGRICECON

Sowcharoensuk, C. (2022, August 1). Industry outlook 2022–2024: Palm oil industry. Krungsri. https://www.krungsri.com/en/research/industry/industry-outlook/agriculture/ palm-oil/io/oil-palm-industry-2022-2024

Su, L., Jung, H., & Yang, M. (2023). Does a Lingua Franca matter in bilateral international trade? International Studies of Economics, 18(1), 80–96. https://doi.org/10.1002/ise3.23

Sudan, F. K. (2022). Indo-Pacific strategy and India’s opportunities and challenges for regional economic cooperation and integration: an exploratory review. Global Economics Science, 3(2), 143–161. https://doi.org/10.37256/ges.3220221290

Tandra, H., Suroso, A. I., Syaukat, Y., & Najib, M. (2022). The determinants of competitiveness in global palm oil trade. Economies, 10(6), 132. https://doi.org/10.3390/ economies10060132

Tao, Z., Ramasamy, S. S., Naktnasukanjn, N., & Ying, F. (2025). Assessing competitiveness and complementarity in agricultural trade between China and Cambodia pre-pandemic and post-pandemic. PLOS ONE, 20(4). https://doi.org/10.1371/ journal.pone.0321081

Tapia, R. F. L., Alegre, G. A. B., Carrasco, B. B., Garcia, Otero, C. B., Lamas, M. A. F., & Cuaresma, J. R. M. (2025). Agri-food competitiveness in the Andean Community: A study of revealed comparative advantage indices. Cogent Social Sciences, 11(1), 1–16. https://doi.org/10.1080/23311886.2024.2447393

Weidner, M., & Zylkin, T. (2021). Bias and consistency in three-way gravity models. Journal of International Economics, 132. https://doi.org/10.1016/j.jinteco.2021.103513

World Bank. (2020). Population Total. World Bank Data. Retrieved August 1, 2025, from https://data.worldbank.org/indicator/SP.POP.TOTL

WWF-India. (2020). Palm oil in India. WWF-India. https://wwfin.awsassets.panda.org/ downloads/palm_oil_brochure_2022.pdf

Yamanouchi, K. (2019). Heterogeneous impacts of free trade agreements: The case of Japan. Asian Economic Papers, 18(2), 1–20. https://doi.org/10.1162/ASEP_a_00686

Yusiana, E., Hakim, D. B., Syaukat, Y., & Novianti, T. (2022). Analysis of factors influencing Thai rice trade based on Gravity model. IOP Conference Series: Earth and Environmental Science, 951. https://doi.org/10.1088/1755-1315/951/1/012039