Opportunities and obstacles for cross-border trade: case of Dumai, Indonesia

Abstract

The conventional wisdom in the economic circles suggests that reducing tariffs (i.e. trade regulation/policy) will enhance cross-border trade. However in reality it is not the case, as there are obstacles to trade. To what extent does non-tarrif trade policy enhances or hinders cross-border trade? If trade regulation/policy is favorable, to what extent does trade facilitation provides opportunities or hinders cross-border trade? Using the case of Dumai, the paper attempts to examine the opportunities and obstacles for cross-border trade by looking at the interdependent relations between trade regulation and trade facilitation factors in influencing cross-border trade. Simultaneosuly, the role of local, regional and national institutions is also examined in the process. Using documentary sources from provincial and local authorities and key informant interview of trade and bureaucratic elites in Dumai, the data for this study were collected and analyzed qualitatively. The market opportunities for exchange of agricultural products and consumer goods with trade exist, but national level institutional constraints in relation to import restrictions have the Malaysian counterpart were found to be promising. Even though the potential for cross-border hampered local growth potential. Attempts to enhance cooperation and collaboration at regional level have failed level. Also, the local level institutions were not socialized and engaged in cross-border trade.