APEC 2020: Connectivity and Trade Performance: Concept and Its Evidence from APEC Economies

Connectivity is one of the specific agenda in APEC summit 2013 in Indonesia. Physical connectivity is one of the pillars among three pillar of connectivity. Infrastructures are very important to facilitate connectivity, namely logistics. This paper is aimed at (i) exploring the relation between logistics (both domestic and international logistics) and trade performance by using gravity model; (ii) developing the logistics cost index (Domestic Logistics Cost Index and International Logistics Cost Index) which is based on economic logic of gravity model; (iii) showing the empirical evidence of the relation between the export performance and the new logistics cost index in APEC economies; (iv) Understanding the selected case of cross border and inside the border connectivity development including its challenges. Some interesting findings are shown in the following: First, the extension of gravity model shows that logistics that consist of domestic and international logistics have positive relation with the improvement trade performance. Second, both of the new logistics index has a positive relation with the export performance in APEC economies; Third, by using the new logistic indices, it could be shown that the improvement of logistics condition of one country/economy in APEC tend to increase the export performance of the economy/country and in the same time it will increase the export of the other APEC economies to that country. Fourth, there are progress and challenges in the development of the infrastructures that support logistics in Indonesia.