The growth of domestic powdered milked consumption in Indonesia exceeds the growth of domestic powdered milk raw materials production, it is causes fulfillment of needs is provided through imports. The purpose of this study are 1) Analyze the factors that influence the competitiveness of the domestic powdered milk industry; 2) Analyze the factors that are determinants of the import of raw powdered milk, and 3) Formulate strategic recommendations that can improve the competitiveness of the domestic powdered milk industry. Based on the results, the factors that most play a role in the competitiveness of domestic powdered milk are government policies in trade, the Milk Processing Industry (IPS), and the company’s strategy. Based on Engle-Granger Cointegration method, in the long run the volume of Indonesian powdered milk imports is significantly affected by the real price of imported powdered milk, the real exchange rate, real per capita income, and import tariffs. Meanwhile, based on short-term dynamic ECM equations, the volume of imported powdered milk is significantly affected by domestic powdered milk production, the real price of domestic powdered milk, real per capita income, and import tariffs.
Keywords: Competitiveness, Engle-Granger Cointegration, Powdered Milk, import
