Improving the Participation of Indonesias Leading Products in the Global Value Chain
Naufa Muna*, Wayan R. Susila
*Trade Analysis and Development Agency, Ministry of Trade
Jakarta, Indonesia
naufa[at]yahoo.com
Business Economics Faculty, Prasetya Mulya University
Jakarta, Indonesia
wr_susila[at]yahoo.com
Abstract
Increasing the participation of Indonesian leading sectors or products in the Global Value Chain (GVC) is a strategic approach to improve Indonesia export and to promote economic growth. Following this argument, the objectives of this study are to (i) identify leading products to be increased in the GVC; (ii) identify the strength, weaknesses, opportunity, and challenges, and (iii) formulate policy recommendations to increase their participation in the GVC. The study used combination of domestic value added, product matching and literature reviews. The results of the analysis showed 9 leading sectors have been identified, namely, basic metals (7 products), chemicals and pharmaceuticals (33), electricals (12), food products (29), information and communication technologies (ICT) (20), non-metallic minerals (7), other manufacturing (12), and textiles (54). Positive trend exports of these products is the main strength, while their main weaknesses are high dependency of foreign import of raw materials, low labor skill, difficulty of local firm in finding trade partners abroad. Positive trend of world import demand is an opportunity, while the main challenge is inadequate availability and compatibility of supporting domestic services needed for trade and ICT as well as ensuring cost competitiveness. Therefore, policy recommendations for increasing participation in the GVC are (i) improving the availability and compatibility of domestic infrastructure and services needed for export operations and ICT, (ii) easing the supply chain for intermediate products whether from domestic or import, (iii) capacity building of labors, and (iv) attracting more FDIs.
Keywords: Global Value Chain, Domestic Value Added, Product Matching, Leading Products
Topic: Business Strategies on GVC Participation