Indonesia Needs Stronger Global Value Chains to Improve Its Economy 

Southeast Asia’s largest economy has been affected by Covid 19, causing Indonesia’s first recession in over 20 years.  The last reported GDP declined 3.49% for the quarter ended September. This is the second GDP showdown in a row, with a 5.32% contraction in the previous three months.  The definition of a recession is two consecutive quarters of negative growth.

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What is the path for Indonesia to become an economic leader not a follower?

The country has also been rocked by protests on the controversial omnibus law, which the president signed into force. The law seeks to reduce red tape to increase investment. Widodo sees the law as crucial to reigniting economic growth and jobs. It appears the citizens want more economic growth, but is this enough?

Many studies claim the best and most successful way for Indonesia to economically expand their economy is for companies to move over and increase their export growth by aggressively adopting Global Value Chain (GVC). This is especially important knowing that Indonesia has lost more than 2 million jobs because of COVID-19.

It is time that the country understands recently published research that shows using Global Value Chains has proven to be one of the best ways to: raise the country’s middle class incomes; increase global manufacturing; and improve quality of life.

Finance Minister Sri Mulyani Indrawati said that the Covid 19 data shows “the worst is over” for Indonesia’s economy. “We have already passed the worst impact of COVID-19 that occurred in Q2 and now we are in the recovery stage,” she said.  “The continuing spread of COVID-19… will hinder a more robust recovery in private consumption and fixed investment going into next year.”

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So what could Indonsia do to change its long term course? Focus on providing quality, often high labor intensive, global exports.  Possibly the best way to improve the economy, according to studies, is providing a truly global value chain (GVC) – one example is ShopTheGlobe –  as it is proven GVC raises incomes while reducing poverty.

When countries such as Indonesia begin helping companies expand utilizing GVC it allows each company to utilize the country’s very strong comparative advantages, which for Indonesia is unlimited low cost labor. This in turn will help export market improve, achieving a global product foothold, where is then becomes possible and easy to raise capital and improve skill sets. Over time, this has been a very successful model.

Indonesia needs to increase its economy and business profitability, not just wait for a Covid 19 recover stage, and focus on providing more and enhanced global free trade. Especially for companies interested in entering or expanding in global markets, starting or advancing their GVC (by using ShopTheGlobe) is a sure way to both make more money and greatly increase global purchasing of their products.

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