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1. Facilitating Global Trade and Investment and Leveraging Value Added in Downstream Industries

Author:
Raihan M. Ramadhan and Pyan Amin Muchtar
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Despite facing global uncertainties, Indonesia has achieved macroeconomic stability, supported by strong responses in fiscal and monetary policy, as well as robust domestic supply chains. By using its natural resources and following the global trend of green industries, Indonesia aims to become a key player in the global renewable energy market. Sound infrastructure is one of the key requirements to attract high-profile investments, but Indonesia struggles with poor and unequal infrastructure. Cumbersome bureaucracy and restrictiveness towards services trade also hinder the nation from reaching its potential. Strengthening physical, human, and institutional infrastructure will help the country secure investments and boost trade.
Topic:
Investment, Trade, Industry, and ASEAN
Political Geography:
Indonesia and Southeast Asia

2. Redefining Indonesia’s Digital Economy

Author:
Militcyano Samuel Sapulette and Pyan Amin Muchtar
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The Indonesian digital economy is the largest and most attractive investment destination amongst the Association of Southeast Asian Nations (ASEAN) Member States (AMS). The sector has grown more than fourfold in the last 4 years and has supported other sectors. Amid the exponential growth, digital businesses are facing what is called a ‘tech winter’ in which start-ups are likely to experience slowdowns or even bankruptcy. In addition, although the digital transformation helps businesses improve productivity and drive economic growth, it has consequences for employment and wages, particularly for less skilled workers. While the potential of the digital economy must be continuously harnessed, some key initiatives need to be implemented to mitigate its negative effects.
Topic:
Science and Technology, Digital Economy, Investment, and Innovation
Political Geography:
Indonesia and Southeast Asia

3. The Global Economic Outlook and the State of Indonesia

Author:
Ivana Markus and Pyan Amin Muchtar
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The global economy is facing a perfect storm as a result of the coronavirus disease (COVID-19) pandemic, prolonged geopolitical tensions, soaring inflation, and tightening monetary policy. A darkening future has been projected and the worst is yet to come. Amid global uncertainty, governments have become less aggressive in their budget spending, while high inflation has led many central banks to tighten their monetary policy. Furthermore, the pandemic has left widespread scarring effects, such as unemployment, poverty, and inequality, particularly on vulnerable groups. Global challenges and lower economic growth of the major economies will also affect Indonesia’s economic conditions, as the country may experience slower growth as a spillover from its major trading partners. It is important for the world and Indonesia to address these challenges, particularly the scarring effects, through multilateral solidarity and better maintenance of prudent fiscal policy.
Topic:
Monetary Policy, Geopolitics, Economy, Investment, Trade, and COVID-19
Political Geography:
Indonesia and Southeast Asia

4. Developing the Blue Economy in Indonesia

Author:
Keanu Can Can and Teguh Dartano
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
During Indonesia’s chairmanship of ASEAN in 2023, it has highlighted the blue economy as a key sector for the region’s sustainable future. A greener and bluer economy requires both environmental and societal balance. In prioritising the sector, Indonesia recognises both the steep challenges and the abundant potential associated with the blue economy, alongside the need for international and inter-sectoral cooperation to fully leverage the sector’s capacity for a more inclusive and equitable future. This brief explores Indonesia’s existing progress in harnessing its blue economy, what challenges lie ahead, and what strategic initiatives Indonesia must undertake to pave a pathway towards a blue economic transformation.
Topic:
Infrastructure, Governance, Regulation, and Blue Economy
Political Geography:
Indonesia and Southeast Asia

5. RCEP and Indonesia: Economic Reform and Prospects for Implementation

Author:
Yose Rizal Damuri and Deni Friawan
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The conclusion of the Regional Comprehensive Economic Partnership (RCEP) is very important for Indonesia as it may bring many benefits to the country. This paper is an attempt to see the role of domestic political-economy dynamics in facilitating and constraining Indonesia’s decision to join, ratify, and implement a free trade agreement (FTA). It also seeks some understanding on whether an FTA can bring significant market liberalisation. This paper focuses on two areas of observation. First, it discusses the current progress of the legislative process and public acceptance of the RCEP agreement in Indonesia and how the process is influenced by the political-economy dynamics of the country. Second, the paper also looks at the potential impacts of the agreement on Indonesia’s current reform agenda, especially the recently passed Jobs Creation Law (Law No. 11/2020). For these observations, we conduct a content analysis on RCEP-related news published in two newspapers in Indonesia, namely Kompas and the Jakarta Post. In addition to content analysis, we also conducted interviews with stakeholders, including parliament members and government officials from the Ministry of Trade who have been actively involved in RCEP negotiations and the ratification process. The paper provides some remarks and recommendations for the future agenda of RCEP ratification and implementation in Indonesia.
Topic:
Economics, Reform, Policy Implementation, Free Trade, and Trade
Political Geography:
Indonesia and Southeast Asia

6. Foreign Direct Investment, Agglomeration, and Production Networks in Indonesian Manufacturing

Author:
Dionisius Narjoko
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the importance of globalisation – defined by international production networks – in determining foreign direct investment (FDI) flows into Indonesian manufacturing since 2000. It is motivated by the fact that the extent of connection between the Indonesian and the global economy had increased after the 1997–98 Asian financial crisis. Models of FDI are estimated by utilising plant-level data and various trade and tariff data. Production networks or agglomeration are found to play an important role in driving FDI in Indonesia’s manufacturing sector, at least for the period 2000–2015. This study provides the insight that agglomeration could be utilised to increase FDI in Indonesia. This not only improves the productivity of the sector targeted by the investment but also promotes productivity growth. Creating more agglomeration areas could therefore be a policy direction taken by Indonesia to help increase FDI.
Topic:
Foreign Direct Investment, Investment, Manufacturing, and Production
Political Geography:
Indonesia and Southeast Asia

7. Digital Technology Adoption and Indonesia’s MSMEs during the COVID-19 Pandemic

Author:
Teguh Yudo Wicaksono and Andre Simangunsong
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The coronavirus disease (COVID-19) pandemic has hit micro, small, and medium-sized enterprises (MSMEs) hard. The estimated economic impact of COVID-19 could exceed the fiscal stimulus package as a percentage of gross domestic product (GDP). Digital technologies have helped them to better navigate the situation. Yet Only 13% of MSMEs adopt the internet for marketing and delivering their products and services. This paper discusses Indonesia’s MSMEs during the COVID-19 pandemic and the digital transformation they pursue. We also discuss policy responses and government support to help MSMEs navigate the worst public crisis in our lifetime.
Topic:
Science and Technology, Pandemic, COVID-19, and Digitalization
Political Geography:
Indonesia and Oceania

8. The Link Between Global Value Chain Activity and Local Human Capital: Evidence from Indonesia’s Manufacturing Sector

Author:
Rashesh Shrestha and Deborah Winkler
Publication Date:
02-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
For developing countries, participation in global value chains (GVCs) provides an opportunity to expand domestic human capital. Since GVC firms require qualified workers to meet high production standards, they have an incentive to invest directly in their workers’ skills or to raise the demand for skilled workers, which indirectly creates an incentive for workers to enrol in vocational education. This paper explores the relationship between GVC activity and workers’ skills in Indonesia. It combines National Labor Force Survey (SAKERNAS) data with the Large/Medium Industry Survey (IBS) to construct a pooled cross-sectional data set of Indonesian manufacturing workers which takes into account measures of GVC activity at the district-sector-year level. The findings suggest that higher GVC activity in a worker’s district-sector-year is linked to a higher likelihood of vocational education of individual workers. A separate panel data analysis at the district level confirms the positive relationship between GVC activity and human capital. Finally, the results indicate that the wage premium for vocational education is higher in districts with greater intensity of GVC activity.
Topic:
Development, Education, Training, Manufacturing, Industry, and Global Value Chains
Political Geography:
Indonesia, Asia, and Southeast Asia

9. Fuelling the Engines of Liberation with Cleaner Cooking Fuel

Author:
Tushar Bharati, Yiwei Qian, and Jeonghwan Yun
Publication Date:
02-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Using the staggered roll-out of the Indonesian Conversion to Liquefied Petroleum Gas (LPG) Programme, we show that a subsidy for the labour- and time-saving cooking technology increased female labour force participation. The programme also increased household consumption expenditure and the decision-making power of women in the household, especially in financial matters. A back-of-the-envelope calculation suggests that the benefits of switching to LPG far outweighed the costs to the households. Based on previous research, we conjecture that intra-household externalities and gender differences in preferences drive the low rates of adoption of cost-effective technology. The programme’s impact on the financial decision-making power of women suggests that subsidies which empower women, even if temporary, can encourage the adoption and sustained use of beneficial technology.
Topic:
Gender Issues, Science and Technology, Labor Issues, Women, and Family
Political Geography:
Indonesia, Asia, and Southeast Asia

10. COVID-19 and Socio-Economic Inequalities in Indonesia: A Subnational-level Analysis

Author:
Aloysius Gunadi Brata, Eusebius Pantja Pramudya, Esther Sri Astuti, Heffi Christya Rahayu, and Heronimus Heron
Publication Date:
04-2021
Content Type:
Research Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines if COVID-19 has worsened socio-economic inequalities across provinces in Indonesia, and if it has affected the spatial disparity in provincial-level socio-economic indicators. Secondary provincial-level data are used from BPS for March 2015 to March 2020. Results indicate that provinces with more COVID-19 cases tend to have increased inequality in urban areas, but inequality in rural areas decreases, as measured by the Gini Index. Also, provinces with many COVID-19 cases tend to have a decrease in their poverty headcount ratios. Thus, COVID-19 may have various implications on the spatial inequality of the Gini Index and poverty headcount ratio.
Topic:
Inequality, Pandemic, COVID-19, and Socioeconomics
Political Geography:
Indonesia, Asia, and Southeast Asia