Indonesia in Post COVID-19 Global Value Chain Restructuring
Updated: Aug 26, 2020
Wrote by Andree Surianta, Associate Researcher
Read the full article here.
Amidst the unfolding pandemic, governments across the world are struggling to find ways to keep their economies afloat. As corporations switch to survival mode, market liquidity is draining rapidly and this is expected to drag international trade and investment down by over 30% (WTO 2020; UNCTAD 2020; OECD 2020). Global Value Chains (GVCs), which hinge on open borders and lean production methods, are beginning to rethink their dependence on China. Calls for reshoring or nearshoring are taking an increasingly urgent tone as governments encourage corporations to shorten their supply chains to improve resilience.
It is worthwhile to note that COVID-19 is simply accelerating an existing GVC restructuring trend, which began with the U.S.-China trade war. Escalating tariffs have caused technology giants to begin mulling Southeast Asia as an alternative supply base (Chatterjee 2019; Cheng and Li 2020b; 2020a). Reports cited over 1,000 Japanese manufacturers looking to diversify their supply chain beyond China, backed by the USD $200 million provided by their government for nearshoring. Again, Southeast Asia will be the main beneficiary of such nearshoring (Reynolds and Urabe 2020).
This article was produced as part of the Asia’s Path Forward initiative of the Center for International Private Enterprise and was originally posted here.