Value Chain Connectivity in Indonesia: The Evolution of Unbundlings

Fukunari Kimura, Lurong Chen

Research output: Contribution to journalArticle

Abstract

This paper applies the conceptual framework of ‘unbundling’, proposed by Baldwin (2016), to assess the value chain connectivity in Indonesia. Indonesia is a geographically large country, and three different levels of unbundling co-exist. The first unbundling aligns with the industry-wise international division of labour in plantation agriculture, mining, and labour-intensive industries; the second aligns with where the task-wise international division of labour dominates mainly in machinery industries; and the third aligns with where face-to-face costs are reduced by the digital economy. We argue that the further upgrading of unbundling and the more effective use of advanced piecemeal technologies among different levels of unbundling will enable Indonesia to achieve rapid and equitable economic development. Overcoming distance is key for effectively using the mechanics of unbundling. We propose that three key elements are be promoted: enhancement of connectivity, development of the service sector, and improvement of the policy environment.

Original languageEnglish
Pages (from-to)165-192
Number of pages28
JournalBulletin of Indonesian Economic Studies
Volume54
Issue number2
DOIs
Publication statusPublished - 2018 May 4

Keywords

  • connectivity
  • distance
  • global value chains
  • information and communication technology
  • international division of labour

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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