TOKYO, Aug 4 (Bernama-BUSINESS WIRE) — ASEAN-Japan Centre (AJC) issued Paper 4 of the “Global Value Chains in ASEAN” series focusing on Indonesia in June 2021. According to the paper, Indonesia manifested a significant share of domestic value added in exports (DVA) at 88 per cent in 2019; however, this high share of DVA is concentrated in manufacturing activities at the lower tiers of production, which require minimum levels of imported input and foreign technology.
Indonesia is the tenth largest economy in the world with a gross domestic product (GDP) of $1.1 trillion. Despite this, the manufacturing sector accounts for only one-fifth of the total value added created. This shows that the manufacturing sector creates small value despite its size, which is twice the size of the primary sector in terms of output. Compared with other upper middle-income countries such as Malaysia and Thailand, Indonesia has maintained the lower-income level and has the slowest growth in manufacturing value added. The expansion of global value chains (GVC) is a good opportunity to improve the technological capability of indigenous manufacturing firms, which is considered one of the keys to escape the middle-income trap.