Indonesia in Post COVID-19 Global Value Chain Restructuring

08.10.2020 | Articles | Andree Surianta

INTRODUCTION

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).