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Value Chain Connectivity in Indonesia: The Evolution of Unbundlings

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  • Fukunari Kimura
  • Lurong Chen

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.

Suggested Citation

  • Fukunari Kimura & Lurong Chen, 2018. "Value Chain Connectivity in Indonesia: The Evolution of Unbundlings," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 54(2), pages 165-192, May.
    • Handle: RePEc:taf:bindes:v:54:y:2018:i:2:p:165-192
    DOI: 10.1080/00074918.2018.1505412
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    Cited by:

    1. Lurong Chen & Lydia Ruddy, 2020. "Improving Digital Connectivity: Policy Priority for ASEAN Digital Transformation," Working Papers PB-2020-07, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. Lurong Chen, 2022. "Digital Connectivity," Chapters, in: Fukunari Kimura & Keita Oikawa (ed.), The Comprehensive Asia Development Plan (CADP) 3.0: Towards an Integrated, Innovative, Inclusive, and Sustainable Economy, chapter 5, pages 134-158, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. Lurong Chen & Kalamullah Ramli & Muhammad Suryanegara, 2023. "Introduction," Chapters, in: Lurong Chen & Kalamullah Ramli & Fithra Faisal Hastiadi & Muhammad Suryanegara (ed.), Accelerating Digital Transformation in Indonesia: Technology, Market, and Policy, chapter 1, pages 1-10, Economic Research Institute for ASEAN and East Asia (ERIA).
    4. Willem Thorbecke, 2021. "The weak rupiah: catching the tailwinds and avoiding the shoals," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 23(3), pages 521-539, December.
    5. Mohammad Zeqi Yasin, 2020. "Productivity: The Growth Accounting and The Stochastic Frontier Approach," Economics Bulletin, AccessEcon, vol. 40(4), pages 3020-3032.

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