Study on the impact of COVID-19 on global value chains relevant to Indonesian exports and development of a recovery roadmap

The Project at A Glance

COVID-19 has had a more devastating impact than other epidemiological events of similar nature. In addition to serious social and health consequences, the overall global economy has been hit through disrupted supply chains, reduced international travel, plummeted commodity prices, and reduced cross-border flows of most tradeable goods.
International Economics (IEC) provided technical assistance to the Indonesian government, specifically the Ministry of National Development Planning of the Republic of Indonesia (BAPPENAS) in assessing the economic impact of COVID-19 on businesses in Indonesia, with a deep dive into key sectors and their entire value chain to prepare recommendations for supporting the country’s recovery effort. The ultimate objective of the project was to contribute to enhanced institutional knowledge on the impact of COVID-19 across sectors, improved trade-related competencies to implement COVID-19 recovery efforts, and improve awareness and knowledge of the domestic industry including SMEs in participating in global value chains.

What We Found

While the long-term impact of the pandemic is largely uncertain, immediate impacts have been severe for businesses in terms of revenue loss, business closures, mass layoffs, and liquidity. As world trade becomes more integrated and intertwined, the global value chains (GVCs) have been disrupted on an unprecedented scale, leading to a sudden global fall in economic activities. to its massive scale, the pandemic’s impacts are felt by virtually all sectors and value chains (VCs); however, the scope and severity of the impact are not uniform.
The impact on supply chains and demand was significant for Indonesian firms, especially MSMEs. A deeper sectoral analysis reveals that imports fall unanimously across sectors. Noticeably, the declining trend in some sectors was quite substantial even before the pandemic. Indonesia’s exports, on the other hand, had more diverse shifting patterns during the 2018-2020 period. Considering the structural changes in trade patterns by country before and after COVID-19, it can be seen that Indonesia’s imports fall in almost all partner countries.

Our Strategy and Impact

The approach taken for this study is to provide a broad overview of the impact of COVID-19 on global value chains, with some specific considerations for the Indonesian context. IEC prepared:

A Study on the Impact of COVID-19 on global value chains relevant to Indonesian exports using quantitative approaches and supported by relevant qualitative approaches;
A Deep Dive Study into three or four sectors and the trade impacts on these sectors across their value chain using quantitative and qualitative approaches; and
An Implementation Roadmap, based on agreed recommended actions, which sets out precisely what needs to be done, by whom and by when.

The study started with a global picture of global trade and value chains, and reported on the impacts of COVID-19 on the composition, direction, and magnitudes of trade. The study finished with a specific analysis of how Indonesia’s trade landscape has been disrupted as a result of the global impact of the pandemic. Following that, a trade flow analysis was then done based on a value chain approach to identify changes against 2019, structural changes by product categories and markets

Our Core Solutions

The world economy is continuously impacted by new risks and challenges, causing significant disruptions to international trade. At International Economics Consulting, we provide strategic insights to assist organisations, businesses, and governments in anticipating risks, building resilience, mitigating impacts, and supporting our clients on their recovery against such shocks.
We support decision-makers with informed and evidence-based analyses and policy options. We map out key government measures and responses to the risks and challenges to formulate strategies for our clients to respond and adapt to the new social, political, and economic landscapes. Learn More.