Supply Chains and Trade Policy: An Indonesian Perspective

ABSTRACT

This paper examines the evolution of supply chains and trade policy in Indonesia, focusing on the countryʼs participation in global value chains (GVCs) and its positioning within the framework of economic unbundling. Drawing on recent empirical studies and trade data, it analyses Indonesiaʼs progress through the First and Second Unbundling stages, while exploring prospects in the emerging Third Unbundling. The analysis reveals geographical imbalances in FDI distribution and challenges in strengthening backward linkages, despite growth in medium‐technology exports. Research findings emphasise three key determinants of successful GVC participation: agglomeration economies, export orientation, and infrastructure quality. The paper highlights the critical role of urban amenities in attracting skilled workers and fostering innovation. This paper provides policy recommendations focused on regional development, investment climate reform, and digital infrastructure enhancement to strengthen Indonesiaʼs competitiveness in global production networks.