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Jakarta Post

Reforms may jeopardize Indonesia’s role in global value chains: World Bank

  • Adrian Wail Akhlas

    The Jakarta Post

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Jakarta   /   Fri, January 31, 2020   /  07:52 am
The Jakarta Post Image
A worker walks in an auto assembly plant in Bekasi, West Java. Manufacturing was listed as one of the sectors that generated offshore borrowings among private companies in January, according to a Bank Indonesia report.(Kompas/Totok Wijayanto)

Planned economic reforms through omnibus bills on job creation and taxation, while seen as boosting investment, may risk Indonesia’s efforts to increase its role in global value chains and international trade, the World Bank says.

According to the Bank’s World Development Report 2020, some countries weaken social and environmental safeguards to attract foreign direct investment (FDI) but thereby reduce their role in global value chains (GVCs). Common measures include reducing minimum wages, eliminating environmental protections and cutting corporate taxes. For Indonesia, reforms should address key impediments to participation in global value chains, including competitive labor resources and logistic bottlenecks, said World Bank East Asia Pacific chief economist Aaditya Mattoo. “Minimum wages can prevent inequality, and the best way to attract FDI an...