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economic diversification

Should Indonesia Worry About Imported Intermediates?

Gonzalo Varela's picture

City and traffic lights at sunset in Jakarta. Source - Jerry Kurniawan, World BankIndonesia finds itself at a crossroads on the trade policy map. A turn in one direction may mean more openness and greater regional integration. A turn the other way—more protectionism and economic nationalism. Those advocating for the proper course share common concerns: the country’s increasing current account imbalance, deindustrialization in sectors built on booming commodity prices, and rising imports of intermediate inputs.

This last factor is perhaps most contentious. There are concerns that an increased reliance on imported inputs will slash domestic jobs and the local value added to exports. But are concerns about increased reliance on imported intermediates justified?
 

Is There a Blueprint for Diversification?

Francisco G. Carneiro's picture

Many resource-rich countries are looking to diversify their economies, in anticipation of the day their natural wealth runs out.  Resource extraction is extremely costly and employs only a fraction of the workforce. After the recent turmoil in the Middle East, policy makers have begun focusing more on the need to create jobs, provide for inclusion, and increase public participation in government decision-making. There are several examples of countries that have used their resource wealth to share prosperity, including the United States, Norway, and Australia.

But is there a blueprint for diversification and economic prosperity?