The COVID-19 pandemic has had a very significant impact on the global economy. World economic growth even reached minus 3.9% (UNCTAD, 2021). The decline in international trade and investment is estimated at over 30% (OECD, 2020; UNCTAD, 2020; WTO, 2020). However, along with efforts to deal with the COVID-19 pandemic, a number of positive trends have begun to appear. World economic growth is estimated to reach 6% in 2021 (IMF, 2021). Trade (goods and services) has shown a positive trend since the 3rd quarter of 2020 (UNCTAD, 2021). Nevertheless, the COVID-19 pandemic has further emphasized the importance of resetting the international trade landscape which is at the center of the global value (supply) chain (GVC), where the production system is spread and divided in various countries in order to produce high effectiveness and profit. In GVC, each country takes on its role, both as a provider of raw materials, intermediate products, and finished goods.
In the global economy, Indonesia cannot be separated from the series of GVCs, even though Indonesia’s participation in GVC is currently seen as still not optimal. Referring to Indonesia’s trade balance, Indonesia’s main export commodities are still dominated by products with low added value, i.e. mineral resources and mining minerals. A similar situation is also found in many other developing countries, especially countries that produce natural resources. Whereas participation in GVC itself has been proven to increase economic growth in developing countries (World Bank, 2020).
This policy brief offers recommendations for actions that the Indonesian government needs to take in increasing its participation in the GVC, in particular by optimizing the G20 multilateral cooperation as an international forum which is seen as having a crucial role in determining the direction of the global economy. Therefore, this policy brief will first identify the G20’s commitment on trade to put the G20’s position on the GVC issue, followed by a brief review of the Indonesian government’s priority agenda in the G20, particularly related to GVC. This is intended to provide a background for the position of the G20 and the Indonesian government on the GVC issue and to recommend strategic steps so that Indonesia can take optimum benefits for the domestic economy.
