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The Impact of Local Content Requirements on the Indonesian Manufacturing Industry

dc.contributor.authorSiwage Dharma Negara
dc.description.abstractLocal content requirements (LCRs) are prohibited under the WTO law as they violate several WTO provisions including the national treatment principle. Nonetheless, many countries, including Indonesia, persistently use LCRs as part of their industrial policies. Countries implement LCRs for various reasons, including to protect local industries; to create employment; to boost export; to enhance local innovation capacity; and to support broader economic development in the country. This paper examines the impact of LCRs in manufacturing sector in Indonesia, with a particular interest on the machinery and transport industries. Since LCRs discourage foreign imports, hence it is expected they may affect firm’s use of imported inputs. The paper uses the Indonesian manufacturing census data, covering the period of 1990 to 2013. It finds the persistence impact of imported inputs on firms’ level of productivity, value added, output, export, and employment on the manufacturing sector in Indonesia. Our main finding indicates the ineffectiveness of LCRs in terms of reducing firm’s dependency on imported inputs. Given this finding, any unreasonably too restrictive LCRs may adversely affect industrial performance and thus its competitiveness.
dc.publisherISEAS Yusof Ishak Institute
dc.titleThe Impact of Local Content Requirements on the Indonesian Manufacturing Industry
dc.typeWorking Papers
dc.subject.expertEconomic planning
dc.subject.expertEconomic structure
dc.subject.expertGrowth policy
dc.subject.expertTrade relations
dc.subject.expertTrade policy
dc.subject.expertEconomic development
dc.subject.adbTrade Facilitation
dc.subject.adbEconomic integration
dc.subject.adbRegional Economic Integration
dc.subject.adbFree Trade
dc.subject.adbTrade Agreements
dc.subject.adbTrade Policy
dc.subject.adbEconomic Development
dc.subject.adbInternational Economics
dc.subject.adbIntraregional Trade
dc.subject.naturalRegional economics
dc.subject.naturalEconomic forecasting
dc.subject.naturalEconomic development projects
dc.subject.naturalSuccess in business
dc.subject.naturalFree trade
dc.title.seriesEconomic Working Paper
dc.title.volumeNo. 2016-4
dc.contributor.imprintISEAS Yusof Ishak Institute
oar.adminregionSoutheast Asia Region
oar.authorNegara, Siwage Dharma
oar.gsauthorSiwage Dharma Negara

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