The Impact of Local Content Requirements on the Indonesian Manufacturing Industry
Negara, Siwage Dharma | October 2016
Abstract
Local 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.
Citation
Negara, Siwage Dharma. 2016. The Impact of Local Content Requirements on the Indonesian Manufacturing Industry. © ISEAS Yusof Ishak Institute. http://hdl.handle.net/11540/9149.Keywords
Aid And Development
Asian Development Bank
Comprehensive Development Framework
Development Cooperation
Development Management
Development Planning
Development Strategies
Development In East Asia
Development Planning
Development Research
Green revolution
Commerce and Industry
Intra-Industry Trade
Large Scale Industry
Labor
Textile Industry
Rayon Industry
Cotton Industry
Clothing Industry
Rural planning
Aid coordination
Industrial projects
Infrastructure projects
Natural resources policy
Educational development
Development strategy
Development models
Economic development
Industrialization
Industrial Economics
Industrial Development
Industrial Policy
Weaving
Textiles
Textile Workers
Wool Industry
Silk Industry
Small Scale Industry
Medium Scale Industry
Local Industry
Export Oriented Industries
Shoe Industry
Clothing
Hosiery Industry
Fur Industry
Leather Industry
Income Distribution
Demographic Indicators
Communication in rural development
Communication in community development
Economic development projects
Development banks
Economic forecasting
Environmental auditing
Cumulative effects assessment
Human rights and globalization
Market share
Labor
Work clothes industry
Women's clothing industry
Children's clothing industry
Uniforms industry
Underwear industry
T-shirt industry
Sweater industry
Suspender industry
Sport clothes industry
Sleepwear industry
Shirt industry
Shawl industry
Men's clothing industry
Leather garments industry
Textile industry and fabrics
Fabrics
Cloth
Wool-growing industry
Garment industry
Apparel industry
Belt industry
Glove industry
Footwear industry
Social change
Social accounting
Inequality of income
Economic growth
Quality of Life
Green Revolution
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