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    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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    Citable URI
    http://hdl.handle.net/11540/9149
    Metadata
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    Thumbnail
    ISEASEWP2016-04Negara.pdf (624.4Kb)
    Author
    Negara, Siwage Dharma
    Theme
    Development
    Industry
     
    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise
    Copyright 2016-2020 Asian Development Bank Institute, except as explicitly marked otherwise