The Impact Of COVID-19 On the Global Value Chain in Indonesia Using a Granular Analysis Approach

Abstract

The COVID-19 pandemic, which started in China, the center of the global supply chain, has affected the Performance of the Global Value Chain (GVC). Corporations in Indonesia depend on raw materials from China, while their multi-sourcing capabilities are still limited. This study aims to analyze the effect of the COVID-19 pandemic on the contribution of Indonesia to GVC as assessed from supply and demand in other countries. This study uses a granular analysis approach, in which the data are cut into pieces as much as possible to make them clear and more detailed. The simulation results of granular data from 46,938 corporations indicate that if China can only meet approximately 80% of the initial capacity due to COVGlobalID-19, other countries must supply the average value if they want to maintain the existing supply chain according to conditions before COVID-19. The simulation results also indicate that China's substitute countries in fulfilling domestic raw materials mostly come from ASEAN and East Asian countries because of price factors and regional proximity. Some goods whose supply chains are dominated by China have a significant decline resulting in a longer supply chain, such as woven fabrics that have to be exported to Africa and Latin America.