Examining Linkage for National Economic Policy Development
Examining Linkage for National Economic Policy Development

Summary/Abstract: Purpose. To study critically examines links as a criterion in shaping Indonesia’s economic policy and to evaluate the relationship between sectors' forward linkages and sectors' contribution to net export earnings, employment generation, and value-added creation of Indonesia's manufacturing. Design/Method/Approach. Statistical analysis of the industries sectors' forward linkages and sectors' contribution to net export earnings, employment generation, and value-added creation of Indonesia's manufacturing between 1995 and 2005. Findings. The policies based on intersectoral input linkages have been prevalent and implemented in many developing countries. Indonesia's Government has frequently introduced the policies based on linkages. It is established that a sector with high linkages does not always provide a greater contribution to the economy. During the research window, sectors with lower forward linkages significantly contributed to Indonesian net export earnings, job creation, and value-added. However, this study does not mean that high connections are bad. This study argues that policymakers should also take into account factors other than relationships. Practical implications. The results of analysis links of Indonesia`s performance in the industries from 1995 to 2000 suggest that the policies based on interconnections, such as policies to provide greater domestic added value, are unwarranted, and but there is no need to place too much emphasis by forward linkages in policymaking. Originality/Value. This study emphasizes that all factors that are direct in the formulation of economic policy should be considered as comparative advantages. Paper type. Empirical.

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