Corporate Adaptation and Financial Strategies in Indonesia’s Downstream Processing Industries

Juhro, Solikin M. and Kuantan, Dhaha Praviandi and Oktaviandhi, Nadhil Auzan (2024): Corporate Adaptation and Financial Strategies in Indonesia’s Downstream Processing Industries.

Abstract

This study explores the response of non-financial corporations and financial intermediaries to recent regulatory changes in Indonesia’s downstream sector. It examines their participation, constraints, and funding requirements. The research employs a qualitative descriptive design, incorporating both a structured questionnaire and network analysis based on detailed financial data. The focus is on key sectors driving the development of downstream industries in Indonesia, such as palm oil processing, nickel-aluminum smelting, and vehicle assembly. The findings reveal that downstream processing generally enhances corporate performance, but the benefits are disproportionately skewed toward large enterprises. Small firms, on the other hand, encounter significant challenges, including limited processing capacity, inadequate funding, and restricted access to loans, which hinder their active participation in downstream activities. To fully realize the potential benefits of downstream processing, the study suggests that financial policies must be reformed to support businesses of all sizes across different stages of the supply chain. Additionally, improving access to financing is essential to enable smaller firms to participate more effectively in these activities. These measures would provide critical support to companies, particularly those operating at the lower levels of the value chain, thereby fostering economic growth at the local level.

• Item Type: MPRA Paper
• Language: English
• Keywords: Downstreaming, Financing Policies, Industrial Manufacturing, Indonesia, Supply Chain Finance
• Subjects: L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L70 - General

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