Socio-economic and Political Structure of Risk in Trade: Cases from Yogyakarta/Indonesia Export-Oriented SME (Small and Medium Enterprise) Clusters in Tourism and Handicraft/Furniture Industries

Indonesia - 11 August 2017

Despite resiliency in meeting challenges of past and recent economic crises as well as major natural disasters (Arfani and Hapsari 2013), Indonesia’s export-oriented small and medium enterprises (SMEs) —such as the ones forming the three clusters in Yogyakarta-based tourism & handicraft industries— encounter major deficit in capacity to integrate fully in international trade activities. The deficit dues predominantly to lingering structural constraints that prevents them to capture significant portion in export share, hence hinders them in connecting to the commodity and related services (in tourism and handicraft) value chains. The study aims to identify those structural constraints by outlining the clusters’ socio-economic and political structure of risk as they participate in international trade and face major challenges in capturing value-added created in the chains. By doing so, it expects to further assess current/existing practices and policies of trade facilitation and other aid for trade mechanisms that are conveyed both in the framework of community-based and government-supported development programs. Linkages –which are mainly based on the commodity value chains—among relevant stakeholders have been developed under such a framework in light of the clusters development project.