Crafting a Global Presence : The Resilience of Indonesia’s Product Amidst the Wave of Deglobalization
It is true that in almost every election, Americans are inclined to say that it is the most consequential election for American history and maybe for the world. Indeed the 2020 election is no exception, but will this year’s election be different ? Well, we all probably agree that it would still be the same. There is a similarity between this year’s election and the 2020 election, in which Trump is running again in the election. In 2020, Trump may have lost, but this year, in almost all survey institutions, Trump is outperforming his rival, Kamala Harris. Moving from there, of course, we can judge that Trump’s potential to return to the White House is getting higher. Moving from there too, Trump’s return with his uniteralist spirit also marks several risks that could potentially occur, one of which is his policy regarding international trade.
If we look back at the time when Trump took office in 2018, a major trade conflict started between the US and China. The US imposed tariffs on about $350 billion worth of Chinese imports, and China retaliated by levying tariffs on an additional $100 billion worth of imports, a retaliatory action allowed by WTO rules (Bowl, 2018). Despite the agreement that was agreed in 2020 to prevent the conflict from getting worse, in fact the war is still continuing, US tariffs affected around 18% of its imports, equivalent to 2.6% of its GDP, while China’s retaliation impacted 11% of its imports, equivalent to 3.6% of its GDP (CEPR, 2023).
This trade war, alongside with the Middle East war, Brexit, Russia-Ukraine war and other geopolitical conflicts also marked the turning point of globalization, it is when disintegration occurs in the relations of countries in the world, or commonly known as deglobalization.
Deglobalization : The Trend and Does It Really Happen in Indonesia ?
At a December 2022 opening of a semiconductor chip plant in Phoenix, Arizona, Morris Chang, founder of Taiwan Semiconductor Manufacturing Company, stated “globalization is almost dead and free trade is almost dead . . . I don’t think they will be back” (Ting-Fang, 2022). Such claims are not new. For the decade economists have been debating the future of globalization, pointing out that since the financial crisis of 2008–2009, world trade has been growing more slowly than GDP, a reversal of an earlier trend observed during the two decades that marked the era of so-called hyper-globalization (1989–2009). Using the data up to date to the onset of the COVID-19 pandemic, Goldberg (2019) and Antràs (2020) argued that there was little systematic evidence to support the view that the world economy had entered an era of deglobalization.
In Indonesia itself, the evidence of the deglobalization trend is supported by a decline in trade per GDP even long before this trend became the world’s attention a decade ago, where Indonesia experienced a decline in trade per GDP since 1998. In 1998, Indonesia’s trade per GDP reached 96%, the financial crisis that happened that time coupled with the new crisis that occurred in 2008 hit the Indonesian economy, and after that, even though it fluctuated, Indonesia’s trade per GDP trend showed a significant decline to only 41% in 2023 (World Bank, 2024). This of course has many implications for the Indonesian economy and of course also for businesses in Indonesia. So, does this phenomenon alter consumer preferences and behavior? How can Indonesian businesses that produce Indonesian products survive or even thrive amidst this wave of deglobalization?
Deglobalization and its Effect on Consumer Behavior
Deglobalization refers to the process of reducing interdependence and integration between global economies. This phenomenon contrasts with globalization, which involves the increasing interconnectedness of world economies through trade, investment, and technology.
Cultural, social, and personal influences shape what consumers like or prefer. For example, cultural traditions can dictate food preferences, while social trends can influence fashion choices. The cost of goods and services plays a crucial role in consumer decision-making. Price sensitivity can vary based on income levels, perceived value, and availability of substitutes. Disposable income impacts the ability to purchase goods and services. Higher income levels generally lead to increased consumption and vice versa. Effective marketing strategies can influence consumer perceptions and preferences, shaping demand for specific products. Technological advancements can create new consumer needs and preferences, as seen with the rise of smartphones and digital services. Family, friends, and social networks can impact consumer choices through recommendations and shared experiences. Macroeconomic factors such as inflation, unemployment, and economic growth affect consumer confidence and spending patterns.
Deglobalization often involves a shift towards localism, where consumers start valuing local traditions, customs, and products more than foreign ones. This can lead to a resurgence of interest in local cuisines, fashion, and cultural products. With reduced global interaction, consumers might have limited access to diverse cultural influences. This can result in a more homogenous taste profile within a region, as there is less exposure to international trends and production. Deglobalization can foster a sense of nationalism and pride in local products, encouraging consumers to prefer domestically produced goods over imported ones. This can shift tastes towards local brands and products, altering consumption patterns.
Deglobalization can lead to the fragmentation of global supply chains, causing disruptions in the production and distribution of goods. This can result in higher production costs and, subsequently, higher prices for consumers.
Tariffs and Trade Barriers: As countries focus on protecting their domestic industries, they may impose tariffs and trade barriers on imported goods. This can increase the cost of imports, making foreign goods more expensive for consumers and leading to a rise in overall prices. Globalization allows companies to benefit from economies of scale by producing large quantities of goods at lower costs. Deglobalization can reduce these efficiencies, leading to higher production costs and increased prices for consumers.
Political and economic instability associated with deglobalization can create uncertainty in markets. This volatility can result in price fluctuations and unpredictability, making it difficult for consumers to plan and manage their expenses. A focus on domestic production can strain local resources and capabilities, especially if a country lacks the necessary infrastructure or expertise. This can lead to inefficiencies and higher production costs, driving up prices for consumers.
Marketing Challenges in Deglobalization Era
The deglobalization era presents significant marketing challenges for businesses aiming to reach a global audience. The rise in trade barriers and protectionism is one of the main challenges. Governments worldwide are implementing more complex local regulations and policies that often discriminate against foreign products. For example, strict Local Content Requirements (LCR) have been implemented in several nations, requiring a particular percentage of a product to be made in the country. Although this regulation is intended to safeguard regional businesses and employment, it presents a substantial obstacle for global corporations. The use of LCRs was criticized as a policy that generates short-term gains, requiring firms to use local inputs and subsequently increasing industrial output and employment, at the expense of incurring higher production costs and consumer prices (CSIS, 2022). For example, the implementation of the LCR in Brazil and Russia has restricted imports of heavy vehicles by 21% and 12% respectively, and as a consequence, this has increased consumer prices for heavy vehicles by between 0.2% and 5.4% in those countries (ECIPE, 2018). This price increase will of course become an additional responsibility for anyone who handles marketing to be able to market their products amidst increasingly competitive global competition.
Another example, to safeguard its domestic steel industry, the European Union, for instance, has placed a number of trade restrictions and anti-dumping taxes on Chinese steel, the anti-dumping tax has even increased from the previous 30.7% to 64.9% in 2023 (European Union, 2023). Additionally, tariffs and non-tariff barriers, such as quotas and import licenses, further complicate international trade. For instance, as a result of the US-China trade war, significant tariffs were imposed on a variety of goods, upsetting global supply chains and having an impact on firms everywhere. In addition to raising expenses for businesses, these trade restrictions also breed uncertainty, which makes it challenging to develop long-term marketing plans.
As nationalism gains momentum and domestic products are promoted, consumer preferences have been transformed from global to local. This shift is reflected in the rising prevalence of campaigns encouraging consumers to purchase locally produced goods, which has led to a decrease in demand for foreign items. Countries like India and the United States have implemented “buy local” initiatives that urge buyers to support their homegrown businesses instead of relying on imports. As a result, marketers must adjust their strategies accordingly by accommodating regional tastes and values while preserving an international brand image. Another significant challenge is the limited access to skilled human resources. The resurgence and in-country relocation of manufacturing activities, known as reshoring and onshoring respectively, are curtailing access to foreign expertise. This alteration may confine diversity and innovation arising from a universally blended workforce consequently impeding successful promotion across various territories. To illustrate this point further, several European or American corporations have commenced relocating their production processes locally to counterbalance inherent hazards linked with international supply chains thereby hoarding skilled laborers’ shortage within developing economies.
The Case in Indonesia : How Deglobalization Affect Indonesia’s Companies
Indonesia is facing challenges to its global brand reputation due to deglobalization. Compared to other ASEAN countries, Indonesia struggles with a lower brand reputation because of political instability, regulatory complexities and inconsistent quality standards. Unlike Singapore and Thailand whose stable political environment, better infrastructure and more consistent regulatory frameworks have enabled them to reliably attract international customers hence building stronger brands for themselves in the market. The reputational challenge indirectly affects Indonesia’s export performance which has been volatile reflecting economic uncertainties across various sectors such as commodity exports like coal, palm oil, and rubber that are highly susceptible shifts in global trade dynamics especially when protectionist policies come into play. As global trade patterns shift and regionalization becomes more pronounced, Indonesia faces the risk of losing market share to countries that can offer more stable and predictable trade environments
Indonesian exporters face increased challenges due to deglobalization, which significantly burden their efforts in sustaining continuous export growth. Moreover, the tendency towards local consumer choices and amplified regulatory barriers in overseas markets exacerbate these issues for Indonesian companies. For instance, nations imposing rigorous import guidelines to safeguard their domestic industries may create hurdles that impede access of Indonesian goods into those markets. In such a context, successful business operations entail agility and adaptability on the part of Indonesians who must focus more on niche market segments while leveraging available regional trade agreements as countermeasures against global trade disruptions’ effects
To strengthen Indonesia’s worldwide brand image and counteract the effects of deglobalization, Indonesians authorities and businesses must prioritize enhancing regulatory frameworks, investing in infrastructure development, and promoting political stability. Furthermore, diversifying the economy beyond commodities can decrease susceptibility to global market variables. Tackling these domestic challenges will bolster Indonesia’s position globally while sustaining economic growth amid prevailing de-globalizing tendencies.
Learn from other countries: Success Marketing Strategy that Applied in Other Countries to Combat Adverse Deglobalization Effect
People have long taught us that the best way to learn life lessons is from other people and this also holds for nations. In the era where the threats of deglobalization have predominantly arisen, some countries may have succeeded in maneuvering similar situations, whereas others, including Indonesia, are still to adopt strategies and examine effective yet applicable regulations from other nations to mitigate the adverse effects.
The Case of Singapore
Small but Fierce
The “other nation” in question may not be huge–since bigger doesn’t always mean better. Geographically, Indonesia is much larger than Singapore, which covers only about 710 square kilometers, according to Worldometers. However, Indonesia, ranking 109th out of 181 countries in DHL’s latest global connectivity report, should reflect on and learn from its neighboring country, Singapore, which holds the top spot.
The DHL Global Connectedness Index tracks the depth and breadth of international trade, capital, information, and people flows. “Depth” means a country’s international flows relative to total activity and “breadth” means the distribution of international flows across countries (Noreen Jazul, 2024). Indonesia’s ranking indicates that the nation still lags significantly in its level of connectivity, particularly compared to its neighboring countries.
“… trade is our lifeblood.” — Ih-Ming Chan, Executive Vice President, Singapore Economic Development Board.
Realizing that Singapore can only continue to thrive by growing businesses in new parts of the world, Christopher Ong, Managing Director of DHL Express Singapore, mentioned that Singapore’s leadership recognized the importance of trade to their economy very early on. In line with that, in 1961, the Singapore Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry, was built aiming to take responsibility for strategies that enhance Singapore’s position as a global center for business, innovation, and talent (EDB, 2023). Not just words, according to EDB Year 2023 in Review, this agency has successfully attracted investment commitments amounting to S$12.7 billion in Fixed Asset Investment (FAI) and S$8.9 billion in Total Business Expenditure per annum (TBE). These commitments, when realized, are expected to create 20,045 jobs with a projected contribution of S$26.7 billion in Value-Added per annum (VA).
A Tech-Savvy Nation
“We can create possibilities for ourselves beyond what we imagined possible.” — Ex Lee Hsien Loong, Ex Prime Minister of Singapore 2004–2024.
Being a country with no natural resources, Singapore found its way to stay ahead of the game in terms of technological advancement. Singapore has put into practice some important tactics that have also helped the city-state succeed. The creation of the Smart Nation Initiative is one such project that may grab our interest.
In accordance with Smart Nation: The Way Forward, in essence, Smart Nation is a transformed Singapore where people will have greater freedom to lead purposeful, happy lives made possible by seamless technological advancements that present everyone with fascinating options. It’s a place where companies can boost productivity and take advantage of fresh opportunities in the digital economy. It’s a country that works with Singapore’s foreign partners to provide digital solutions that benefit individuals and companies worldwide. Several important areas, including finance, education, health, transportation, and urban solutions, have seen attempts at change. In particular, Smart Nation is revolutionizing businesses in Singapore, for instance, based on Smart Nation’s COS 2022 Infographic: Helping Businesses, by facilitating trade and economic opportunities. Through a “Networked Trade Platform”, Smart Nation facilitates trade-related transactions and cross-border digital connectivity and currently offers 17 e-services to approximately 5,500 companies (Smart Nation, 2022). On the other hand, Industry Transformation Maps (ITM) also encourage the expansion of Singaporean businesses and assist Singaporeans in securing good employment and taking advantage of chances. A sector-specific growth and competitiveness plan, encompassing topics like productivity, internationalization, innovation, digitalization, jobs, and skills, is a component of every ITM.
Among several ways the Smart Nation affects companies and workers in Singapore, market expansion is one of the most significant. Advances in digital infrastructure and connectivity enable firms, particularly in Singapore, to expand their reach into diverse and untapped sectors on a local and global scale. According to Reeracoen Singapore’s publication in April 2024, a recent survey revealed that 70% of companies in Singapore reported an increase in international sales after leveraging digital platforms.
Concluding what Dr. Steven Altman, a senior research scholar at NYU Stern School of Business and co-author of the DHL Global Connectedness Index, said, it is crystal clear that the attractiveness of the country’s environment internally is an even bigger driver of connectedness than the policies about openness. Thus, we should not lose sight of Singapore’s key strengths. Agreeing with what Pushan Dutt from Institut Européen d’Administration des Affaires (INSEAD) stated, the availability of these effective policies and strategies reflects how strong Singapore is from its fundamentals, such as legal system, long-term vision for the country, and a highly technocratic and skilled bureaucracy. This fact leads us to conclude that institutional basics must be similarly solid and of the highest quality for policies and strategies to be effective, no matter how methodical or successful they are.
The Case of South Korea
It Begins with “K-”
Apart from the neighboring country, in a bigger scope of Asia, we all recognized South Korea as a country that wallows with “gold” due to its sharp global marketing. You could ask random people on the streets — from mothers to college students to newly-teenaged kids — and you’d be hard-pressed to find anyone unfamiliar with K-dramas, K-pop, or Korean cuisine. Over the last few decades, especially since the late 1990s, South Korea has enjoyed a massive boom in global success.
However, this wasn’t always the case. In the aftermath of the Korean War, South Korea’s economy was among the world’s weakest (CEBR, 2023). It’s axiomatic (unquestionable) that such a war would destroy the nation’s infrastructure, resulted in a large number of deaths, and forced people to relocate. According to The Centre for Economics and Business Research (2023), in 1953, South Korea’s GDP per capita was less than that of Haiti and Somalia, two of the world’s poorest nations even now, and the country’s economy was nearly totally dependent on foreign assistance. However, after the Korean Armistice Agreement which was signed on 27 July 1953, South Korea experienced unprecedented growth–as depicted in Figure 5 (CEBR, 2023). Yet, South Korea’s economy still underwent an unstable economic condition. According to an article from The Economist, when the financial crisis in Asia struck in 1998, South Korea’s economy collapsed resulting in the GDP plunged by 7%. That’s when the first hints of Hallyu came.
In a more digestible term, Hallyu could be understood as “Korean wave” — a phenomenon in which South Korean culture was well known to the world (Fahrisa, 2022). Based on what is stated in an article from The Economist, the three administrations of South Korea looked to Hallyu as a soft power tool in their decade of stagnation, intending to raise South Korea’s profile overseas and increase demand for its cultural exports and tourism. Even up until recent years, to the level of international organization, South Korea’s President Moon Jae-in invited K-pop superstars BTS to join him at U.N. headquarters for the General Assembly’s World Leaders Week, according to a CBS News article (2021). That justifies the statement from Farisa (2022) that the South Korean government has not passed up the chance to “profit” from the popularity of its culture since Hallyu was used as an instrument of cultural diplomacy and permeated the creative industry to serve the interests of the nation.
In the journal, (Farisa in Guo et al. n.d., 2022), stated that the Hallyu effect was enormous, representing over $1.87 billion, or 0.2% of South Korea’s GDP in 2004 and as recent as 2019, Hallyu had estimated a $12.3 billion boost on the Korean economy. Additionally, according to a Global Hallyu Trends (2020) analysis, America and Asia preferred Korean restaurants for dining in 2017–2018, whereas, in 2019, they indicated a preference to visit South Korea instead. Despite this evidence reflecting how South Korea’s efforts to become a more globalized nation were greatly aided by the emergence of Hallyu, we shall agree that it is not enough to only identify or associate ourselves with the successful and well-liked Korean cultural trends, there needs to be some effective global marketing tactics that use a more logical approach, showcasing trends in addition to the company identity in a clever and planned manner, as stated in an article from BorderX.
Kimchi Plays a Role
It’s red-colored, spicy, tangy, and slightly sour with a hint of umami flavor from the fermentation process. The Kitchen Sisters, in an NPR article, argues that Kimchi is more than just cabbage salad; it is ingrained in the nation’s culture. In Korea, there are hundreds of variations of kimchi, and the country consumes over 1.5 million tonnes of it annually. This passion is seen in the Korean stock market as well: The “Kimchi Index” keeps track of the ideal times to buy Napa cabbage along with the other twelve ingredients, which include anchovies, carrots, radishes, and chili. In this regard, South Korea is using the “gastrodiplomacy” as a strategy that uses food to gain their national interest. From the Gastrodiplomacy Net’s article, this tactic is being used in coordinated and ongoing public relations and investment campaigns by governments and states, frequently in partnership with non-state entities, to raise the profile and value of their country’s food brand. The South Korea government, through the newly founded Korean Food Foundation and with the support of private companies, believed that Korean food (or hansik) could ride the wave of interest in Korean culture that followed the success of its TV dramas, films, and — above all — K-pop (Fabio Parasecoli, 2022).
Amplifying Partnership
One of the private companies in South Korea (Korean brands) that have successfully marketed their products globally is CJ CheilJedang’s Bibigo. The brand’s attempts to localize the product were partly responsible for its success. Bibigo adopted a significant global marketing strategy by doing a partnership, particularly with the Los Angeles Lakers to put Bibigo on the map with the U.S. audience (BorderX, 2023). According to a BorderX article, with 70 countries offering Bibigo Dumplings and 1 trillion won ($890 million) in sales worldwide in 2020, the dish’s popularity has already become well-known worldwide.
Closing
Trade wars, growing ideological differences, moreover, the increased onshoring of jobs that primarily takes place in Asia (WEF, 2023), and any other facts that have emerged, indicating the rise of deglobalization, shall serve as a wake-up call to any of us — particularly the government and enterprises in Indonesia — to not wait any longer in adopting concrete strategies as anticipation and an effort to connect Indonesia beyond its borders.
Investment in Digital Infrastructure
Looking at other countries, particularly Singapore, and in light of the isolationist trends that tend to occur during the era of deglobalization, there’s a significant urgency for Indonesia to address its alarming status quo regarding technological advancement. Although there have been some quite impressive improvements, for example the adoption of e-payments in 2017 resulting in more than 12 million of the poorest Indonesians gaining access to savings accounts within two years (Hilman Palaon, 2023), it hasn’t been as advanced as it needs to be. Technological advancements need to be holistic and integrated, not focused only in certain aspects. Mediana in Kompas (2023) argues the maturity of digital adoption in most industrial sectors is still at the stage of starting to develop. In line with this, according to the Vision of Indonesia Digital 2045 document, just 6% of Indonesia’s manufacturing sector has adopted Industry 4.0 technology, which is typified by the application of robotics, artificial intelligence, and 3D printing. This statistic is based on data from the Asian Development Bank for 2020. In the meantime, 64% of them are still in the digitalization or industry 3.0 phase. Stable productivity issues are also present in the manufacturing industry.
In accordance with Mediana in Kompas (2023), Hafiz Noer, Head of the Research Division of the Centre for Digital Society at Gadjah Mada University (UGM), determined that the Digital Indonesia Vision 2045 published by Kemkominfo was merely meant to serve as guidance for other ministries and agencies as they developed their digital strategies and was not legally binding. Given Indonesia’s ongoing issues as a technology consumer and the country’s ICT adoption maturity at an emerging stage, a national medium or long-term development plan (RPJMN/RPJMP) would be a more binding framework for governing the country’s transition to a digital economy (Kompas, 2023).
Aside from the policy fundamentals that are not yet solid, another issue is the ransomware attack that has been confirmed as the cause of the shutdown of the Indonesian government’s national data center which then resulted in as many as 210 institutions in Indonesia impacted (Georgia Butler, 2024). In response to that, a Senior Communications and Information Ministry official, Semuel Abrijani Pangerapan, did announce on Thursday that he took responsibility for the failure to safeguard the data center in Surabaya, East Java, from the cyberattack on June 20, citing a “moral failing” on his watch as his reason for stepping down (Juwita, 2024). This incident reveals that Indonesia’s technological infrastructure is not robust enough to withstand the challenges of a more isolated, deglobalized environment. Therefore, the government needs to put more concern in technological advancement, particularly by encouraging investment–at least in three aspects: infrastructure, cybersecurity, and innovation. Quoting from Kompas (2023) and in line with the case of Singapore, Hafiz Noer added that in certain cases, nations have even produced legally enforceable national roadmaps (Smart Nation — as the plan for digital governance and Digital Government Group). He added, this blueprint outlines rules that each ministry/institution must follow in order to expedite the ICT (information and communications technology) system.
Empowering MSMEs (Micro, Small, and Medium Enterprises) in Amplifying Partnership
When it comes to “empowering” in the context of “MSMEs”, some of us would think about financial incentives. In fact, regarding this context, “empowering” doesn’t always have to be correlated with giving incentive in the form of money. At particular times, such as during the rise of deglobalization, the focus shifts beyond financial incentives. By empowering MSMEs can mean enhancing their resilience by doing a number of ways–including facilitating B2B (business-to-business) networking across borders. This idea would be in line with what Korean brands, particularly CJ CheilJedang’s Bibigo, did to amplify their product sales by collaborating with Los Angeles Lakers.
In accordance with an article from Kompas (2021), Minister of Trade Muhammad Lutfi, during the signing of a memorandum of understanding between the Ministry of Cooperatives and Small and Medium Enterprises, the Ministry of Trade, and PT Sarinah (Persero) at SMEsCo Building Jakarta on Thursday (28.10.2021), stated that the three main problems of MSMEs (lack of experience, insufficient funding, and absence of networks) had been experienced by himself 20 years ago when he served as the Chairman of the Indonesian Young Entrepreneurs Association. Lack of experience makes it somewhat difficult for MSMEs to adapt. Similarly, the lack of networking at times causes challenges in competing, and insufficient funding is a perpetual issue faced by MSMEs (Kompas, 2021).
Amplifying partnership of Indonesia’s MSMEs is a global marketing tactic that is needed–especially in terms of the era of deglobalization. The government should create a systematic policy regarding the creation of platforms and opportunities for MSMEs to connect with brands, within and/or across the globe with an aim to significantly enhance their market reach. Finally, this will also be followed by the prior policy recommendation of investment in technological advancements.