To be an advanced industrial country is one of major goals for long-term economic development in Indonesia. Efforts have been intensified to develop manufacturing sector as the backbone of economy, focusing on developing non-oil and gas manufacturing.
Manufacturing has always been the largest contributor for the formation of Indonesia’s Gross Domestic Product and its growths. Up until 2017, the share of manufacturing to GDP was still slightly above 20% before continuously decreasing to below 20%: 19.62% in 2019 and 19.88% in 2020. The government targets to recover the share of manufacturing to 20% level of GDP by 2024.
Over January-September 2021, the Indonesian GDP grew 3.24% (c-t-c) while GDP of manufacturing grew 2.87%, of which oil & gas manufacturing dropped 1.89%, while non-oil & gas manufacturing expanded 3.37%. A number of oil & gas manufacturing sub-sectors grew very high at above 10%, namely transport equipment 16.13%, basic metal 11.57%, machinery & equipment 11.56%, and chemical and pharmaceutical 10.09%.
Manufacturing exports also contribute the largest share to Indonesia’s export, averaging at around 80%. Over January-September 2021, the share of manufacturing export reached 80.71% of total non-oil & gas exports. Top five manufacturing exports are base metal products, palm oils, textile & garment, electrical products, and processed foods.
In 2022, the growth of manufacturing industry is targeted at 4.5%-5%. Manufacturing export is targeted to reach US$ 175-180 billion, direct investment in manufacturing of Rp 300-310 trillion, and job creation in manufacturing for 20.84 million workers in 2022.
To achieve these targets, various challenges have been identified. They include disruption of the supply chain, scarcity of containers, and dependence on imports of raw materials and auxiliary materials, as well as the need for mitigation against the wave of Omicron virus variants in the industrial sector.
To reduce or eliminate dependence on imports, the Ministry of Industry builds the Indonesia Manufacturing Center (IMC). IMC will bridge the gap between the demand side of the industry for machinery and the supply side of machinery from the results of research, development, and innovation either by universities, research institutes, or industry. In 2022, there will also be the Development of a Center of Excellence for Medical Devices, Facilitation of Commercialization of Research Results, Innovation and Infrastructure Facilitation of a Center of Excellence for Medical Devices.
To increase the competitiveness of domestic products, the Ministry of Industry implements a policy of The Improvement of Domestic Product Strengthening Program (P3DN). Currently, there are 13,456 industrial products with a Domestic Component Level (TKDN) value of more than 25% whose certificates are still valid. This number will continue to grow as the government allocates a budget on the the TKDN certification process. This policy is in line with the implementation of the Indonesian National Standard (SNI) to support strengthening domestic industry.
In addition, the Ministry continues to provide free certification facilitation to domestic industrial companies, including but not limited to industrial products of medical devices, machinery, pharmaceuticals, machinery, electronics and telematics, metals, electricity, chemicals, fertilizers, automotive and their components, ceramics, cement, textiles, and SME products. Facilitation of TKDN certification in 2022 is given for at least 1,250 product certificates.
With regard to Industrial 4.0, the government wil develop collaboration and the ecosystem of The Indonesian Digital Industry Center 4.0 (PIDI 4.0) as well as the filling of showcase facilities, training equipment and research laboratories and test beds at PIDI 4.0. The PIDI 4.0 will also focus on preparing human resources for PIDI institutions as well as developing a talent pool and industry 4.0 expert pool. It will also develop PIDI satellites located in the Polytechnic Education unit of the Ministry of Industry and industrial companies.
Indonesia officially holds the 2022 G20 Presidency starting 1 December, 2021 with a big theme of “Recover Together, Recover Stronger”. As President at the 2022 G20 forum, the Government of Indonesia proposed adding industrial issues in the Trade and Investment Working Group to become the Trade, Investment and Industry Working Group (TIIWG). In this Working Group, priority issues related to industry, trade and investment will be discussed in order to support the recovery of the world economy from the impact of the Covid-19 pandemic. The industrial issue that is planned to be brought up in the TIIWG is “Inclusive and Sustainable Industrialization via Industry 4.0” under the broader theme of strengthening Sustainable Development Goals for economic recovery.
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