Analyst: Can Indonesia’s Manufacturing Sector Grow Rapidly?

The growth of the manufacturing sector in Indonesia after the COVID-19 pandemic in Indonesia has begun to recover and is starting to show positive developments. However, the manufacturing sector is currently still facing various challenges so that its performance is still not optimal. LPEM economist at the Faculty of Economics and Business (FEB) UI, Teuku Riefky, said that the manufacturing sector is now the largest contributor to gross domestic product (GDP) in the Indonesian economy.

“If we look at the influencing factors, there are various things, in terms of workforce competitiveness, workforce productivity, incoming investment, business competition climate, infrastructure, and various other factors,” he said, Sunday (7/4/2024 ).

According to Riefky, there are various policies issued by various ministries or state institutions that themselves have a negative impact on the performance of the manufacturing industrial sector.

“I did not mention which ministry specifically, but there are many policies in terms of regulations, investment, infrastructure improvements, ease of doing business, as well as related regulations, for example, land acquisition which have a negative impact on domestic industry,” explained Riefky.

Riefky also explained that aspects of Indonesia’s fiscal policy, such as import duties and so on, also play a role in the competitiveness of Indonesia’s manufacturing industrial sector.

“In terms of import duties, of course there is an impact on the competitiveness of national industry,” added Riefky.

In this context, according to him, the Indonesian government needs to expose the domestic industrial sector to be able to compete against foreign industry, but the government must be clear in providing incentives for industry to be able to compete well.

“Our industry needs to be exposed to competition with foreign products accompanied by incentives. However, this does not mean that it must be completely protected, so it is not exposed from a competitive perspective to global conditions,” concluded Riefky.

From data from the S&P Global Purchasing Manager’s Index (PMI) Indonesian Manufacturing in March 2024 which was at level 54.2 or an increase of 1.5 points compared to the achievement in February which touched 52.7. These figures show that Indonesia’s manufacturing industrial sector has been in an expansionary position for 31 consecutive months. This is also in line with the achievements of the Industrial Confidence Index (IKI) in March, which were both in the expansion phase at the level of 53.05.

Meanwhile, according to the General Chair of the Natural Gas Users Industry Forum, Yustinus Gunawan revealed that the HGBT policy has had a very positive impact on national industry.

“The HGBT policy makes national industry grow and survive and contributes to increasing taxes, increasing foreign exchange by increasing exports and saving foreign exchange due to reducing imports, increasing investment and increasing labor absorption,” said Yustinus.

Seven sectors receiving HGBT including fertilizer, petrochemicals, oleochemicals, steel, ceramics, glass, rubber gloves provide added value to the national economic sector reaching IDR 157.2 trillion. Therefore, the continuation of the HGBT policy which will expire in December 2024 is an inevitability or something that cannot but be implemented.

For this reason, the performance of domestic industry needs to be boosted so that it has a positive impact on national economic growth. “Because if HGBT is not continued, it will certainly have a big impact on the industry,” he explained.

April 7, 2024, detikFinance