Indonesia’s manufacturing industry is the strongest component of its economic growth, contributing 19.70 percent to the country’s GDP in 2019. Indonesia’s manufacturing sector, in terms of the country’s Standard Business Classification (Klasifikasi Baku Lapangan Usaha or KBLI), comprise of 24 sub-sectors, ranging from Food and Beverages to machine maintenance and installation. This section mainly covers the manufacturing sector in generalized terms, specifically in regards to the condition of Indonesia’s manufacturing sector and the Indonesian government-stated goals therein.
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IN THIS SECTOR REPORT
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Law No. 17/2007 on the long-term planning for national development 2005-2025 mandates the strengthening of the manufacturing sector in achieving an efficient, modern, and sustainable economic growth. Within the masterplan for national industrial development 2015-2035, the government aims to push forward the establishment of three main pillars: added value to agricultural, mineral and oil and gas resources; upscaled human resources; and technological advancement. In the last decade, it can be said the construction of these pillars is going strong with
One major example of the establishment of these three pillars is the push towards the construction of smelters aimed at further processing Indonesia’s mineral resources – nickel in particular. With a nickel reserve of approximately 21 million metric tons, according to the US Geological Survey, Indonesia possesses significant potential in becoming a global player in the electric vehicle battery market, in which nickel is a major component. This is further proven by its 2020 deal with South Korean corporation LG to establish a battery factory in the country, as well as its recent courtship with US-based Tesla Inc.
Another example of the country’s most recent foray in the aforementioned three pillars involves the focus towards “Making Indonesia 4.0”. An initiative led by the Joko Widodo administration to upscale the country’s technical know-how. In this regard, Indonesia is set to be the partner country of Hannover Messe 2021 following the delay to the convention caused by the COVID-19 pandemic. Furthermore, Indonesia regards Germany as a role-model for its dual-vocational education system - a system that the country aims to integrate in its focus to upscale its workforce.
Indonesia is among the few major countries that has successfully navigated the path of becoming a developed country by shifting from a commodity-based economy to manufacturing-based one. And while it can be argued that the country still has a long way to go, it has at least shown both in terms of potential and in terms of policy-making that it is enthusiastic about taking its place in the global value chain.
HIGHLIGHTS
Share of Non-Oil and Gas Manufacturing sector growth relative to GDP (in percentile)
No |
Sub-Sector |
2015 |
2016 |
2017 |
2018* |
2019** |
|
1 |
Food and Beverages |
7.54 |
8.33 |
9.23 |
7.91 |
7.78 |
|
2 |
Tobacco |
6.24 |
1.58 |
-0.64 |
3.52 |
3.36 |
|
3 |
Textiles |
-4.79 |
-0.09 |
3.83 |
8.73 |
15.35 |
|
4 |
Leather and Footwear |
3.97 |
8.36 |
2.22 |
9.42 |
-0.99 |
|
5 |
Wood and Other Wooden Goods |
-1.63 |
1.74 |
0.13 |
0.75 |
-4.55 |
|
6 |
Pulp and Paper |
-0.16 |
2.61 |
0.33 |
1.43 |
8.86 |
|
7 |
Chemical and Pharmaceutical |
7.61 |
5.84 |
4.53 |
-1.42 |
8.48 |
|
8 |
Rubber |
5.04 |
8.50 |
2.47 |
6.92 |
-5.52 |
|
9 |
Non-Metal Mining |
6.03 |
5.47 |
-0.86 |
2.75 |
1.03 |
|
10 |
Basic Metal |
6.21 |
0.99 |
5.87 |
8.99 |
2.83 |
|
11 |
Electronics and Other Metal Goods |
7.83 |
4.33 |
2.79 |
-0.61 |
-0.51 |
|
12 |
Machinery |
7.58 |
5.05 |
5.55 |
9.49 |
-4.13 |
|
13 |
Transportation Tools |
2.40 |
4.52 |
3.68 |
4.24 |
-3.43 |
|
14 |
Furniture |
5.17 |
Business Sectors |
