Indonesia is Optimistic to Become a Manufacturing Hub in ASEAN
Industry Minister Airlangga Hartarto (left) visiting an automotive component plant owned by Thai Auto Summit Group (Image Credit : Industry Ministry).

JAKARTA (TheInsiderStories) – As one of the core investment destination, Indonesia is optimistic to become a manufacturing hub in Southeast Asian countries (ASEAN) region, Even so, become a production base for global producers to meet domestic market needs to export, said the minister on Wednesday (05/08).

Industry Minister Airlangga Hartarto in an official statement stated, to boost the manufacturing sector production capacity, government is efforts to increase an investment by creating a conducive climate and providing business licensing and industry incentives. One of the efforts made by the government is to provide fiscal incentive facilities in the form of a tax holiday, he said.

“We expect the utilization of existing capacity continue to rise, because with greater capacity it will be able to encourage exports to potential traditional markets and new markets,” he said.

In the first quarter (1Q) of 2019, the manufacturing industry contributed 22.7 percent of the total investment value of US$1374 billion and contributed 20.7 percent of the national GDP. This amount higher 19.86 percent from the same period of last year.

“Based on these achievements, the World Bank report also shows that Indonesia is ranked fifth among the G20 countries,” Hartarto revealed.

Last week, Statistics Indonesia released, the manufacturing sector that got the highest growth was the textile and apparel industry by 18.98 percent, tobacco 16.10 percent, furniture 12.89 percent and the chemical, pharmaceutical and traditional medicine industries which grew 11.53 percent.

The good performance was also followed by the paper products industry which grew 9.22 percent, the base metal industry grew 8.59 percent, and the food and beverage industry grew 6.77 percent.

These manufacturing sectors are able to surpass national economic growth in 1Q 2019 by 5.07 percent, he explained. The government is optimistic that the target of growth of the non-oil and gas industry is 5.4 percent in 2019. The sectors that are projected to grow are high, including the food and beverage, the machinery, the textile and apparel, and the leather goods and footwear industry.

Hartarto stressed, several manufacturing industry sectors already have a deep industrial structure, starting from upstream to downstream, where the automotive industry, textiles and clothing, food and beverages, basic metals and chemicals have been produced domestically.

“In the near future, there will be several automotive principals who will join and will make Indonesia an automotive manufacturing hub in the Asian region,” he said.

The government believes, the potential of the automotive industry in Indonesia will be even greater, where the number of car production has now reached 1.34 million units, or $13.76 billion. It is estimated that there will be four major automotive companies that make Indonesia a global supply chain.

The shrinking manufacturing sector when Indonesian was experienced 1998’ financial crisis continues to grow and makes Indonesia almost equal to Germany, whose manufacturing sector contribution is at 20.6 percent. In the top position is China (28.8 percent), followed by South Korea (27 percent) and Japan (21 percent).

In fact, Hartarto expected, through Making Indonesia 4.0, Indonesia’s dream to enter 10 countries rank that have the strongest economy in the world in 2030 is near in eyes.

Moreover, the PwC and McKinsey studies have included Indonesia in the top-seven of the world economy in 2045, he added.

To spur this growth, the government will launch a super deductible tax incentive to create competent industrial workforce and produce product innovation.

In addition, the government encourages industry players to be involved in vocational education and training activities and actively carry out research and development activities.

Written by Daniel Deha, Email: daniel@theinsiderstories.com