Minister for Industry Airlangga Hartarto - Photo by the Ministry

JAKARTA (TheInsiderStories)Trade war tension between the United States (US) and China creates new opportunities for Indonesia industrial investment, said one official last week. This can be seen from several foreign manufacturing companies that want to move their production base to Indonesia from China, in order to avoid high tariffs imposed by the US.

Minister for Industry Airlangga Hartarto predicted that some of the global textile and footwear industries are considering moving factories from China to Indonesia. As planned, in 2019, there are Chinese investors who will invest Rp10 trillion in the textile industry sector. This investment leads to the development of the midstream sector, such as spinning, weaving, dyeing and printing.

It shows that Indonesia is considered to be one of the main destination countries for the investors. This is similar with the government’s commitment to continue to create a conducive and health investment climate and provide convenience in the business licensing process.

“For example, investors from China are building new industrial estates in Central Sulawesi, which for the past five years have invested $5 billion and exports from these locations have reached $4 billion,” he said in a written statement.

According to the ministry’ data, the US-China trade war also has an impact on industry players in Indonesia to spur their utility or production capacity in an effort to fill the export markets to these two countries. As example, he said, the country export steel to the US.

Until November 2018, Indonesia’ iron and steel exports to the US surged by 87.7 percent compared to the same period the previous year. While Indonesia’ total exports to the US were recorded to grow 3 percent in the same period.

He said that Indonesia and US economic cooperation had been complementary to meet the market needs and manufacturing sectors of each country. In fact, with the new digital economic era from the US, it also opens up opportunities for development in Indonesia.

“For example, we have got an investment in the form of Apple Developer Academy. The government is also exploring opportunities for data center development in Indonesia,” he cleared.

The minister also stressed that trade war will ultimately only reduce the performance of the global economy. He adde, “New norms with low growth are conditions that are not ideal for all.”

With the growth of the world economy which ranges from 3-3.6 percent, as International Monetary Fund reported, it does not have a good impact on the conditions in Indonesia, including also happening in Southeast Asia.

Therefore, the central bank must anticipate and be careful in raising interest rates. Because what is more important is liquidity, so the business can function. Where the current one digit interest rate is, the condition is good enough and can be more effective for the manufacturing sector if it is lowered again.

On the other side, he said that the Government is implementing strategic policies in the industrial sector to strengthen the national economy. The moves include increasing productivity and competitiveness, boosting the value of manufactured product exports, and strengthening or deepening industrial structures.

Through that, targeted that state GDP growth will touch up to 1-2 percent, then open more than 10 million additional jobs, and manufacturing contributions reach 25 percent of GDP. Estimated, that Indonesia can be one 10 countries that have the strongest economy in the world in 2030.

The Ministry also noted that the non-oil and gas processing industry sector get a positive performance in 2015 with an average growth of 4.87 percent and still the sector that contributed the most to national GDP, with deposits up to 17.66 percent in 2018.

In the labor sector, the industrial sector has absorbed a workforce of 18.25 million peoples. This number rose 17.4 percent compared to 2015 at 15.54 million.

Therefore, the government spurred five sectors that will become pioneers in the application of industry 4.0, includes food and beverage industry, textiles and clothing, automotive, chemical, and electronics.

Moreover, the manufacturing industry has become a driver of the Indonesian economy through increased productivity, investment and exports.

“During 2015-2018, Indonesia enjoyed rapid growth in the five manufacturing sectors. We project that growth will continue until the following years,” Hartarto concluded.

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