Indonesia's Manufacturing Industry Continues to Expand Amid Global Economic Uncertainty

Jakarta, INTI - Indonesia's manufacturing industry continues to show positive developments despite the unstable global economic dynamics. This is evidenced by the Industrial Confidence Index (IKI) reaching 52.5 in June 2024, and Indonesia's Manufacturing Purchasing Manager’s Index (PMI) standing at 50.7, marking 34 consecutive months of expansion. Additionally, the Bank Indonesia Prompt Manufacturing Index for the first quarter of 2024 reached 52.80%, continuing the expansion phase from the previous quarter.

This remarkable performance cannot be separated from the Ministry of Industry's consistent efforts in initiating strategic policies for domestic manufacturing industry players. Minister of Industry Agus Gumiwang Kartasasmita has taken various breakthroughs to support the growth of this sector.

On Thursday (18/7), the Minister of Industry opened the Tech Link Summit 2024, a strategic collaboration forum between startups, industry, academia, and the government to create a stronger innovation ecosystem. “Yesterday, a senior economist said that the Minister of Industry never takes care of the industry. (This event) is one of the tangible forms of the Ministry of Industry's attention in nurturing the industry,” said the Minister.

This view contradicts the Ministry of Industry's efforts that have been implemented so far. For example, during the Covid-19 pandemic, the Ministry of Industry initiated the provision of luxury goods sales tax discounts borne by the government (PPnBM DTP) for four-wheeled vehicles to boost sales that had plummeted due to a drastic decline in public purchasing power.

"This fiscal policy has proven to be able to increase the sales of four-wheeled motor vehicles, which contributed to the growth of the automotive industry sector and also provided a stimulus for the growth of its supporting industries," explained the Ministry of Industry's spokesperson, Febri Hendri Antoni Arif in Jakarta, Thursday (18/7).

Throughout 2021, when the PPnBM DTP policy for four-wheeled motor vehicles was implemented, the non-oil and gas processing industry grew by 3.67 percent. Some subsectors even grew above the national economic growth, including the transportation equipment industry, which grew by 17.82 percent.

As the Daily Chair of the National Team for Increasing Domestic Product Usage (P3DN), Minister of Industry Agus Gumiwang Kartasasmita continues to encourage ministries/agencies (K/L), regional governments, and state-owned enterprises (BUMN) to optimize the budget for purchasing domestic products in a quality and efficient manner. At the Business Matching 2024 event in March in Bali, which brought together domestic industries with budget holders as users of local products, commitments for purchasing domestic products in government procurement of goods and services reached IDR 1,428.25 trillion. This figure is higher than the commitment of the previous period, which reached around IDR 1,157.47 trillion.

"Meanwhile, regarding the fulfillment of gas needs for the industry at competitive prices, the Ministry of Industry continues to oversee the implementation of the Specific Natural Gas Price (HGBT) policy. The ideal implementation of HGBT has proven beneficial in boosting industrial growth and the overall economy," explained Febri.

The total positive impact of HGBT on the industrial sector during 2020-2023 is IDR 147.11 trillion, with details including an increase in exports of IDR 88.12 trillion, an increase in tax revenue of IDR 8.98 trillion, an increase in investment of IDR 36.67 trillion, and a decrease in fertilizer subsidies of IDR 13.3 trillion.

President Joko Widodo has approved the extension of the HGBT program and provided directions to conduct an in-depth study to add sectors receiving HGBT outside the current seven industrial sectors. The Ministry of Industry has also prepared and proposed the Draft Government Regulation (RPP) on Natural Gas for Domestic Needs. The RPP will regulate gas management for industrial interests and energy sources (electricity).

To ensure the availability of raw materials for the domestic industry, especially the cocoa processing and coconut processing industries, the Ministry of Industry initiated the formation of institutions that will regulate these two commodities. This institution aims to ensure the sustainability of the industry, competitiveness, and increase added value.

This effort is based on the declining availability of domestic cocoa raw materials by 8.3 percent per year during the 2015-2023 period. This has resulted in an increase in imports from 239,377 tons to 276,683 tons and the cessation of operations of nine out of 20 cocoa processing companies.

In the coconut processing industry, the downstream industry is still limited due to the suboptimal utilization of coconut raw materials, and currently, whole coconuts are still being exported. The utilization rate of the coconut processing industry is currently around 55 percent.

The cocoa and coconut institutions will provide positive impacts on farmers and industry. Benefits for farmers include increased productivity through land intensification and rejuvenation, improved processing yields, and guaranteed harvest absorption. Meanwhile, benefits for the industry include increased added value and exports, as well as diversification into high added-value derivative products.

The Ministry of Industry also strives to maintain a conducive business and investment climate for the industry, including the national ceramics industry, to enhance its competitiveness. These efforts are pursued by providing various incentives such as HGBT, tax allowances, implementing non-tariff barriers by mandating SNI for ceramic tiles, encouraging the use of domestically produced ceramic tiles, implementing Industry 4.0, and imposing trade remedies (BMAD/BMTP).

"The Ministry of Industry supports the recommendation from the Indonesian Anti-Dumping Committee (KADI) to impose BMAD on imports of ceramic tile products from China. The high imports of ceramic tiles have also caused several ceramic tile companies to cease production," concluded Febri.

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