Indonesia: Manufacturing sector to drive Indonesia’s economy: Bappenas

  • The government believes the manufacturing sector will be the new engine of economic growth for Indonesia and will, therefore, focus on its development in the next five years.
  • National Development Planning Agency (Bappenas) head Bambang Brodjonegoro said developing the manufacturing sector was vital to increasing Indonesia’s potential GDP growth and, at least, maintain the growth in the long run.
  • A joint report by the Asian Development Bank (ADB) and the Bappenas estimates that Indonesia will see an average growth rate of 6.31% between 2020 and 2024 under the “good scenario”. This scenario projects the share of employment in the manufacturing sector to increase gradually during the period to 20% of the workforce by 2024.
  • Under the “bad scenario”, which assumes the share of employment in the manufacturing sector will slightly decrease to 13%, the report estimates Indonesia’s potential GDP growth rate to hit 5.52% on average between 2020 and 2024.
  • Indonesia’s manufacturing sector employs 14.72% of the workforce, according to Statistics Indonesia (BPS) data from Aug 18, while the agriculture sector remains the country’s primary employer by using 28.79% of the labour force.
  • The country’s dependence on commodities is susceptible to price swings in the market and therefore provides the Indonesian economy with a weaker platform compared to downstream products of the manufacturing-based exports, Bambang argued.
  • The minister said the next medium-term development plan (RPJMN), which was being drafted by Bappenas, would stress on value-added creation in the economy, particularly in the manufacturing sector, so that the country could diversify its export products.
  • The first step in developing the manufacturing sector be to boost the complexity of exporting Indonesia’s natural resource, which means developing more downstream products considering its abundance in the country as well as its major presence in the country’s trade data, Bambang said.
  • Data compiled from Bappenas revealed that more than 30% of Indonesia’s exports in 2018 was from commodity-based sectors such as coal, vegetable oil and fats, natural gas, as well as petroleum and its derivative products.

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