Source: The Ministry of Industry of the Republic of Indonesia

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The manufacturing industry is increasingly disbursing funds to increase capacity and make Indonesia a production base in an effort to meet the demand of the domestic and export markets. This is reflected in the realization of investment in the industrial sector, which reached Rp 230.8 trillion (US$15 billion), or 39.5% of the Rp 584.6 trillion total investment value in the first semester of 2022. 

"The manufacturing industry saw its investment value rise from Rp 167.1 trillion in the first half of 2021 to Rp 230.8 trillion in the first half of 2022. That is a double-digit increase of 38 percent," said Industry Minister Agus Gumiwang Kartasasmita in Jakarta, Saturday (23/7). 

The Minister of Industry explained that, so far, increased investment in the industrial sector has always provided a broad multiplier effect for the national economy. In addition to increasing foreign exchange reserves and employment, it would also strengthen the domestic manufacturing structure so that industries in Indonesia can be more competitive on the global stage.  

"Indonesia remains an investment destination because it is supported by a large market potential and pro-business government policies, including efforts to accelerate national economic recovery from the impact of the Covid-19 pandemic," he explained.  

Mr. Kartasasmita emphasized that the government is determined to consistently improve the investment climate and provide a conducive business environment. By maximizing effort to manage the Covid-19 pandemic, he hopes to see realized investment continue to increase.  

"Furthermore, improved domestic demand that goes along with increased public activity and mobility due to the acceleration in the distribution of booster vaccines to the public and industrial workers ensures that investors will continue to be interested in expanding into Indonesia," he added.  

Referring to data from the Ministry of Investment/Investment Coordinating Board (Badan Koordinasi Penanaman Modal – BKPM), in the January-June 2022 period, domestic investment in the industrial sector was Rp 65.2 trillion, or 23.8% of the total domestic investment of Rp 274.2 trillion. Meanwhile, foreign investment in the industrial sector spiked upward with Rp 165.6 trillion, or 53.4% – the highest among other sectors – of the total FDI of Rp 310.4 trillion.  

“Investors are currently targeting productive sectors such as the manufacturing industry compared to other sectors. Therefore, in addition to driving the capital-intensive industrial sector towards technology transfer, we are also encouraging investments into labor-intensive industrial sector as an effort to increase labor absorption in the country," said the Minister of Industry.  

Throughout the first semester of 2022, the food industry contributed the most to the achievement of domestic investments with Rp 24.2 trillion, which is an increase of 8.8% year-on-year (YoY). Furthermore, for FDI achievements, the largest contribution comes from the basic metal, metal goods, non-machinery, and equipment industry, which reached $5.7 billion or an increase of 26.3% YoY, followed by the chemical and pharmaceutical industry with $1.8 billion, or an increase of 8.1% YoY.  

“Cumulatively, for domestic and foreign investment for the first semester of 2022, the highest investment in the manufacturing sector went to the basic metal, metal goods, non-machinery, and equipment industry amounting to Rp 87.9 trillion or an increase of 15% YoY, followed by the food industry with Rp 42 trillion or an increase of 7.2% YoY,” said Mr. Kartasasmita.  

He said the government's policy of consistently campaigning for downstream industries and stopping the exports of raw materials may potentially increase investment in the smelting and refining industries. “Smelting factories are starting to grow in a number of areas outside Java. This means it will encourage economic equity or is in line with Indonesia-centric development," said Mr. Kartasasmita. 

Additionally, efforts are needed to make Indonesia a country with an environmentally friendly industry. This is because the world today tends to choose products from industries that use new and renewable energy. 

"In addition to efforts to increase the added value of domestic raw materials through industrial downstreaming, we are also committed to accelerating the development of green industries and building an electric vehicle ecosystem. This is in line with the priority program of the Roadmap of Making Indonesia 4.0, with the main target of being a top ten country with the strongest economy in the world by 2030," he said.