Ministry of Industry to launch Industrial Confidence Index
10 Nov 2022
Source: Ministry of Industry of the Republic of Indonesia
Link to original article HERE
With the Industrial Confidence Index or IKI, the Ministry aims to deliver accurate, complete, and up-to-date information on the country’s manufacturing sector.
The Ministry of Industry noted a number of factors inhibiting the growth of the industrial sector. These include the rise in inflation, the lockdown policy due to the pandemic, the Russia-Ukraine geopolitical situation, the dynamics of the global economy, the decline in commodity prices, the decline in export volumes, as well as the scarcity of raw materials.
Amidst these current global economic headwinds, the Ministry of Industry saw the need for monitoring the condition of the industry as the main supporting sector of the national economy.
"In order to keep pace with the dynamics and challenges of the global economy, the Ministry of Industry seeks to obtain accurate, complete, and up-to-date information on the manufacturing sector, one of which is through the creation of the Industrial Confidence Index," said the Secretary General of the Ministry of Industry Dody Widodo at the Kick-Off and Technical Guidance for Completing the Industrial Confidence Index Questionnaire in Bandung, Monday, November 7, 2022.
The Industrial Confidence Index or IKI is an index that is being developed by the Ministry of Industry. It will be launched at the end of November 2022. It aims to provide an indicator of the confidence or optimism level of the manufacturing industry on economic conditions, as well as a description of the state of the manufacturing industry and the prospects for business conditions in Indonesia for the next six months.
"The Ministry of Industry aims for the IKI to be used to diagnose problems in the industrial sector and solve them quickly and accurately," said the Secretary General of the Ministry of Industry. The IKI can also help anticipate greater losses if problems occur in the industry, as well as to describe the business climate of the industry to be able to find out the business prospects of the Indonesian industrial sector in the future.
Mr. Widodo explained that there were already several similar indices that showed the condition of the manufacturing sector, such as the manufacturing Purchasing Managers' Index (PMI) released by S&P Global and Bank Indonesia's Prompt Manufacturing Index (PMI BI). He said the IKI report would have more respondents and would represent all the business scales of the Indonesian industrial sub-sectors.
“Some of the advantages of IKI include its 'trustworthy' nature because it is scientifically sound, systematically verified, and is validated. Furthermore, it is ‘current’ as it will be released in the same month or period. It is also ‘comprehensive’ with presentations and analyses derived from the reporting of all industrial companies in Indonesia. Finally, IKI has the most 'detailed' data from the 23 types of industrial sub-sectors based on the 2-digit KBLI [Indonesia Standard Industrial Classification]," he explained.
Mr. Widodo went on to say that IKI was a perspective index calculated based on three variables – namely orders, production, and inventories – and that an IKI with a value of more than 50 indicated an expansionary/optimistic condition of the industry, while an index of less than 50 indicated a contracting industry condition.
Head of the Data and Information Center of the Ministry of Industry Wulan Aprilianti Permatasari said that the series of activities for the Development of the Industrial Confidence Index included a hybrid Kick-Off Meeting on Monday, November 7, 2022, and an offline Technical Guidance for Completing the Industrial Confidence Index Questionnaire on Tuesday, November 8, 2022.
"This kick-off meeting is aimed at disseminating the Industrial Confidence Index to the public," she said, adding that the Technical Guidance for Completing the Industrial Confidence Index Questionnaire was aimed towards more than simply informing industries about IKI but also towards disseminating the procedure for filling it out, especially to industrial companies in Bandung City, Bandung Regency, and West Bandung Regency areas.
"Next, after the reporting is completed, the Ministry of Industry will carry out a Focus Group Discussion on the calculation of the IKI value and the launch of the IKI at the end of November 2022," Ms. Aprilianti concluded.