Indonesia’s Expanding Industries Pave the Way to Positive Economic Growth


The COVID-19 pandemic has deeply impacted the lives of Indonesian citizens. Work has become scarce, businesses are suffering, schools experience great difficulty in providing good education, and medical care has now become a luxury. Indonesia’s economy is affected so much that most tourism industries have come to a halt. This has created a big problem because Indonesia has been rather dependent on the tourism industry.

Now that travel restrictions and bans have been set around the world, Indonesia must look further and focus on other industries. In order to accelerate Indonesia’s economic recovery, strategic steps must be taken to ensure that the people are led to prosperity.

Industrial sectors that are the prime movers of economic growth are the chemical industries, the pharmaceutical and traditional medication industries, furniture industries, rubber industries, and plastic industries, machinery industries, as well as the food and beverage industry.

If we look closely, we can examine the percentage of growth that these industries have experienced. Industries that have had a positive growth over the years are the chemical, pharmaceutical, and traditional medicine industry (11,46%), with the furniture industry close behind it (8,04%), the plastic and rubber industry (3,84%), the machinery and equipment industry (3,22%), and lastly is the food and beverage industry (2,45%).

Increased use of domestic products to facilitate industry expansion in Indonesia

One way to facilitate the expansion of industries in Indonesia is by prioritizing domestic products over imported ones. However, one of the biggest challenges currently faced by Indonesia is the high demand for imported goods as a result of the implementation of various Free Trade Agreements (FTA) amid the spirit of strengthening industrial competitiveness and securing domestic product markets. The industrial minister of Indonesia, Agus Gumiwang Kartasasmita, has launched a 35% import substitution program in 2022. The targeted import substitution value is IDR 152.83 trillion or 35% of the 2019 import potential which is IDR 434 trillion.

Measures to reduce imports are carried out through import substitution and increasing utilization of the domestic products (Peningkatan Penggunaan Produk Dalam Negeri/P3DN). Through this programme, the Indonesian government hopes to increase investment and cover the areas of industry that are still dominated by imported items. If Indonesia is able to find investors and increase the use of domestic products, it is almost certain that Indonesia will be able to continue to have positive economic growth.

Other efforts to push economic growth and industrial expansion in Indonesia

Striving for economic growth means that the Indonesian government must also adjust its regulations to make it as attractive as possible to future investors. One of the things that the Indonesian government has done is to provide a tax holiday to increase Indonesia’s investment rate.

In order to make it worthwhile for future investors, the Indonesian government has simplified the process of getting a tax holiday. The process that used to take up to 45 days can now be completed in no more than 5 days. This process now takes less time because there is no longer a need for investors to go through a discussion process with the committee when applying for a tax holiday.

Now, investors just need to apply for tax holiday on the Online Single Submission (OSS) system operated by Ministry of Investment/BKPM apply for tax holiday on the Online Single Submission (OSS) system operated by Ministry ofThe system will immediately check that the requirements have been met. Once the requirements are met, the tax holiday facility will be granted.

The sectors that may receive a tax holiday are the processing industries based on agricultural, plantation, and forestry products, as well as the digital economy sector. The computer components sector and the main smartphone component sector have been merged into the electronics/telematics equipment sector. Thus, in total there are 18 sectors that may receive a tax holiday in Indonesia.

Although there is no absolute guarantee, efforts must still be made to ensure Indonesia’s economic growth continues. Expanding industries in Indonesia is important and must be given careful thought and consideration. Seeing that until today Indonesia is still mostly dependent on imported goods, there are many opportunities to invest in promising sectors in Indonesia to help promote the use of domestic goods.