The Key Sectors to Back Up Making Indonesia 4.0
The Indonesian government has designed a roadmap to implement several strategies in jumpstarting the nation’s development by formulating Making Indonesia 4.0. The aim is to boost Indonesia’s competitiveness in the Fourth Industrial Revolution (4IR). The government also aims to enhance export opportunities and become more globally competitive by focusing on five essential sectors: food and beverages, textiles and clothing, automotive, electronic, and chemical. In 2020, the Ministry of Industry added two pilot sectors to apply industry 4.0, namely pharmaceuticals and medical devices.
Investment Opportunities and Economic Growth
The aforementioned sectors received a sudden boost from the government in supporting the national roadmap to maximize local advantages in natural resources, supply chains, and consumer demand. These sectors also account for 70% of industrial GDP, 65% of industrial exports, and 60% of the workforce in the manufacturing industry.
The food and beverages category is big on employment and the most significant contributor (34%) to GDP in the manufacturing sector. Secondly, the textiles and clothing sectors among the top five of the industries with the highest contribution to the nation’s GDP recorded at 1.30% in the second quarter of 2019.
The third sector which receives much attention in the roadmap is automotive. It contributes 1.76% or equivalent to IDR260,9 trillion (approx. USD18,036 billion) to the nation’s GDP, with
sales tax playing a pivotal role. Meanwhile, the electronics sector recorded high exports, at USD3,75 billion, throughout 2020. In the first quarter of 2021, the metal, computer, and electronic goods sectors were among the top five investment sectors with a value of IDR31,2 trillion (approx. USD2,156 billion). Lastly, the roadmap also has the chemical, pharmaceutical, and medical equipment sectors. Together, these sectors contributed up to 4,48% in 2020 to the nation’s GDP.
According to BKPM’s most recent data, Indonesia’s manufacturing investment contributions are valued at 40.2% of the total investment value in Indonesia, or up to IDR219,7 trillion (approx. USD15,187 billion). Two manufacturing sectors recorded brilliant performances in disbursing funds throughout the first quarter of 2021: the basic metal industry, metal goods, non-machinery, and equipment, recorded at Rp27,9 trillion or approx. USD1,928 billion (12.7%); and the food industry, recorded at Rp21,7 trillion or USD1,499 billion (9,9%).
The government is determined to create a conducive business climate by providing accessible business permits and various attractive incentives. The Ministry of Industry
provides incentives for export credit interest rates to encourage industrial players to apply for credit at domestic banks. The ministry aims to reduce the export credit
interest rates by half, from around 6% to 2.5-3%.
A Look into the Future
The aspiration to be in the top 10 of the world economy is not an illusion if all the plans are executed well and the roadmap to elevate investment opportunities is successfully implemented. Indonesia will focus on a net export value of up to 10% of the nation’s GDP.
Simultaneously, the country will double industrial productivity and build local innovation capabilities by increasing the funding scheme for research and development
(R&D) activities. Are you ready to be a part of Indonesia’s future? Let’s begin the journey.