Transforming the Industry with R&D


By 2045, Indonesia is predicted to be the fourth biggest economy in the world, achieving the ‘high-income’ status. This statement is based on the fact that Indonesia will have a demographic bonus between 2030-2040, with 64% of the population being in productive age. To meet the 2045 goals, the government will bring R&D to a greater focus and allocate more investment opportunities to this sector.

R&D in the industry was not the government’s focus for many reasons. The bureaucratic mindset complicates research funding processes. Funding is limited to a smaller scope, to institutions rather than to national mission. The government needs to increase investment and funding in R&D and improve the mechanism of the research funding and processes.

Strengthening collaboration with universities, supporting government research institutions, encouraging more R&D in industrial activities, and increasing the pool of Ph.D. graduates by providing training and scholarships; are some steps to be implemented. By implementing R&D at both the university and industry level, the government can maintain the standard quality of education and industry skills despite technological advances over time.

Mandated through the 2020 Job Creation Law, the R&D budget for the Indicative Expenditure Ceiling of Ministries/Institutions in 2021 reached IDR9.9 trillion, according to Ministry of Finance data. To ensure efficiency in R&D funding, the Ministry of Research and Technology/BRIN will assess the feasibility of potential researches in the framework of National Research Priority (PRN). Research funds will be allocated to seven priority sectors for economic recovery, namely health, education, information technology (IT), infrastructure, food security, social protection, and tourism.

Capitalizing on knowledge and skills is a long-term investment but is essential to boost the economy decades forward. Industries benefit from receiving more reliable data to base their innovations on, performing more experiments to create technological advances, creating a more inquisitive generation of employees, and getting impeccable human resources over generations.

In the manufacturing industry, the business sector with the most contribution to the GDP, R&D can facilitate companies in job creation and bridging the educational system and the industry needs. This way, there will be a smaller expectation gap between the employers and their workers, a key factor in fostering a healthier work environment.

The investment target of IDR1,200 trillion in 2022 will focus on research and innovation. Foreign investors are welcome to conduct research and foster innovations in the country. On the other hand, businesses within the country are encouraged to perform their R&D and receive fiscal incentives in the form of super tax deductions.

Innovation begins with research. By starting strong with R&D, Indonesia is more likely to achieve the ‘high-income’ status by 2045.