The Ministry of Industry expects sectors excluding tourism and oil and gas to increase their contribution to gross domestic product to 28.6 percent in 2015 and to 31.2 percent by 2020, up from 25.7 percent forecast for this year. But the way forward will have to be supported by sweeping changes.
The gains should drive up the country’s per capita GDP from the current $2,271 to $3,961 by 2020, which may qualify Indonesia as a developed country, the ministry said.
“We expect the engine of the country’s economic growth will change from being based on labor and natural resources to become more technology and capital intensive [by 2020],” Agus Tjahayana, the ministry’s secretary general, said in an industrial workshop in Jakarta on Monday.
The government also wants to provide more support to small- and medium-sized enterprises, so the sector will contribute more to the GDP.
“Small industry should grow by 1 percent higher than national economic growth of 6 to 7 percent next year, while medium and large industries are expected to grow 14.1 percent and 5.6 percent, respectively, each year by 2020,” Agus said, adding that by then there would hopefully be a better balance between the growth of the SME and large enterprise sectors.
Industry Minister Fahmi Idris, who is unlikely to be reappointed to his post, said it would be difficult for Indonesia to become a developed industrial nation. He said there was a long list of requirements that needed to be satisfied before the nation reached that level, with the dated infrastructure a major hurdle to overcome.
Fahmi added that the country’s manufacturers needed to develop iconic products in order to compete with other countries on the world market.
A leap forward in human resources driven by education was also required. Lessons could be learned from nations with smaller but better-educated populations that boasted high per capita GDP, such as Finland, home of mobile-phone giant Nokia, Fahmi said.
“Out of 130 million working-age people [in Indonesia], 57 to 60 percent of them have only reached elementary school-level. How can we compete with such low education levels?” he said.
Returning to infrastructure, Fahmi said it was lacking nationwide, especially outside Java.
“We are facing a lack of infrastructure. The problem is not just in areas such as Sumatra, Kalimantan, Papua or Sulawesi, but it’s also a problem in the Indonesian economic heartland of Java Island,” he said.
Also hurting the situation, Fahmi said, was the lack of firms to help foreign companies facilitate ventures and deal with the nation’s complex bureaucracy, which has caused many companies to pull out of investments.
Last, but not least, there is a lack of high-tech innovation, he said.
“It might be due to Indonesia’s lack of a highly skilled labor base or because we don’t have enough research and development agencies tasked with encouraging technology,” Fahmi said.
Bambang Trisulo, chairman of the Indonesian Automotive Industry Association (Gaikindo), said the government must develop clear programs to achieve these goals if the nation is to join the ranks of the developed world.