CORE: High-tech downstreaming hampered by unprepared ecosystem

The intention is good, but in reality the contribution of manufacturing to GDP remains low in Indonesia. Technology investors are looking for a good ecosystem, not just tax holidays.

Economist at the Center of Reform on Economics (CORE) Indonesia, Dipo Satria Ramli, assesses that the government’s plan to expand downstreaming into the semiconductor sector and high-tech manufacturing still faces challenges because the industrial ecosystem is not yet fully ready.

According to him, the government currently needs to build an industrial ecosystem that can support high-tech investment.

“The intention is good, but in reality the contribution of manufacturing to GDP remains low in Indonesia. Technology investors are looking for a good ecosystem, not just tax holidays,” Dipo told ANTARA in Jakarta on Tuesday.

As is known, the government has established 8 National Priority Work Programmes (PKPN), which include food sovereignty; energy and water self-sufficiency; education; health; downstreaming and industrialisation; infrastructure, housing, and disaster resilience; strengthening the people’s economy and village development; and poverty reduction.

One of the agendas is the expansion of downstreaming into the semiconductor, aerospace, and high-tech manufacturing sectors.

Dipo said that investors in the technology sector need a strong business ecosystem, including the availability of supply chains, business certainty, efficient logistics, and legal certainty.

This is because as long as these factors are not yet ready, Indonesia will face challenges in attracting investment in high-tech sectors.

In addition, domestic entrepreneurs are also considered to still tend to wait and see on economic developments before making new investments.

Therefore, the government is deemed to need to ensure the readiness of the industrial ecosystem as a whole, so that the downstreaming agenda does not stop at providing investment incentives, but is able to encourage the formation of high-tech industries domestically.

“As long as the supply chain, business certainty, logistics, and legal certainty are not ready, it seems difficult to attract investors in these sectors. Moreover, many local entrepreneurs are currently in a wait-and-see mode,” he said.