Economist confident Indonesia has great potential to capture industry relocation

Jakarta (ANTARA) - Executive Director of the Institute for Development of Economics and Finance (Indef) Esther Sri Astuti believes Indonesia has a great opportunity to attract industrial relocation investment amidst the global supply chain diversification trend. Speaking on Wednesday, Esther said that to compete with countries such as Vietnam, Thailand, and Malaysia, the government needs to strengthen various investment supporting factors that are the main considerations for global investors. Esther stated that capital inflows into Indonesia are highly dependent on the creation of a competitive and conducive business climate. Several aspects that need to be reinforced include legal certainty, promising market prospects, availability of raw materials, a supportive industrial ecosystem, integration with global supply chains, and readiness of energy and basic utility infrastructure. In addition, harmonisation of regulations between central and regional governments is also considered important to improve ease of doing business and provide certainty for investors. Esther further explained that the trend of transitioning towards a green economy is seen as opening even greater opportunities for Indonesia. As one of the world’s producers of critical minerals, Indonesia holds a strategic position in supporting the development of environmentally friendly technologies. She said Indonesia has the potential to become a major supplier of raw materials for green technology, including electric vehicle batteries and renewable energy infrastructure, through commodities such as nickel and copper. To support these opportunities, the government has also rolled out various industrial downstreaming policies. Incentives provided include tax holidays, income tax reductions, exemption from import duties on machinery and raw materials, and the provision of a Specific Natural Gas Price (HGBT) facility. Furthermore, Esther assessed that downstreaming is an important strategy to increase the added value of national natural resources while strengthening Indonesia’s position in the global supply chain. Through downstreaming, Indonesia can produce higher value-added products, encourage technology transfer, and increase industrial productivity. On the other hand, downstreaming also has the potential to expand the absorption of skilled labour, increase the involvement of MSMEs in the industrial supply chain, and support the transition towards a sustainable green and blue economy. She also emphasised the importance of investment in education and human resource development so that the needs of the industrial workforce can be met.