Economist proposes targeted incentives to ease burden on manufacturing industry
Not broad stimulus, but incentives that truly target the most affected sectors
Jakarta (ANTARA) - Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, has proposed that the government provide more targeted incentives to support the manufacturing sector, which is currently under strain following the contraction of Indonesia’s manufacturing Purchasing Managers’ Index (PMI) to 49.1 in April 2026.
The manufacturing PMI is an indicator of manufacturing industry activity. A figure above 50 indicates expansion or growth in industrial activity, while below 50 signals contraction or slowdown.
Yusuf, when contacted in Jakarta on Wednesday, stated that policy responses need to be swift and specific to prevent the pressure on the industry from deepening.
According to him, the government needs to provide incentives that truly target the most affected sectors, particularly in the upstream industrial chain.
“From a fiscal perspective, interventions also need to be more specific. Not overly general stimulus, but incentives that truly target the most affected sectors,” he said.
In addition, the government is also seen as needing to strengthen import substitution through increased use of domestic products to reduce dependence on imported raw materials.
Diversification of raw material sources is also considered important so that the industry does not rely too heavily on certain regions vulnerable to disruptions from geopolitical conflicts.
Yusuf further encouraged the expansion of the Local Currency Transaction (LCT) scheme so that trade transactions do not rely too much on the US dollar, thereby reducing exchange rate pressures on production costs.
Besides that, support for the logistics sector is also needed because some of the current manufacturing pressures stem from rising distribution costs.
According to Yusuf, if the manufacturing PMI contraction continues, the impact could spread to the national economy because the manufacturing sector is one of the main pillars of economic growth and employment absorption.
“When production continues to decline, the risk of layoffs will also rise. Even now, the signs are already starting to appear from the decline in employment absorption in this sector,” said Yusuf.
In response to the situation, the Ministry of Industry (Kemenperin) stated that it is taking mitigation measures and strengthening the national industrial sector, including accelerating the formulation of various strategic policies, such as strengthening import substitution, increasing the use of domestic products (P3DN), and diversifying raw material sources and export markets.
In addition to existing industrial protection policies, Kemenperin is also preparing new proposals in the form of incentives and additional protection policies for the industry.
The Central Statistics Agency (BPS) recorded that the processing industry grew by 5.04 percent year-on-year in the first quarter of 2026 and remains the main pillar of the economy. This sector contributes 19.07 percent to gross domestic product (GDP), with a value of Rp1,179.6 trillion at current market prices.