Even though the country’s manufacturers are expected to nearly double their growth this year, the business community remains critical of infrastructure problems that are increasing production costs and creating bottlenecks.
According to the Ministry of Industry, the manufacturing sector is forecast to experience growth of 4.9 percent this year, almost double the 2.6 percent growth recorded last year.
“Our target is that manufacturing sector growth is on par or exceeds national economic growth,” Industry Minister M.S. Hidayat said, adding that the growth was being driven by agro-industry and the palm oil sector in particular.
Growth in manufacturing was forecast to expand by 5.05 percent next year, Hidayat said. “Eventually, we’re expecting the sector to grow by 7 percent in 2014,” he added.
Indonesia’s economy, which expanded by 4.5 percent last year, is expected to grow by 6.2 percent this year and 6.3 percent next year.
Hidayat said the government was prepared to provide financial incentives to boost the manufacturing sector.
“We’re planning to give tax breaks for cocoa, palm oil and rubber commodities,” he said.
The business community, meanwhile, has joined economists in criticizing the government for not providing better infrastructure to boost economic growth.
Sofyan Wanandi, chairman of the Indonesian Employers Association (Apindo), said the government needed to improve infrastructure first if it wanted to achieve its growth target.
“What businesses need right now is improved infrastructure,” he said. “Infrastructure could cut production costs and stimulate the manufacturing sector.”
Sofyan said the cost of manufacturing in Indonesia was higher than importing finished goods or raw materials.
“The textile industry is ailing as cotton prices soared more than 100 percent.
And other subsectors like automotive and electronics, even though they showed increasing figures, import 60 percent of their components.
“If the government can reduce bottlenecks in airports, ensure fuel and electricity availability and improve roads, it could achieve its targets,” Sofyan said.
Economists such as Juniman, from Bank Internasional Indonesia, have voiced similar concerns.
“Building roads and seaports are vital to distribute goods and commodities in the country,” Juniman said.
President Susilo Bambang Yudhoyono has pledged to invest $140 billion through 2014 to improve infrastructure and boost economic growth to an average of 6.6 percent annually by the end of his second term that year.
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