Is Indonesia's Perfume Industry Ready to Make the Nation's Name Fragrant?

Aroma has always been a marker of a nation’s strength, long before diplomacy and modern trade emerged to structure relations between countries. Indonesia today is enjoying a position that is rarely recognised by the wider public. Data from the Ministry of Industry shows that the national export value of essential oils in 2025 reached US$348.7 million, growing by around 34.4 percent compared to the previous year. This achievement propelled Indonesia to fifth place among the world’s largest essential oil exporters, behind India, the United States, France, and Brazil. Furthermore, almost 90 percent of the world’s demand for patchouli oil is supplied from the archipelago, a fact that places Indonesia as an irreplaceable node in the global fragrance supply chain.

However, the fundamental question is not merely whether Indonesia excels in raw material supply, but whether that advantage is sufficient to revive the national manufacturing sector, which has experienced a declining contribution to Gross Domestic Product over recent years. This phenomenon has been described by a number of economists, including Dani Rodrik, as a symptom of premature deindustrialisation, a condition in which developing countries lose their manufacturing base before reaching a mature level of prosperity. Indonesia’s wealth of fragrant raw materials has the potential to be the answer, provided it does not stop at being merely a raw export commodity.

The glory of Indonesia’s aromatic oil industry is not a new story. The name nilam itself originates from the acronym of the Dutch colonial company, Nederlandsch-Indische Landbouw Maatschappij, which abbreviated it to NILAM. This company was the first to cultivate and monopolise the large-scale trade of Acehnese patchouli oil from the late 19th to early 20th century. Willem Spoon, in his notes titled Atjeh Patchouli-Olie published in 1932, documented that Acehnese patchouli possessed the best quality characteristics in the world, far surpassing the quality of patchouli from Java and other regions. Archival research from the digital library of Lampung University also records that in the 1930s to 1940s, essential oils became a leading export commodity of the Dutch East Indies with a value reaching 2,402 guilders in 1933, surpassing other colonial commodities, with the United States, Britain, and France as the main buyers.

With historical capital at that level, Indonesia was actually once highly deserving of becoming the world’s perfume hegemon, at least in terms of premium raw material supply. Unfortunately, that potential was never converted into independent downstream manufacturing capacity. The colonial structure was indeed designed that way, in which the Dutch East Indies only played the role of raw material supplier, while the advanced refining processes, formulation, and sale of finished products remained controlled by European fashion houses. That pattern apparently did not fully change after independence.

A Ministry of Industry report in 2009 revealed a sharp irony. At that time, Indonesia supplied around 90 percent of the world’s patchouli needs, yet actually experienced a trade deficit in downstream perfume products. The import value of perfume and essential oil derivative products in 2008 was recorded at US$401 million, while exports were only US$103 million, a deficit of three to four times. Fauzi Aziz, who at the time served as Director General of Small and Medium Industries at the Ministry of Industry, asserted that until then there had not been a single domestic producer capable of independently producing high-quality perfume. The dark history also briefly repeated itself in the 1990s, when armed conflict in Aceh hit the national patchouli supply chain until production plummeted by around 70 percent. Farmers switched to other commodities, and Indonesia nearly lost its status as the world’s patchouli epicentre that had been built since the colonial era. It was only in 2016 that the government launched a revitalisation programme, expanding cultivation to East Kalimantan and South Sulawesi, a step that gradually restored Indonesia’s position on the global fragrance map.

Recent data shows more promising activity compared to previous decades. The news portal Suar.id noted data from Statistics Indonesia showing that the export volume of finished Indonesian perfume rose 12.9 percent in 2023 to 9.43 million kilograms, although it subsequently declined in 2024 and 2025. Singapore remained the main export destination with a value of US$82.49 million in 2025, followed by Malaysia and the United States. Meanwhile, the cosmetics industry, which encompasses the fragrance sector, recorded a domestic market value of around US$9.74 billion in 2025, with annual growth projections ranging from 4.33 to 4.37 percent according to the Director General of Small, Medium, and Miscellaneous Industries at the Ministry of Industry, Reni Yanita. The number of cosmetics business operators registered with the Food and Drug Supervisory Agency also jumped from 1,292 business units in 2024 to more than 1,500 business units by the end of 2025, around 90 percent of which are small and medium-scale industries.

What distinguishes the current situation from the colonial era is the emergence of local brands that dare to play at the downstream level. HMNS, for example, succeeded in introducing its products at Paris Fashion Week 2022, a symbol that domestic creative capacity is able to penetrate a stage that was once only controlled by French fashion houses. Global fashion houses such as Christian Dior, Yves Saint Laurent, and Tom Ford even continue to rely on Indonesian patchouli as a fixative ingredient in their luxury perfume formulas, showing that the quality of the archipelago’s raw materials has never truly been doubted by the global market. The soft power framework developed by Joseph Nye can be used to read this phenomenon more broadly. Fragrance is not merely an economic commodity, but also a medium for representing identity.