A large contributor to Indonesia’s economy, manufacturing industry, had relatively stagnant growth this year, the Central Statistics Agency (BPS) says - but the government pledges to revitalize the crisis-hit sector starting next year.
In the first nine months of this year, large- and medium-scale manufacturing industries grew an insignificant 0.02 percent from the same period in 2008, BPS reported.
While manufacturing industry makes up 27 percent of Indonesia’s gross domestic product (GDP) of about Rp 5,400 trillion (US$563.67 billion), manufacturing industry has been largely overlooked and needs to be improved to help spur economic growth, the BPS said.
Analysts said that in the past five years of President Susilo Bambang Yudhoyono’s administration manufacturing industry had received less attention. The government put its weight more behind the non-tradable sectors like telecommunications rather than the tradable sectors like manufacturing that could attract more workers, resulting in an imbalanced economy.
Moreover, since last year the country’s manufacturing industry - in particular export-oriented sectors - had suffered from the negative impacts of the global economic downturn, which had significantly reduced overseas demand. While the global economy has seen signs of recovery, global demand has yet to return to the pre-crisis levels.
To fix this, the government has pledged to support the real sector in Yudhoyono’s second five-year term, inviting stakeholders to the two-day National Summit held last week so as to hear their recommendations.
“We have stated that manufacturing industry and some strategic industries will be our priorities,” said Finance Minister Sri Mulyani Indrawati Tuesday, adding priorities included sugar, cement, palm oil and other natural resources.
With real sector improvements, the economy is expected to grow by more than 7 percent per year by 2014, Yudhoyono’s last year in office.
Industry Minister MS Hidayat, himself the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said manufacturing industry would remain slow without better infrastructure, including gas and electricity.
Businesses have often complained against the decisions by state power utility PT PLN to shut off electricity in some areas, undermining and delaying industrial output.
Higher gas prices have inflated fertilizer prices, discouraging farmers, a factor which has slowed down agricultural development.
Kadin has given recommendations for action plans for the government in the next five years, most notably to develop labor-intensive manufacturing and agriculture.
More employment is expected to cut the poverty rate, which now stands at 14.15 percent, or 32.53 million people, according to the latest BPS survey in March.
In a meeting Tuesday morning, Coordinating Minister for the economy Hatta Radjasa said economic ministers had reviewed all the recommendations by stakeholders in the National Summit.
“We are focusing on the response. For instance, if a law revision is needed, [then] how long will it take.”
Each economic minister will review their sector and report to the coordinating minister for the economy. On Thursday, the President will hold a Cabinet meeting to design the economic roadmap for the 2010-2014 period, said Hatta.
The government expects the economy to expand by above 7 percent per year by 2014
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