Manufacturing PMI Weakness Does Not Disrupt Investment in Special Economic Zones

The Coordinating Ministry for Economic Affairs has stated that the weakening of Indonesia’s Manufacturing Purchasing Managers’ Index (PMI) has not affected investor interest in Special Economic Zones (KEK). Secretary of the Coordinating Ministry for Economic Affairs Susiwijono Moegiarso said that investment entering the KEKs is still showing a positive trend. He noted that the PMI decline to 46.9 in June 2026 cannot be used as a single indicator to assess investment prospects in these areas. “Not all KEKs are engaged in the manufacturing sector. Of the 25 existing KEKs, only 13 are manufacturing-based, while the rest operate in the services and other sectors,” Susiwijono said during a press conference at his office in Jakarta on Monday, 6 July 2026. He explained that the PMI describes short-term industrial activity conditions, whereas investment decisions are based on a more complex set of benchmarks. Investors entering KEKs typically take two to three years to realise factory construction and production facilities. “The PMI is a monthly index that also reflects expectations for the coming months. What we are discussing is real investment that is already queuing to enter the special economic zones,” he stated. The majority of manufacturing investment in KEKs comes from various sectors, including mineral processing, electronics, textiles, furniture, footwear, and the electric vehicle battery industry. For example, the Galang Batang KEK focuses on the bauxite processing industry into alumina, while the Kendal KEK hosts various manufacturing industries such as household appliances, electronics, textiles, furniture, footwear, and battery components including anodes and cathodes. Previously, S&P Global reported that Indonesia’s Manufacturing PMI contracted to 46.9 in June 2026, down from 50.0 in May. The decline was triggered by a drop in demand for Indonesian manufactured goods, with the rate of reduction being the sharpest in a year. The report also noted a significant rise in average cost burdens, with input price inflation the highest since September 2013, driving the strongest increase in factory selling prices in nearly 13 years.