Manufacturing productivity in the country still shows positive momentum. A number of producers have increased output, driven by new demand, especially in the domestic market. This is in line with S&P Global data showing that Indonesia's Manufacturing Purchasing Managers' Index (PMI) remained in expansion in February 2024 at 52.7.
“We greatly appreciate manufacturers in Indonesia who still have high confidence in running their businesses impressively amid unstable global economic and political conditions,” Minister of Industry Agus Gumiwang Kartasasmita said in Jakarta on Friday (1/3).
The Minister is optimistic that the national economy remains quite resilient, even though advanced economies such as Japan and the United Kingdom are in recession. Economic strength is in line with the positive performance of manufacturing, the largest contributor to national GDP. “More attention is therefore needed to improve manufacturing performance through strategic policies,” he said.
One crucial policy initiative proposed by Minister Agus is extending the certain natural gas price (HGBT) so it can be used more widely by industry. According to him, the HGBT of USD 6 per million British thermal units (MMBtu) currently covers only seven industrial sectors.
“At our ministry, no one is left behind; we propose all of them. Why seven in the first place? That was the initial strategy. But fundamentally, the Ministry of Industry supervises all industries, not just seven sectors,” he said.
The seven sectors are fertilizers, petrochemicals, oleochemicals, steel, ceramics, glass and rubber gloves. Agus is therefore pushing for all industrial sectors to obtain competitive gas prices.
There are 24 industrial subsectors that need gas as a raw material and to support production. “I am asking for an expansion because that is what we want, and the gas price is key to the competitiveness of our industrial products so they can have high added value,” he stressed.
In addition, the low gas price policy is an instrument for attracting foreign and domestic investment, especially in industry. “So we see the continuation of the HGBT policy as important because it has a large multiplier effect on the national economy,” he added.
If these strategic policies are implemented well and on target, the Minister believes national manufacturing performance will shine even more. This is also reflected in the Industrial Confidence Index (IKI), which reached 52.56 in February 2024, up 0.21 points from January 2024.
From 2014 to 2022, Indonesia's manufacturing GDP grew an average of 3.44 percent, higher than world and OECD growth (World Bank data), with a contribution of 19.9 percent. Indonesia's Manufacturing Value Added (MVA) in 2021 reached USD 288 billion (UNStats data), showing that Indonesia is one of the world's manufacturing powerhouses.
In 2023, non-oil and gas industrial exports accounted for 72.24 percent of Indonesia's exports. Realized industrial investment exceeded IDR 3,031.85 trillion over a decade, showing that manufacturing remains strong amid the current global recession. With rising investment, employment continues to grow; industry now employs 19.29 million people, up 23.5 percent from 2014.
“These indicators are in line with the manufacturing PMI, which has been in expansion for 30 consecutive months, showing that manufacturing keeps growing and is not deindustrializing,” the Minister stressed.
Commenting on Indonesia's February 2024 manufacturing PMI, Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said operating conditions in Indonesia's manufacturing sector have kept improving since the start of the year, with solid domestic demand supporting growth in new orders and output.
“Overall, sentiment among Indonesian manufacturers improved in February, in line with forward-looking indicators such as new orders, suggesting that output will keep expanding in the short term,” she said.
Indonesia's manufacturing PMI in February marked 30 consecutive months of expansion. In the second month of 2024, it surpassed the manufacturing PMIs of China (50.9), Germany (42.3), Japan (47.2), the United Kingdom (47.1), the United States (51.5), Malaysia (49.5), Myanmar (46.7), the Philippines (51.0), Taiwan (48.6), Thailand (45.3) and Vietnam (50.4).
Source: Press Release of the Ministry of Industry of the Republic of Indonesia