Manufacturing sector to drive Indonesia’s economy: Bappenas

The manufacturing sector is crucial for Indonesia’s development in the next five years, according to the National Development Planning Agency (Bappenas) head Bambang Brodjonegoro.

Indonesia might see a growth rate of 6.31 percent between 2020 and 2024, according to a report by the Asian Development Bank (ADB) and Bappenas. Employment in the manufacturing sector is expected to account for about 20 percent of the workforce by 2024.

The country’s potential GDP growth rate might reach 5.52 percent on an average between 2020 and 2024. At present, the manufacturing sector accounts for 14.72 percent of the workforce, while the agriculture sector is still the major employer. About 28.79 percent of the workforce is engaged in agriculture.

Currently, Indonesia’s heavy reliance on commodities is subject to heavy ups and downs in prices. It is precisely why enhancing the manufacturing sector is crucial. It will help in reducing the nation’s dependence on the export of raw commodities. Export of manufacturing-based products is a stronger platform that would most likely provide a boost for the Indonesian economy, said Brodjonegoro.

“Indonesia wants to become an upper-middle-income economy in the next 15 years,” said Brodjonegoro. “The current structure of the Indonesian economy, which is still based on agriculture, natural resources and simple manufactures and services does not allow us to attain higher growth rates. Therefore, the development of a sophisticated manufacturing sector is necessary to unlock Indonesia’s growth in the medium to long term.”

According to the ADB report, Indonesia needs to create niches in manufacturing activities, support product diversification and bridge the gaps between large firms and small and medium-sized enterprises. A strong connection between domestic entities and the international market would also prove to be essential for the economy to start depending on the manufacturing sector for its growth.