VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Business conditions faced by Indonesia's manufacturing industry continued to improve in the middle of the second quarter of 2019. The driver of the increase was stronger expansion in output and growth in new demand.

This was reflected in the Indonesian manufacturing Purchasing Managers' Index ™ (PMI ™) data released by the Nikkei which showed that Indonesia's manufacturing PMI in May this year was 51.6, up from the previous month at 50.4.

The PMI points above the 50 mark indicate that the manufacturing sector is expanding. The achievements in May 2019 are the highest since August 2018. In the period of May, the confidence of Indonesian manufacturers continued to surge, companies also increased the number of workers, and increased purchasing activities.

"We see, manufacturing industry players are still optimistic about expanding or increasing investment. This is supported by stable and conducive political, economic and security conditions in Indonesia, especially after yesterday's election, "said Minister of Industry Airlangga Hartarto in Jakarta, Sunday (2/6).

The Minister of Industry is optimistic, the performance of the manufacturing industry is increasingly stretching. "Moreover, the transportation infrastructure is increasing rapidly with the connectivity of the eastern and western regions of Java, as well as several regions that are feeders and hubs in Indonesia," he explained.

Then, another potential is the experience of industrialization in Indonesia which is more than 30 years so that it has a pool of talent for the leading sector. "In order to boost industrial performance, the government also prioritizes vocational education and polytechnics by introducing a link and match system to reform the curriculum," he added.

In order to spur investment in the industrial sector, the Ministry of Industry also facilitated a number of polytechnic developments in industrial estates. This strategic step is to create competent human resources (HR) that meet the needs of today's industry. "We have built a polytechnic, including in the Cilegon, Morowali and Kendal industrial areas," said the Minister of Industry.

Furthermore, the Ministry of Industry has proposed the provision of fiscal incentives in the form of super deductible tax for industries that actively carry out research and development activities to generate innovation and industries involved in vocational education and training programs. This fiscal incentive is believed to be able to attract investors in the industrial sector while boosting its competitiveness.

Responding to data from the Indonesian PMI Manufacturing survey in May 2019, IHS Markit Chief Economist Bernard Aw said that Indonesia's manufacturing sector growth in May was a momentum to gather optimism towards the second quarter of this year. "The increasingly strong demand conditions have pushed the company to continue to increase production in the coming months," he explained.

This continued increase, according to him, will also increase confidence among manufacturing industries in Indonesia. "We see, the future output index, a benchmark for business expectations, jumped to its highest position for more than two years, becoming the highest monthly increase (15.6 points) recorded in the survey history," he explained.

Pegatron investment

The Minister of Industry added, one of the manufacturing sectors that is increasingly aggressive in investing in Indonesia, namely the electronics industry. For example, an electronics company from Taiwan, Pegatron cooperates with the national electronics industry in Batam to produce wifi components and equipment that have been exported to the United States.

"They said that they would increase the number of their production and produce other electronic products in a cooperative capacity with Satnusa. In addition, they are also looking for new investment locations. Besides in Batam, they also consider East Java, "said Minister of Industry.

In addition, Airlangga said, there were several industries from China that would relocate their factories to Southeast Asia, including Indonesia, which was the main destination. "There are textile, garment and footwear companies that are looking at new locations in Indonesia. Besides that, there are also chemical and biochemical industries and the automotive industry, "he said.

These sectors are industries that are getting priority development by the Indonesian government to be more competitive globally, because they are export-oriented, labor intensive, and become import substitutions. Based on the map of Making Indonesia 4.0, these industries will also be a pioneer sector in implementing 4.0 industry in the country.

"At present it shows intense competition between Asian countries which are competing to benefit from the US-China trade war by making their countries attractive to foreign investment," he said.

Director of Industrial Area Directorate General of Resilience, Regional and International Industrial Access (KPAII) Ministry of Industry (kemenperin)