Indonesia to boost manufacturing sector to seize opportunity provided by China

Indonesia will boost its manufacturing sector to capture an opportunity provided by China that is shifting to more value-added manufacturing activities amid rising labour costs. 

Over the past decade, the share of Indonesia's manufacturing sector in the national Gross Domestic Product has declined from 28 per cent to 24 per cent. 

"We want to push it again. Increasing labour cost in China is a good opportunity for Indonesia to capture," Coordinating Economic Minister Mr Sofyan Djalil told a World Economic Forum (WEF) discussion in Jakarta on Monday. 

Elaborating on his points on the sidelines to reporters, Mr Sofyan said the government will introduce tax incentives and measures that attract investors to the sector.

"We will build schools, labourers' housing facilities near projects where investors are planning to build an industrial estate, for example," he told reporters. 

High global commodity prices had led Indonesia to neglect developing its manufacturing sector as it enjoyed the fastest economic growth in a decade in 2008, and continued to have high economic growth in the following few years. The South-east Asia's largest economy is the world's largest palm oil producer and a main exporter of rubber, coal and gas. 

"Indonesia is a big country with 250 million people. More than 60 per cent of the population is under 30 years old. It is a big potential. We understand that we have a lack of infrastructure. We didn't pay enough attention to this. But this is a good opportunity for investors," Mr Sofyan added. 

For example, Indonesia' current electricity generation capacity of about 35 gigawatt is inadequate for its needs, he said.  It has, therefore, set itself an ambitious target of building an additional 35 gigawatt by end of 2019.

"We have a lack of airports, seaports, which means a big challenge for us. (Providing such infrastructure) is in fact the most challenging job for Indonesia going ahead," he added. 

wahyudis@sph.com.sg