industrial indonesia new manufacturing projects making government
High-tech revolution to improve Indonesia’s industrial competitivenessIndonesia is looking to utilise advancements in modern technology to spurgrowth and improve competitiveness in the industrial sector, with thegovernment unveiling a new plan aimed at increasing manufacturing output.Launched in early April, the Making Indonesia 4.0 strategy highlights thepotential of technological advancements – including the internet of things,artificial intelligence, human-machine interface, 3D printing, and robot andsensor technology – to boost industrial capacity.Five priority sectors – food and beverages, automotive, textile, electronicsand chemicals – have been identified as areas where Indonesia can become aglobal leader under the roadmap, with manufacturing forecast to account for21-26% of GDP by 2030, up from 18% in 2016.The government projects that the increase in manufacturing activity willcreate some 7m-19m jobs over the next 12 years and add 1-2% to GDP annuallythrough to 2030, lifting average annual growth rates to between 6% and 7%.## Infrastructure projects to help drive industrial growthTo meet the goals of the Making Indonesia 4.0 strategy, the government ishoping a series of major infrastructure projects, a more supportive legalframework, and incentives for modern technology transfer and development willboost manufacturing activity.Speaking at an Indonesia Employers Association event in Jakarta on April 24,Airlangga Hartanto, the minister of industry, said strengthening raw materialoutput was key to improving industrial production, with a series ofconstruction projects to help fuel demand.The government pledged to develop Rp5500trn ($390.4bn) worth of new publicworks projects between 2015 and 2019, to be largely funded by the privatesector, of which around $300bn remains in the pipeline.Developments include a specific focus on transport and logistics sectors, with2650 km of new roads, 3258 km of rail lines, 15 airports and 24 seaports to beconstructed, along with mass rapid transit systems for six metropolitan areas.Of these 265 projects, 26 had been completed by the end of the first quarterof this year, and another 150 are under construction; however, a series ofconstruction-related accidents saw the government suspend development on someprojects in February.While infrastructure developments should ease productivity bottlenecks, MakingIndonesia 4.0 foresees a major overhaul of the education system to improvenational human resources and better align academic curricula with the neweconomic model. Officials have also pledged to redevelop the country’sindustrial zones, and bolster industrial sustainability through the greateradoption of electric powered vehicles, biofuels and renewable energy sources.Furthermore, the policy calls for incentives such as tax exemptions orsubsidies to be offered to speed up the adoption of certain technologies, inaddition to greater collaboration between the state, private sector anduniversities to develop an innovation-based ecosystem, and a harmonisation ofregulations and policies.## SMEs key to industrial pushAnother factor central to the success of the strategy is improving thetechnological uptake of small and medium-sized businesses (SMEs). There are anestimated 3.7m SMEs in Indonesia, accounting for some 99% of all businessesand more than 60% of GDP.Along with micro firms, industry figures have highlighted how SMEs have thepotential to be key suppliers for some of the major sectors targeted underMaking Indonesia 4.0, emphasising the need to integrate them into thetechnology and supply chains as the policy is rolled out.## New regulation aimed at improving skills transferThe accelerated industrial programme has also been supported by newregulations governing the employment of foreign workers domestically, adevelopment expected to assist in building up the skills of the localworkforce.The new regulations, which were approved in March and come into effect inJuly, will make it easier for both local and international companies to employforeign workers.However, some political leaders and trade unions have raised concerns that thechanges could see Indonesian workers locked out of manufacturing jobs infavour of highly skilled foreigners. Currently, there are some 126,000 foreignworkers in Indonesia, according to data from the Ministry of Manpower.Another area of concern is that the technological upgrade of the industrialsector could make many existing jobs redundant in the coming years, meaningthe re-skilling of workers will be key to meeting the targets of makingIndonesia 4.0.