Vania Lundina

Manufacturing industry has played an Manufacturing industry has played an important role in the industrial and important role in the industrial and

economic development of Indonesia. economic development of Indonesia. This sector has also become the This sector has also become the

most influential factor to the most influential factor to the economic and industrial growth economic and industrial growth

among other sectors. The following among other sectors. The following presentation will discuss the presentation will discuss the

developments and effect of the developments and effect of the manufacturing industry in Indonesia.manufacturing industry in Indonesia.

Indonesia’s Manufacturing Indonesia’s Manufacturing ProductsProducts

Products:Products:TextilesTextilesClothingClothingFootwearFootwearCement Cement Chemical fertilizersChemical fertilizers

The largest exports, as well

as garments, furniture and

shoes

The Manufacture The Manufacture Growth Growth

Indonesia experienced a rapid Indonesia experienced a rapid industrialization since 1975. industrialization since 1975.

Manufacturing’s contribution to Manufacturing’s contribution to the economy increased from 10% the economy increased from 10%

to 25% during this period.to 25% during this period.

Significant developments in Significant developments in 1969-1996;1969-1996;From the mid 1960s to early From the mid 1960s to early

1980s, the GDP grew by 7.5% 1980s, the GDP grew by 7.5% every yearevery year

Due to the collapse of the price of Due to the collapse of the price of oil in 1980-1985, the GDP oil in 1980-1985, the GDP decreased into 6.7% p.a. from the decreased into 6.7% p.a. from the mid 1980s to 1996mid 1980s to 1996

In 1970, 45% of GDP is obtained In 1970, 45% of GDP is obtained from agriculture sector, while from agriculture sector, while 12% of it came from 12% of it came from manufacturing industry.manufacturing industry.

The manufacturing sector The manufacturing sector began to slow down to 7% p.a. began to slow down to 7% p.a. after 1993. Factors affecting after 1993. Factors affecting the slow down were: the long-the slow down were: the long-standing weaknesses and standing weaknesses and others due to the emerging others due to the emerging constraints to sustained constraints to sustained industrial growth.industrial growth.

By 1996, the GDP from By 1996, the GDP from manufacture rose again to 27%manufacture rose again to 27%

In 1998-1999, the balance trade In 1998-1999, the balance trade between manufacturers has between manufacturers has shown some advantages shown some advantages through manufactured exportsthrough manufactured exports

Manufacturing exports Manufacturing exports increased from less than 15% to increased from less than 15% to 60% by 1999.60% by 1999.

Entering 2000, the industrial Entering 2000, the industrial manufacture began to be stablemanufacture began to be stable

During the Financial Crisis in During the Financial Crisis in 2008-2009, the manufacture 2008-2009, the manufacture industries grew by 4.2% with the industries grew by 4.2% with the greatest growth in paper and greatest growth in paper and printing, cement and food and printing, cement and food and beverage production.beverage production.

This is supported by foreign This is supported by foreign investmentinvestment In 2009, Panasonic company plan to In 2009, Panasonic company plan to

locate one of its companies in locate one of its companies in Indonesia due to the promising Indonesia due to the promising manufacture condition.manufacture condition.

ProblemsProblems

The problems of Indonesian Manufacturing The problems of Indonesian Manufacturing Sector can be grouped under two Sector can be grouped under two

categories: Structural Weaknesses and categories: Structural Weaknesses and Organizational Weaknesses.Organizational Weaknesses.

Specific ProblemsSpecific Problems

In 1980s, Indonesia faced a In 1980s, Indonesia faced a series of economic problems; the series of economic problems; the rose of oil pricesrose of oil prices

In 1997, there was another In 1997, there was another serious economic problem. The serious economic problem. The manufacturing sector manufacturing sector experienced a negative growth experienced a negative growth of -11.4%of -11.4%

of Indonesia’s manufacturing sectorof Indonesia’s manufacturing sector

Strategies and PoliciesStrategies and Policies

Between 1970-1980s the government Between 1970-1980s the government launched an economic liberalization launched an economic liberalization programs to improve the economic programs to improve the economic conditioncondition

Made oil and gas exports a top priorityMade oil and gas exports a top priority

In 2010, the government is going to do a In 2010, the government is going to do a manufacturing industry revitalization, manufacturing industry revitalization, especially to sugar, cement and fertilizers especially to sugar, cement and fertilizers industries.industries.

Growth and Structural Growth and Structural ChangeChange

Indonesia’s manufacturing sector stands out Indonesia’s manufacturing sector stands out in comparison with other countriesin comparison with other countries

Expanded 11% per annum (second after Expanded 11% per annum (second after China)China)

Average increases in labor productivity Average increases in labor productivity compared to other sectorscompared to other sectors

Technologies:Technologies:Low = 47% productionLow = 47% productionMedium = 36%Medium = 36%High = 17%High = 17%

Impacts and Impacts and OpportunitiesOpportunities

Manufacture employmentManufacture employment

Manufacture exportsManufacture exports

Manufacturing productionManufacturing production

According to Loretta Wan, the Regional According to Loretta Wan, the Regional Director of South East Asia & India from Director of South East Asia & India from Hong Kong Trade Development Council Hong Kong Trade Development Council Delegation, Indonesia will experience Delegation, Indonesia will experience another significant development of another significant development of manufacturing industry up to 2015. manufacturing industry up to 2015.

Indonesia is a favorite destination of Indonesia is a favorite destination of investment from many investors around investment from many investors around

the world, especially Asian countries.the world, especially Asian countries.

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