Sector

Industry

Indonesia's industrial sector encompasses diverse subsectors that play a significant role in the country’s gross domestic product (GDP). Notably, manufacturing contributed 16.30 percent of Indonesia’s total GDP in the second quarter of 2023, with key activities including the manufacturing of textiles, automotive, electronics, and food processing. During the same period, other subsectors also experienced growth, led by the metal, computer, electronic devices, optical, and electronic appliances industry, which grew by 17.32 percent. This was followed by growth in the basic metal industry by 11.49 percent, the transportation industry by 9.66 percent, the food and beverage (F&B) industry by 4.62 percent, and the paper and recording media industry by 4.50 percent.

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Industry

Indonesia's industrial sector encompasses diverse subsectors that play a significant role in the country’s gross domestic product (GDP). Notably, manufacturing contributed 16.30 percent of Indonesia’s total GDP in the second quarter of 2023, with key activities including the manufacturing of textiles, automotive, electronics, and food processing. During the same period, other subsectors also experienced growth, led by the metal, computer, electronic devices, optical, and electronic appliances industry, which grew by 17.32 percent. This was followed by growth in the basic metal industry by 11.49 percent, the transportation industry by 9.66 percent, the food and beverage (F&B) industry by 4.62 percent, and the paper and recording media industry by 4.50 percent.

Notably, the F&B industry stands out as the only non-mineral industry to have made the largest contribution to the national GDP at 38.61 percent in the first quarter of 2023, having generated US$1.1 billion from 2,226 projects through foreign direct investment (FDI) and Rp 26.72 trillion from 5,416 projects through domestic investment sources.

Indonesia’s massive industrial development has enabled the industrial sector to provide extensive employment opportunities, with over 19 million people employed in the sector, making it the largest workforce in Indonesia as of 2019. By 2024, the government aims to further increase employment in the sector to more than 20 million people.

Among all the subsectors, the non-oil and gas manufacturing industry has emerged as one of the most important in terms of employment, providing work opportunities for approximately 14.13 percent of the Indonesian labor force in 2022. Companies within this subsector are mostly concentrated on the island of Java. Additionally, the Riau Islands are known to have the highest average net wage for manufacturing workers in the country, with around Rp 5.55 million per month as of February 2023.

Furthermore, Indonesia's industrial sector presents promising opportunities for growth and development across various fronts, including Industry 4.0 transformation, adoption of sustainable practices, regional integration with Southeast Asia and Pacific actors, downstream manufacturing, and empowerment of small and medium enterprises (SMEs). Particularly concerning Industry 4.0 transformation, the government administers the integration of advanced technologies into the production process to improve efficiency and product quality. Additionally, efforts are underway to reduce production costs by placing cement, refined petroleum, automotive, and F&B at the forefront of entering Industry 4.0.

Moreover, the incoming administration has promised to bolster the downstream agenda, especially in the mining sector, with plans for 20 new smelters set to become operational between 2024 and 2025. The shift towards downstream mining products, such as bauxite, copper, and tin has the potential to increase their value, with added values reaching up to three to 180 times along the value chain.

Latest News

September 17, 2026

Indonesia’s recurring wildfires have once again spiraled into a crisis that reaches far beyond its forests and peatlands. As dense haze shuts down schools, endangers public health, and chokes local economies at home, smoke from fires across Sumatra and Kalimantan has drifted across national borders, blanketing parts of Singapore, Malaysia, Brunei, and the Philippines. What has long been treated as an unfortunate, seasonal environmental headache is morphing into a thorny test of governance, and an escalating diplomatic liability for Jakarta.

The scale of this year’s burn is staggering. Data from Nusantara Atlas shows a dramatic surge in cumulative hotspots in late August, leaping from 190,571 on Aug. 22 to 294,699 just a day later. By Sept. 10, that tally had topped 301,990, with Kalimantan recording the highest density of active blazes. The emissions tell an equally grim story. According to the European Union’s Copernicus Climate Change Service, Indonesia’s wildfires released an estimated 19.7 million metric tonnes of carbon dioxide between Sept. 1 and 7 alone, accounting for more than a third of all wildfire emissions worldwide during that period.

By July, roughly 202,000 hectares had already burned, according to data cited by Reuters. That damage expanded sharply through August, with total burned area estimated to have reached 600,000 ha, concentrated largely in Kalimantan, Sumatra, and South Papua. A potent El Niño has undoubtedly exacerbated conditions, ushering in parched, blistering weather that allows fires to ignite and spread with ease. Yet weather alone cannot shoulder the blame for a disaster that returns like clockwork.

Forestry Minister Raja Juli Antoni has openly acknowledged that many of these fires were set intentionally by individuals and corporations. Slashing and burning remains the cheapest, easiest method for clearing land in rural Indonesia, particularly where peatlands and native forests are systematically converted into oil palm and pulp plantations. This reality shifts the underlying debate: The issue is not simply whether Indonesia can respond to extreme weather, but whether it possesses the political will to stop illegal burning and hold perpetrators accountable.

Authorities have started taking legal steps. The Forestry Ministry recently handed down administrative sanctions to six Forest Utilization Business Permit holders after fires scorched 1,511.55 ha across their concessions in West, Central, and East Kalimantan. Five of these companies received government-enforced compliance orders. A sixth, PT MPK, had its operating permit suspended alongside an enforcement order after investigators discovered extensive, recurring burns across its land.

Yet enforcement remains the ultimate bottleneck: identifying the actual culprits behind the blazes and imposing penalties severe enough to serve as a genuine deterrent.

At home, the toll is devastating. More than 1.4 million students have been forced back into remote learning due to toxic, hazardous air. In Palembang, South Sumatra, the closures disrupted around 250,000 students across 1,030 schools. Meanwhile, health authorities recorded more than 50,000 cases of acute respiratory infections across seven provinces between July and August alone.

A recent assessment by the Center of Economic and Law Studies (CELIOS) estimated the combined economic and healthcare losses from the January–August fires at Rp 39.3 trillion (US$2.25 billion) to Rp 123.1 trillion. The upper end of that estimate represents nearly half, 49.1 percent, of Central Kalimantan’s projected 2026 regional GDP.

The fallout, however, does not stop there. Malaysia has felt the brunt of the drifting plume. On Sept. 4, authorities declared an emergency in Serian, Sarawak, as air quality deteriorated to hazardous levels, shuttering schools across the state. The haze has even reached the Philippines, pushing air quality readings in Manila into unhealthy territory. Faced with fouled air, Malaysia and Brunei have moved to escalate the matter through regional channels, reviving diplomatic frictions that have simmered for decades.

On paper, ASEAN possesses a tailored mechanism for precisely this challenge: the ASEAN Agreement on Transboundary Haze Pollution (AATHP), adopted in 2002 and ratified by Indonesia in 2014. The pact outlines clear protocols for monitoring, prevention, emergency response, and joint mitigation. Yet the treaty cannot supplant domestic law enforcement. Pinpointing who lit a blaze, proving whether a concession holder failed to safeguard its perimeter, and meting out punishment remain sovereign duties.

Herein lies the regional framework’s greatest limitation. ASEAN can streamline satellite data and coordinate disaster teams, but it cannot march into an Indonesian concession to enforce the law. A regional accord can mitigate the fallout from a haze crisis; it cannot dismantle the economic incentives that ignite the fires in the first place. Regional coordination is underway. In late August, the ASEAN Specialised Meteorological Centre triggered a Level 3 alert for the southern ASEAN region, signaling intense fire activity and an imminent risk of severe transboundary haze.

Indonesia has navigated major haze crises before, yet the skies continue to darken every dry season. For a public weary of choking on smoke and increasingly skeptical of official assurances, deploying more water-bombing helicopters is no longer enough. Meaningful progress requires naming names, prosecuting offenders, and ensuring corporate negligence carries real, biting costs. The most urgent test ultimately rests with Jakarta: proving it can stop the next fire before it turns into yet another national emergency and regional embarrassment.

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