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
President Prabowo Subianto gave a passionate speech at the United Nations General Assembly (UNGA) on Sept. 23 that impressed many people, paving the way for the Indonesian leader to set himself as an international leader ready to play his part in promoting global peace and order.
Making his debut at the annual gathering of world leaders, Prabowo reiterated Indonesia’s commitment to the multilateral system under a strong UN and offered to send soldiers for peacekeeping missions anywhere in the world, including Gaza.
He also said Indonesia is ready to recognize Israel and provide guarantees of its safety and security after the creation of the Palestinian state. While recognition of Israel is implied by Indonesia’s support for the two-state solution, no other Indonesian leader in the past has gone as far as openly stating it, let alone offering to provide security for the Jewish state.
Prabowo won praise from many global leaders for his speech, although some at home criticized him for trying to appease Israel too much when it is now widely recognized that it is conducting a genocide against Palestinians in the Gaza Strip.
United States President Donald Trump described it as a “great speech” and praised the delivery, noting Prabowo’s banging his fist on the podium, when the two met on the sidelines of the assembly in New York City. Israeli prime minister Benjamin Netanyahu, who spoke at the assembly two days later, hailed Prabowo’s speech as “optimistic”, coming from the country with the world’s largest Muslim population.
Praise came from many other global leaders, with many of them approaching Prabowo immediately after the speech to congratulate him, including Jordan’s King Abdullah II and Brazilian President Luiz Inácio Lula da Silva, according to the Presidential Office in Jakarta.
That Prabowo has ambitions to be seen as a global leader is well known. He had traveled the world extensively even before his inauguration in October 2024, cutting deals bilaterally and addressing summits in international forums. He has visited at least 35 countries as president and attended five different summits, including the latest UNGA.
One important leader he has yet to meet, bilaterally, is President Trump. The Presidential Office had earlier been working to arrange a meeting between them in the White House in Washington, a short flight from New York City, but the plan did not materialize.
They met in New York when Trump organized a special meeting with eight leaders from Muslim-majority countries to discuss his Gaza peace plan, more evidence that the US leader recognizes Indonesia as an important player in the Middle East peace process.
Indonesia is not without credentials in staking its claim on the global stage. It is the fourth-largest country in terms of population, the third-largest democracy, and the largest democracy in the Muslim world. A member of the Group of 20, it is the 16th largest economy and on its way to entering the top five in 20 years, according to independent predictions.
Prabowo stands out because his predecessor, Joko “Jokowi” Widodo, shied away from the global stage, focusing more on domestic policies and leaving foreign policy entirely in the hands of diplomats at the Foreign Ministry. In contrast, Prabowo runs his own foreign policy, and made his aide Soegiono, with limited international affairs experience, the foreign minister.
Many observers compared Prabowo’s UNGA speech to the one given by Indonesia’s first president, Sukarno, in the same forum in 1960. Titled “To Build the World Anew”, Sukarno urged the UN to fight against colonialism and imperialism. Having hosted the historic Asia Africa conference in Bandung in 1955, the speech made Sukarno one of the top leaders from newly independent nations. He was one of five founders of the Non-Aligned Movement in 1961.
Prabowo’s speech is nowhere near Sukarno’s in terms of substance and impact, but he is the closest of any Indonesian leaders since then to pay such attention to global affairs.
The Middle East could pave the way for his global ambitions, in spite of criticisms at home that he may be going too far to undermine’s Indonesian support for an independent state of Palestine. He offered to provide peacekeepers for Gaza, and early this year, he said Indonesia could take up to 2,000 Palestinians from Gaza who desperately need medical assistance.
While Prabowo used the word genocide, he did not mention Israel by name. This may be a deliberate diplomatic ploy since using harsh words risks having doors shut on his ambition of playing a bigger role in the Middle East. At any rate, Indonesia has already condemned the Israeli genocide, individually and through UN resolutions.
In spite of his suggestion of Indonesia providing security guarantees for Israel, the Foreign Ministry reaffirmed the long-held position that recognition of the state of Israel will come only after Palestinians gain their independent state under the two-state solution.
