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

October 27, 2025

President Prabowo Subianto spent much of the first year since his October 2024 inauguration trying to fulfill his campaign promises, but he has also been quietly consolidating power over his political detractors, with a little help from his Army friends.

When he took office 12 months ago, he shared power by setting up the country's largest and most diverse coalition government that includes just about everyone who matters in national politics.

Winning the 2024 election with a convincing majority, he has shared the spoils with not only those who helped his campaign but also the losers. Prabowo has parceled out strategic positions in the government, including posts in state-owned companies, to buy their support, if not loyalty. He has even expanded the size of the cabinet to over 100 ministers and deputy ministers to accommodate this strategy, breaking the maximum limit of 40 previously prescribed by law.

His administration could be almost called a national unity government if the Indonesian Democratic Party of Struggle (PDI-P) had not turned down his offer to join. While it is the only one out of the eight political parties in the House of Representatives that is not part of the coalition government, but PDI-P has hardly played the role of an effective opposition.

Prabowo's coalition government comprises the seven other political parties including his own Gerindra Party, as well as special interest groups representing businesses, Islamic organizations and the Indonesian Military (TNI) and the National Police (Polri). Although the latter two are constitutionally answerable to the president, they are powerful institutions whose interests no leader can ignore. One notable absence is labor unions, but they are weak and ineffective and thought to be of little strategic value.

Prabowo has pretty much gotten what he wanted in the last 12 months, including his legislative agenda, with the parties in his coalition controlling over 80 percent of House seats.

While he faces no real challenges from political institutions, criticism has come from less organized movements such as youths and students, who have turned to social media to air their grievances through popular memes and hashtags like #IndonesiaGelap (Dark Indonesia) and #KaburAjaDulu (Leave first). Many people displayed the Straw Hat Pirates flag from manga One Piece, symbolizing Gen Z defiance, in place of or next to the national flag during Indonesia's 80th independence anniversary.

Later in August, these online grievances erupted into offline mass protests and riots nationwide in the first biggest test to Prabowo's presidency. He responded by quickly deploying the military to the streets to quell the violence, effectively taking over the police's job.

While he appears to have things under control, the most serious challenge to his power has come from within his administration, from a faction that has no name but clearly has the largest clout.

This is the faction representing the interests of predecessor Joko "Jokowi" Widodo, who continues to pull strings through his eldest son, Vice President Gibran Rakabuming Raka, and more than10 ministers that were carried over from his cabinet. He also wields influence strings through the seven political parties in Prabowo's government, particularly Golkar, the largest among them, and through several Supreme Court and Constitutional Court justices appointed during his 10-year term. Meanwhile, the leadership of the Corruption Eradication Commission (KPK) is composed of figures installed just a few weeks before he stepped down in October 2024.

The power struggle between the sitting and former presidents became apparent when Prabowo replaced five of Jokowi-appointed ministers following August's violent protests. But his plan to reform the police was foiled when National Police chief Gen. Listyo Sigit Prabowo, another Jokowi appointee, set up an internal reform committee before he could set up one of his own. Jokowi's power may be weakening, but he still calls some of the shots.

Prabowo has been building his power base not so much through Gerindra, but by opening the doors for the military to fill strategic posts in the civilian government. The House swiftly revised the TNI Law by not only extending the mandatory retirement age for military officers to 65 but also expanding the number of civilian agencies where active-duty officers can serve to 16. He has also appointed long- and recently retired military officers to some of these strategic positions.

In August, he inaugurated six new Army military regional commands to bring their total to 21, giving the TNI authority to oversee domestic security, which is technically the police's domain. The Army has also received the green light to create 100 new battalions, with recruits being trained in not only military skills but also civic jobs.

Prabowo once said that in Jokowi, he had the best political mentor to prepare him for the presidency. He served as Jokowi's defense minister in 2019-2024, when he had a close-up view of how manage a big coalition and reduce the opposition's strengths. He has followed that style of governing in running an even bigger coalition, and has now perfected the art of coalition management by drawing the military closer to the center of power.

Underpinning the ongoing power struggle is the 2029 presidential election. But Prabowo must still deliver on his campaign promises over the next four years, including his ambitious 8 percent economic growth rate, to have any chance at getting reelected, assuming that this is indeed his intention.

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