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 may be projecting himself globally and at home as a leader who is tough on corruption, not just in words but also in actions, with several high-profile corruption cases in his first year in office. But the business community is not impressed, and has even given the thumbs down to his overall anti-graft campaign.
This could have serious repercussions on Indonesia as an investment destination, especially compared with some of it Southeast Asian neighbors.
Indonesia’s 2025 Corruption Perception Index (CPI) showed a significant decline, with the score dropping to 34 out 100, down from 37 in 2024. Indonesia ranked 109th out of 180 countries surveyed, down 10 places. It is behind Singapore, Malaysia, Timor-Leste and Vietnam but scored better than Thailand, the Philippines and Cambodia.
The CPI asks mostly business executives but also country experts and analysts about their assessment on various aspects of public sector corruption including bribery, kickbacks, embezzlement of public funds, effectiveness of anti-corruption efforts and transparency and accountability of government.
Experts cite narrowing public space, weakening enforcement and the erosion of judicial independence as key factors for Indonesia’s decline.
The 2025 CPI report, published by Transparency International this month, is in sharp contrast to a survey by Indikator Politik that says Prabowo continues to enjoy a high approval rating of 80 percent, thanks mainly to his social programs, including his signature program of providing free lunch to millions of school children nationwide.
Prabowo has repeatedly vowed to get tough on corruptors, getting to the roots of the problem and pledging he would hunt them down all the way to Antarctica.
In his speech at the World Economic Forum in Davos, Switzerland, last month, he said he would not make compromises with corruptors, citing as examples the recent crackdown on companies for illegal logging blamed for the massive flood disaster in Sumatra before the end of the year.
The year 2025 also saw some high-profile corruption cases, including one against Riza Khalid, a long-time contractor/supplier to state oil and gas company Pertamina, who is a fugitive, but his son Muhammad Kerry Adiranto is currently facing an 18-year jail term.
The Corruption Eradication Commission (KPK) and the Attorney General Office have also claimed to have saved the country trillions of rupiah from the corruption cases they handled.
As if this was not enough, in a speech on Indonesia’s economic outlook in Jakarta last week, the president hinted at the need to resort to an iron hand in dealing with corruptions. Responding to accusations that he had turned his back on democracy, the former Army general said: "But if you ask the people, maybe you also need a little authoritarianism [...] to fight those corruptors."
His predecessor Joko “Jokowi” Widodo weighed in on the anti-corruption drive this week suggesting that KPK should be governed by the old law when it had more power and independent. An irony, given that the change in the law happened in 2019 under his watch.
Even more irony because the Indonesian Democratic Party of Struggle (PDI-P) supported Jokowi’s proposal to go back to the old KPK law. Although they now have parted ways, PDI-P was the main party in Jokowi’s coalition government that enabled the change in the law in the House of Representatives.
The change meant that since 2019, KPK reports to the president. It also lost some of the powers to support its work, including conducting wiretapping on corruption suspects, and it also changed the status of their staffers into civil servants.
It’s no coincidence that Indonesia’s CPI turned for the worse following the change. Indonesia scored the highest then at 40, and ranked 85 out of 180 countries surveyed.
The KPK had been on the frontline in the anti-graft campaigns during Jokowi’s first term in office in 2014-2019. In his second term in 2019-2024, he turned the agency, governed by the new law, into a powerful political tool to serve his interests, going after many of his political nemesis. All five current commissioners are his, rather than Prabowo’s, appointees.
Prabowo’s office has said the government is not entertaining the idea of going back to the old KPK law.
