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
In the quest to decarbonize the electric power industry, the private sector can play a major role in accelerating the transition to renewable energy, says Royal Golden Eagle (RGE) Managing Director Anderson Tanoto.
Speaking at a panel discussion on the electrification of the power sector at the Indonesia International Sustainability Forum 2024 on Sep. 5, 2024, Anderson revealed that a factory owned by Riau province’s largest pulp and paper producer APRIL Group, part of RGE, is powered 88 percent by biomass from renewable sources.
With an aim to reach a rate of 90 percent, the process began with the installation of solar panels at closed landfills three years ago at a rate of US$ 1 million per megawatt (MW). With coal prices hitting record highs in 2022 and solar panel costs coming down, he continued, the investment became a compelling economic reason on its own.
“It wasn't about going green, it was about saving money. The payback for the solar panel at that point in time, by generating power from the solar panel of 1 MW, was about six and a half years. Fast forward five years later, we've installed almost 26 MW of solar panels across all our landfill permits, and we were able to actually generate good return on investment on these projects,” he said, adding that Indonesia’s large surface area can be potentially used to generate approximately 3,000 gigawatts (GW) of electricity annually.
According to Anderson, for the transition to renewable energy to happen in the near future, the private sector must be willing to take the plunge, whether for sustainability or economic reasons.
“With this kind of lower prices of solar panels, as the private sector, the time to seize the opportunity is now.”
On a larger scale, he acknowledged the industry’s energy trilemma, in which stakeholders want energy to be simultaneously cheap, clean and secure. At the same time, he also highlighted the need for lower battery prices, noting that the main challenge in increasing the renewable energy capacity is the high battery and energy storage costs.
“What needs to happen in order for us to accelerate further is to have what has happened in the photovoltaic business also occur on the battery side, so that battery costs can continue to come down,” he explained.
With the energy transition’s capital intensive nature, Anderson also called for further support in financing through competitive rates, which will encourage more companies to turn towards renewables when coupled with a move towards a free market.
“The opportunities are immense from the private sector, and we're happy to be able to participate,” he concluded.
Anderson’s remarks today coincided with the announcement from RGE and Total Energies. Their joint venture, Singa Renewables, has received conditional approval from Singapore’s Energy Market Authority to import 1 GW of solar photovoltaic energy from Indonesia to Singapore.
