Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Manufacturing sector in Indonesia - statistics & facts
Over the last decades, the Indonesian government has prioritized the manufacturing sector to maximize its potential contribution to accelerated industrialization. Today, this sector stands tall as Indonesia's largest GDP contributor and dominates the country's export landscape. Major industries such as food and beverages (F&B), coal and refined petroleum, chemicals, transportation, as well as metals and electronics, are the leading . This sector also has created an extensive number of employment opportunities. With an ambition to become one of the largest economies globally by 2030, Indonesia's manufacturing sector promises boundless prospects and potential for its country and international partners.
Due to its cost-effective and abundant labor, Indonesia is becoming a more enticing destination for foreign investments. Basic metals, food, and chemicals manufacturing are among the subsectors receiving the most foreign direct investments. The surge in foreign investment into Indonesia’s basic metals manufacturing can be attributed to the increasing global demand for nickel due to its usage in steel and electric-vehicle battery production, with Indonesia being home to the world’s largest nickel reserves. The country has also relaxed its investment and labor laws to further attract foreign ownership to its economy.
To boost the , the Indonesian government has been working on the Industry 4.0 transformation. This initiative involves the integration of modern and advanced technologies in production processes to improve efficiency, product quality, and reduce production costs. Some industrial sectors, such as cement, refined petroleum, automotive, and F&B, are at the forefront of entering Industry 4.0 in Indonesia. As part of a national priority program, the government established Indonesia's Digital Industry Center 4.0 (PIDI 4.0) to develop the essential worker capacity and technical skills required for Industry 4.0. PIDI 4.0 also serves as a learning hub for assisting enterprises in developing value chains. Investing in human capital and high-tech infrastructure, facilitating research, development, and knowledge transfer from international corporations to local manufacturers, and acquiring more investments are Indonesia's main strategies for continuing to become one of the world's manufacturing leaders.
Rising foreign investments in Indonesia’s manufacturing sector
Indonesia’s manufacturing sector employed over 19 million people in 2023, making it one of the sectors with the largest workforce in Indonesia. Compared to other Asian countries, labor costs in Indonesia are relatively low, with the ranging from around 1.3 to over five million Indonesian rupiah. The subsectors that account for a significant portion of employment include , apparel manufacturing, and .Due to its cost-effective and abundant labor, Indonesia is becoming a more enticing destination for foreign investments. Basic metals, food, and chemicals manufacturing are among the subsectors receiving the most foreign direct investments. The surge in foreign investment into Indonesia’s basic metals manufacturing can be attributed to the increasing global demand for nickel due to its usage in steel and electric-vehicle battery production, with Indonesia being home to the world’s largest nickel reserves. The country has also relaxed its investment and labor laws to further attract foreign ownership to its economy.
Indonesia’s strategies to improve its manufacturing sector
The manufacturing industry is pivotal to Indonesian exports, accounting for over 70 percent of in 2023. However, Indonesia's exports in several sectors have been primarily centered on intermediate exports, most notably for mining, wood, paper, petroleum, chemicals, rubber, and basic metals. One of the government's current priority programs is implementing industrial downstream policies to increase the added value of domestic raw materials, which have a more significant effect on the national economy.To boost the , the Indonesian government has been working on the Industry 4.0 transformation. This initiative involves the integration of modern and advanced technologies in production processes to improve efficiency, product quality, and reduce production costs. Some industrial sectors, such as cement, refined petroleum, automotive, and F&B, are at the forefront of entering Industry 4.0 in Indonesia. As part of a national priority program, the government established Indonesia's Digital Industry Center 4.0 (PIDI 4.0) to develop the essential worker capacity and technical skills required for Industry 4.0. PIDI 4.0 also serves as a learning hub for assisting enterprises in developing value chains. Investing in human capital and high-tech infrastructure, facilitating research, development, and knowledge transfer from international corporations to local manufacturers, and acquiring more investments are Indonesia's main strategies for continuing to become one of the world's manufacturing leaders.
