Industry

With the largest land mass, population and economy in South-east Asia, Indonesia is set on becoming the region’s industrial powerhouse. A historical reliance on natural resources has left its industry lagging behind that of regional peers Thailand, Malaysia and Vietnam in terms of exports, even as the country continues to clock robust GDP growth. Excessive bureaucracy and protectionist policies have further hindered the development of manufacturing exports, contributing to the double-digit decline in foreign direct investment in the third quarter of 2018, as well as the country’s persisting trade deficit. However, reforms are taking hold and Indonesia enjoyed GDP growth of 5.1% in 2018, with gains in both light and heavy manufacturing. Estimates put manufacturing’s contribution to GDP at 20.5%, not far below levels in most industrialised economies. This chapter also contains interviews with Airlangga Hartarto, Minister of Industry, and Rosan Roeslani, Chairman, Indonesian Chamber of Commerce and Industry.