Challenges for Govt to Boost Manufacturing Sector

Kompas/Bahana Patria Gupta

The power plant building at the Java Integrated Industrial and Port Estate (JIIPE), Gresik Regency, East Java, Friday (3/9/2021).

Indonesia still needs improved investment to drive economic productivity in the manufacturing sector. Raising investment also means developing human resources.

JAKARTA, KOMPAS — The government has made efforts to tackle a number of investment barriers in order to increase Indonesia’s economic complexity index (EIC). In addition to the quantity of investment, the quality also needs to be encouraged to effect economic growth.

The issue was raised during a virtual discussion on the "Acceleration of Investment Realization in Indonesia" on Friday (29/10/2021).

Present at the discussion were National Development Planning Minister and National Development Planning Agency (Bappenas) chairman Suharso Monoarfa, Institute for Development of Economics and Finance (Indef) researcher Ahmad Heri Firdaus and leaders of companies that are members of the Kompas Collaboration Forum.

KOMPAS/DIONISIUS REYNALDO TRIWIBOWO

Minister and National Development Planning Agency (Bappenas) chairman Suharso Monoarfa.

Suharso pointed out the need to increase the ECI given the fact that Center for International Development (CID) at Harvard ranked Indonesia at 61st out of 133 countries in 2019. Indonesia's ECI was the lowest in Asia.

One of the determining factors of the decline in the index was low diversification of Indonesian manufacturing products.

“In the last ten years, Indonesia's economy has grown below its potential. We increased the quantity of products without optimal diversification,” he said.

The product is an indicator of the advantage of an economic system because it is the output of economic knowledge present in it.

The ECI is a measure of the productive capabilities of large economic systems of a country based on economic activities. The product is an indicator of the advantage of an economic system because it is the output of economic knowledge present in it.

The government is looking to accelerate the expansion of the manufacturing sector after having been affected by the Covid-19 pandemic. According to Bappenas, the total investment in 2022 would be between Rp 5,835.5 trillion and Rp 6,057.7 trillion in order to boost diversified manufacturing products.

KOMPAS/KRISTIAN OKA PRASETYADI

Officers inspect the steam pipes at the Lahendong Geothermal Power Plant (PLTP) Unit 5 and 6 site managed by PT Pertamina Geothermal Energy in Tompaso, Minahasa, North Sulawesi, Friday (30/7/2021).

The measures include reinvigorating stalled investments and ensuring the implementation of the Job Creation Law and its derivative provisions.

Ahmad Heri Firdaus shed light on foreign and domestic investments, which have increased in the last five years but have not been able to trigger a significant increase of labor absorption.

Nusantara Multimedia University rector Ninok Leksono lamented the lack of graduate engineers working in the manufacturing sector.

"What is commonly practiced by this nation is that if we can buy [import], why do we bother to make our own. This attitude undermines the concepts and theories of innovation studied at the academic level," he said.

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PT Krakatau Steel (Persero) president director Silmy Karim criticized the government for being too focused on attracting investment without enough efforts to facilitate investment to grow Indonesia.

KOMPAS/TOTOK WIJAYANTO

PT Indofood Sukses Makmur director Franciscus Welirang

Meanwhile, PT Indofood Sukses Makmur director Franciscus Welirang pointed to the difficulties in accessing a shipping for export. "Sea freight rates have increased 3 to 6 times, both at home and abroad," he said. (DIM)

(This article was translated by Musthofid)