Jakarta, February 19, 2025 - Indonesia will need to stimulate its manufacturing sector in order to achieve the objective of 8% economic growth in 2029, according to panelists at the mini-plenary titled “Getting Industrial Policy Right for Indonesia” during the second day of the Indonesia Economic Summit.

Marco Kamiya, UN Industrial Development Organization Representative for Indonesia, Timor Leste, and Philippines, said various academic researches and past experiences suggest that the share of manufacturing-to-GDP must be around 25% in order for economic growth to reach and to be maintained at 8%. “Indonesia needs to hit 8% economic growth continuously, not occasionally, in order to achieve Golden Indonesia 2045,” said Marco Kamiya.

Manufacturing accounts for around 19% of Indonesia’s GDP in 2023, highe than 18% in 2022, according to the World Bank. However, the share of manufacturing to GDP in Indonesia has been in steady decline from its peak of 32% in 2002.

According to the Investment Coordinating Board (BKPM), the share of FDI flows into primary sectors such as agriculture and plantation declined to 12.2% of the total FDI amount in 2024 from as high as 18.7% in 2010. The share of FDI flows into secondary industries such as mineral processing rose to 58.5% from 20.6% in 2010-2024.

Marco Kamiya offered three solutions to drive the manufacturing sector: Firstly, to improve the absorption capacity of new technology for both large companies and small- and medium-enterprises (SMEs); second is enabling digital transformation that will be crucial to elevate productivity; and lastly stimulating entrepreneurship.

Yose Rizal Damuri, Executive Director at Center for Strategic and International Studies (CSIS), said Indonesia’s push to drive manufacturing sector and economic growth higher must face the realities in the form of (1) informal sector remains a major source of employment, and (2) lack of skill workers.

Around 80 million Indonesians were employed in the informal sectors, which need to be lifted in terms of their incomes and social protections. Furthermore, around 40% of the Indonesian workforce only has primary school education and another 20% only has middle-school education.

"We cannot expect them to join the tech sector or do more sophisticated things,” said Yose Rizal Damuri, who suggested that the Indonesian Government must do more to revitalize the labour-intensive industries.

Pham Sanh Chau, CEO of VinFast Asia, said the way forward for Indonesia is to encourage FDI flows into the country. VinFast planned to invest billions of dollars in Indonesia in order to create an ecosystem for Electric Vehicles in Indonesia as the Vietnamese conglomerate believes in Indonesia’s growth potential.

About the Indonesia Economic Summit (IES): The Indonesia Economic Summit (IES) is an annual initiative of the Indonesia Business Council (IBC). Initiated as a high-level forum for collaboration and innovation, IES seeks to promote competitiveness, inclusive growth, and sustainable prosperity for Indonesia. This forum reflects IBC’s commitment to advancing Indonesia’s role in the global economic arena.

About the Indonesian Business Council (IBC): The Indonesian Business Council (IBC) is an association of CEOs and business/industry leaders of leading companies in Indonesia, established in February 2023. IBC seeks to promote and strengthen Indonesia’s competitiveness, encourage collaboration, and enhance the contribution of the Indonesian private sector to economic growth and prosperity, through advocacy. For media inquiries, please contact:
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