Indonesia's Ministry of Industry is optimistic that the country's manufacturing industry will grow 5.7 percent (year-on-year) in 2016, up from the estimated 5.3 percent growth pace this year. Indonesian Minister Saleh Husin said this optimism is based on higher domestic direct investment. Domestic investment realization in Indonesia's industry sector rose 7.45 percent (y/y) to IDR 20.1 trillion (approx. USD $1.5 billion) in the third quarter of 2015 from IDR 18.7 trillion in the same quarter last year. Foreign direct investment (FDI) into Indonesia's industry sector stood at USD $3.15 billion in Q3-2015.
Minister Husin stated that the growth of the non-oil & gas manufacturing industry reached 5.21 percent (y/y) in the third quarter of 2015, up from the growth pace of 4.73 percent (y/y) recorded in the same quarter last year. In nominal terms, the export of manufactured (non-oil & gas) products in Indonesia's industry sector stood at USD $72.2 billion in the first eight months of 2015. Indonesia's main export markets for these products are the USA, Japan, China, Singapore and India. Husin said exports of industrial products accounted for about 70 percent of the nation's total exports in the January-August 2015 period.
Indonesia's (non-oil & gas) industrial sector accounts for 17.8 percent of the country's gross domestic product (GDP) up to the third quarter of 2015, up from 17.4 percent in the same period last year. The Industry Ministry targets this figure to rise to 18.5 percent by the end of 2015.
Husin emphasized the importance to boost competitiveness in Indonesia's industrial sector by improving the availability of electricity and gas at competitive rates, having more competitive interest rates at commercial banks, as well as reducing the country's currently high logistics costs.
The relatively high gas price in Indonesia is a particular concern to the petrochemical, ceramic, glass and fertilizer industries. Whereas industries in Malaysia and Vietnam pay USD $5 per british thermal unit (mmbtu), the gas price in Indonesia is currently still at USD $9 per mmbtu. In an effort to boost domestic industries, the Indonesian government decided to cut energy tariffs for labor-intensive industries in an economic stimulus package unveiled on 7 October 2015. For gas, it means that prices will be cut to USD $7 per mmbtu per January 2016. Although this will indeed cut operational costs, the price is still much higher than in aforementioned countries, making Indonesia's manufactured exports less competitive.