Indonesia Trapped in De-industrialization: Indef

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  • TEMPO.CO, Jakarta - Didik Junaedi Rachbini, an economist from the Institute for Development of Economics and Finance (Indef), said that Indonesia is experiencing de-industrialization or an industrial performance decline. "It happens due to failure in Indonesia's structural transformation, so industry tends to show negative growth," he said in a discussion at Bidakara Hotel, Wednesday.

    The de-industrialization, Didik said, is indicated by the annual growth figure. He said that if the economic growth reaches six percent, the industry growth should be at 12 percent. "In reality, however, the industry can only grow two to three percent and tends to be negative,” he said.

    The manufacturing industry's contribution to the Gross Domestic Product (GDP), according to Didik, has been on the decline since nine years ago. In 2004, the sector contributed 27.4 percent to the GDP. In 2011 and 2012, its contribution went down to 24 and 23 percent respectively.

    As of the second quarter of this year, the manufacturing industry's contribution to GDP only reached 23.77 percent. "Its role has been replaced by other sectors, such as electricity, water, communication, construction and services," Didik said.

    Didik said that the growth decline was also caused by the low competitiveness of local products and the dependency on imported raw materials. The influx of illegal imported goods, such as garment, shoes, plastic products and electronics, had caused the manufacturing industry growth to slow, while the lack of skilled workers and the centralization of manpower also hinder the competitiveness of industrial products.

    To revitalize the national industry, Didik suggested the government to redesign the policy by encouraging the imports of substitute products and become more export-oriented.

    "[The increase] was triggered by a revenue jump, the increasing use of production capacity as well as the average amount of work,” he said in his office Wednesday.