The Ministry of Investment/Investment Coordinating Board (BKPM) emphasizes that comprehensive improvements in the industrial process or reindustrialization can enhance the contribution of the manufacturing sector to Indonesia's economy. M. Pradana Indraputra, Special Staff for National Entrepreneur Development at the Ministry of Investment/BKPM, stated that reindustrialization could optimize domestic industrial processes, increasing production capacity, job creation, innovation, and optimal use of resources. Reindustrialization is the foundation for Indonesia's economic development plan for the next five to ten years. Currently, Indonesia prioritizes four commodities in developing downstream industries: nickel, bauxite, tin, and copper. By optimizing industrialization, Indonesia's natural resources can meet global energy transition needs. Indonesia has the world's largest nickel reserves, the second-largest tin reserves, the sixth-largest bauxite reserves, and the seventh-largest copper reserves. The Indonesian government has four priorities in the downstream bauxite and aluminum industry: solar panels, automotive components, food packaging, and building materials, with investment potential reaching USD 48.89 billion.
Pradana noted that two strategies guide government policy. First, developing the downstream bauxite industry as an import substitution. Second, strengthening domestic industries. To achieve this, the government will continue to provide fiscal incentives such as tax holidays, tax allowances, import duty exemptions, and super tax deductions to industries contributing to downstream processing in Indonesia. Meanwhile, the Ministry of Industry reported that Indonesia's Manufacturing Purchasing Manager's Index (PMI) in May 2024 was at 52.1, indicating expansive performance for 33 consecutive months. Indonesia's manufacturing PMI outperformed that of the United States and China, which were at 50.9 and 51.7, respectively. Although Indonesia's manufacturing PMI remained in the expansive scheme, its performance slightly declined from 52.9 to 52.1. The Ministry of Industry attributed this decrease to reduced production activities due to a drop in foreign orders and concerns about potential decreases in domestic orders in the future.
