According to Industry Minister Airlangga Hartarto, Indonesia is planning to open up more sectors to foreign investors as well as re-evaluating their stringent labour laws to become a regional manufacturing powerhouse rivalling Germany and South Korea.
The government is hoping to rely on the chemical, automotive and electronics industries to boost the contribution of manufacturing sector 25 per cent of the country’s economy by 2025 from 20 per cent now, added Hartarto. Should everything go smoothly, the move may help boost the country’s exports tackle its current account deficit.
“Our target is to be the manufacturing hub of ASEAN”, Hartarto said in an interview in Jakarta on 6 May. Indonesia will seek to eclipse Germany and South Korea and match up to China as a base for making everything from electric vehicles to petrochemical products, he said.
Indonesia’s manufacturing sector has been struggling over the years. The government is looking to reinvigorate the country’s deteriorating sector to bolster growth and help curb the current account deficit while creating millions of jobs. Indonesia has only been growing at about 5 per cent a year, well under the promised 7 per cent target that was promised by the Widodo administration.
“The government’s initiatives to bolster manufacturing will include relaxing the negative investment list, which regulates levels of foreign ownership across hundreds of sectors, implementing tax holidays for both domestic and foreign firms, and reforming the labour law”, said Hartarto.
With the world taking larger steps to adopt green technology, Indonesia wishes to capitalise on this trend by wanting battery-powered automobiles to make up 20 per cent of the nation’s total output by 2025. A road map being prepared by the government would involve existing manufacturers such as Toyota Motor Corp. and Mitsubishi Motors Corp. as well as Chinese electric vehicles makers such as BYD Co. and Wuling Motors Holdings, added Hartarto.
The government has promised tax incentives to companies willing to invest in electric vehicles while also making it expensive to own fossil fuel-powered automobiles to save the country about Rp798 trillion (US$56 billion) from reducing dependence and imports of crude oil.