Indonesia wants to transform manufacturing with disruptive technologies

June 1, 2022
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Why this is important to Wisconsin businesses: Wisconsin manufacturers could provide digital solutions as well as more traditional electrical equipment and pharmaceutical products to potential partners in the market.

Indonesia is making a strong push for manufacturing to lead the country’s economy as it continues to recover from the COVID-19 pandemic.

In its most recent move, the government debuted its Center for Indonesia Digital Industry 4.0 in late 2021 as a one-stop solution for the country’s manufacturers to adopt smart factory technologies and accelerate growth.

Indonesia’s manufacturing sector already has shown significant gains, with investments of $22.5 billion in 2021, topping the government’s target of $20 billion. Manufacturing also was the biggest contributor to the national gross domestic product (GDP) in the second quarter of 2021, accounting for 17.3%, and it plans to provide more than 20% of the GDP by 2024, according to the country’s Ministry of Industry.

The effort to update manufacturing began in 2018 with the government’s Making Indonesia 4.0 program. Its aim: to transition the country to a knowledge-based economy by employing disruptive technologies that will significantly boost manufacturing performance and productivity. The program is focusing on five key sectors: food and beverages, textiles, automotive, chemicals and electronics.

So far, Making Indonesia 4.0’s accomplishments include establishing an index to measure the productivity and competitiveness of domestic manufacturers, offering a 300% tax holiday incentive for research and development activities, and opening the Center for Indonesian Digital Industry 4.0. The center will serve as the flagship among a network of digital capability centers that the government plans to implement.

Wisconsin exporters and service providers could pursue opportunities to participate in Indonesia’s digital industrial transformation by offering technologies such as:

  • Data centers
  • Artificial intelligence, the Internet of Things, robotics, 3D printing, and augmented and virtual reality
  • Cloud accounting, e-procurement and digital tax systems
  • Employee training and skill building
  • Options for incorporating sustainable practices into production processes

Meanwhile, Indonesia still needs raw materials and critical components for the foundation of its manufacturing sector. The country imports 74% of the basic metals and more than 50% of the petrochemicals needed for its electronics and automotive manufacturing. Other top imports include electric machines, appliances and equipment, and pharmaceutical products.

Conducting business in Indonesia can be complicated, though—with lengthy regulations and policies—and solutions will need to fit the appropriate development stage of Indonesian companies. For example, telecommunications companies in the country began the commercial rollout of 5G in mid-2021, but equipment costs for the massive transition have postponed plans.

Interested Wisconsin suppliers and service providers are encouraged to seek assistance from WEDC’s in-market representative in Southeast Asia to help navigate the Indonesian market.

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