Indonesia: Becoming a Global Leader in Manufacturing

Indonesia is poised to become the future global leader in manufacturing with a strong economic backdrop, and due to the political uncertainty in neighboring countries. According to a report from Deloitte, Indonesian manufacturing will be rank number 15 in world manufacturing hubs by 2023.

It is no surprise because the Indonesian manufacturing industry accounts for 20.5% of the country’s GDP. This contribution is higher than the global average GDP from the manufacturing sector.

At the moment, there are only five countries whose manufacturing sectors contributing more than 20% to their GDP: China (28.8%), South Korea (27%), Japan (21%), Germany (20.6%), and Indonesia.

The shift to manufacturing in Indonesia makes all the difference and is ready to bring Indonesia long-term economic prosperity.

In this article, you will know why Indonesia plays a vital role in the global manufacturing market, and how your business can be part of the growth.

Starting a Manufacturing Business in Indonesia: Why?

Thriving Economy

Indonesia’s economy has been growing significantly compared to other countries in the region: the country’s economy is 66% of the ASEAN economy with GDP growth between 5.1% and 5.2% annually.

In 2015, the Indonesian manufacturing sector grew by 5.04%, surpassing the 4.79% national economic growth rate. Of course, the growing economy does not come without challenges especially since Indonesia is located not far from giants such as China and India.

However, the world does not ignore this diverse, youthful, and dynamic country with over 260 million people.

In fact, according to PwC, Indonesia can overcome these challenges and manufacturing is one of the key contributors to Indonesia becoming the 5th largest economy globally. It is also predicted that Indonesia will soon move up from the current 16th place to surpass powerful countries such as Germany, Russia, Brazil, etc., in just a mere 12 years’ time.

Revitalization of Manufacturing in Indonesia

In 2014, Indonesia started to revitalize its manufacturing industry. In spite of the economic challenges mentioned, the manufacturing sector in Indonesia shows no sign of slowing down.

Besides, more and more industrial parks have popped up in the country. Those parks are usually developed in cooperation with other international partners that ensure their occupancy and profit.

One of the parks that hit the attention of international investors was built in Semarang recently. Read Semarang: The Future of Manufacturing Industry in Indonesia.

Lower Production Costs in Indonesian Manufacturing

When comparing Indonesia to other countries in Asia, Indonesia has the most appealing labor costs. In other words, the profits of manufacturers will be higher due to the lower production costs.

In the aspect of hourly wages, Indonesia is more attractive and stands out against China — the world’s largest factory. This is because China is now moving into high-tech manufacturing and its labor costs have significantly risen in recent years, approximately 10-15% annually.

People, People, and People

Sitting at the place of the world’s fourth-largest population at 260 million, the purchasing power is also favorable to the growth of manufacturing in Indonesia.

According to statistics published by Euromonitor, the annual disposable income of Indonesian households has exceeded US$10,000, a huge increase from 6 million to 16 million in just five years.

Setting up a Manufacturing Factory in Indonesia

Setting up a factory in Indonesia will take some time and of course capital. You cannot afford mistakes, and therefore you should do extensive research before you have decided to start your own business.

Cekindo offers market research that will help smooth the entire process. We also serve as a good avenue for you to connect with potential suppliers, buyers, and distributors, and most importantly, we will assist you with the incorporation of your business in Indonesia.

Visit us in our offices located in Jakarta, Semarang, and Bali, or contact us through an online form below and we will get back to you with a free quotation.