Industry 4.0: The Challenges and Opportunities of Making Indonesia 4.0

Industry 4.0: The Challenges and Opportunities of Making Indonesia 4.0

InCorp Editorial Team

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The Indonesian government has launched the “Making Indonesia 4.0” roadmap to boost the country’s economy. This initiative aims to implement new manufacturing technologies in the most vital sectors of Indonesia. These sectors contributed to two-thirds of the country’s total manufacturing output in 2017.

These sectors included automotive, food and beverage, electronics, textile, and chemical. They will be prioritized under the “Making Indonesia 4.0” roadmap. The government is optimistic that this initiative will lead to a massive transformation, including more jobs in the Indonesian market and an increase in exports. 

President Joko Widodo is confident that implementing Industry 4.0 will help Indonesia become one of the top ten global economies by 2030. This article offers insights into the progress of Industry 4.0 in Indonesia, including the challenges and opportunities that come with it to support the country’s rapidly growing economy.

What is Industry 4.0?

Industry 4.0 refers to the fourth industrial revolution, which transforms manufacturing by implementing new technologies and innovations, particularly in digital technology, cyber-physical systems, biology, and hardware automation.

The vision of Industry 4.0 is to make smart factories a reality and fully utilize digital manufacturing. It is believed to be end-to-end digitization in the manufacturing sector and will create an ecosystem across the entire supply chain.

Currently, Industry 4.0 is supported by five vital technological innovations: artificial intelligence (AI), Internet of things (IoT), robot and sensor technology, human-machine interface, and 3D printing.

The Role of Making Indonesia 4.0

The world is now moving towards Industry 4.0, and Indonesia is also preparing to join the new trend.

As the backbone of the Indonesian economy, the manufacturing sector in Indonesia accounted for 20% of Indonesia’s GDP in 2017. Almost one in five of the working population in Indonesia is employed in this sector. 

Thus, if Industry 4.0 is thriving in Indonesia, the country will see a growth in GDP of at least 7% annually between 2018 and 2030; the manufacturing industry will contribute to 26% of the nation’s by 2030 as well.

The Challenges of Making Indonesia 4.0

Indonesia faces tough competition from countries like China, Vietnam, and Thailand. The government has implemented positive strategies to tackle the challenges, but four significant obstacles remain for Industry 4.0 in Indonesia. 

These include capability issues, funding problems, lack of technology/digital infrastructure and system suppliers for Industry 4.0, and regulation and policy overlap that require further synchronization.

For funding and capabilities problems, not only does the manufacturing sector need a large number of fresh funds, but the implementation of Industry 4.0 also requires foreign talent and technology to help improve the capability and quality of the domestic industry.

As for the need for more technology and system suppliers, many manufacturers have been discouraged from migrating to Industry 4.0. Last but not least, harmonization is needed for rules and policies, and the Indonesian government still needs to solve this issue.

The Opportunities in Making Indonesia 4.0

Industry 4.0 has great potential in Indonesia due to its large population and high number of smartphone and internet users. A study by McKinsey in 2018 found that almost 78% of Indonesian companies were aware of Industry 4.0, which is second only to Vietnam. Interestingly, countries like Singapore, Malaysia, and Thailand have lower rates of Industry 4.0 awareness than Indonesia.

Industry 4.0 will contribute approximately US$121 billion to Indonesia’s GDP if appropriately executed by 2025. It may also help Indonesia earn up to US$150 billion annually by 2025.

The Promising Business Sectors for Indonesia 4.0

4.0 industry in Indonesia is on the horizon, marked by the integration of machine automation and the Internet of Things. It impacts various aspects of daily life, leading to the rise of new startups, job losses for conventional workers, and closures of retail stores, among other changes. 

The World Economic Forum predicted the loss of 75 job types in the next four years, offset by the creation of 133 new jobs due to technological advancements. Despite the challenges, Industri 4.0 presents new business opportunities. Here are four business opportunities in this era:

1. Startups

The government’s Making Indonesia 4.0 initiative focuses on five industrial sectors: food and beverage, automotive, electronics, chemicals, and textiles. Starting a startup in these sectors may benefit from government support. However, other sectors like artificial intelligence, augmented reality, crypto, and fintech offer untapped potential.

2. Online Buying and Selling

Indonesia already has major marketplaces like Tokopedia and Bukalapak. Regardless of business size, these platforms provide equal opportunities for all. With a large user base, businesses can avoid promotional costs, and online transactions eliminate expenses such as rent and operations, maximizing profits.

3. On-Demand Services

On-demand services cater to user requests, as seen in platforms like Gojek and Grab. Opportunities exist in various sectors, such as housekeeping, custom products, and painting services. Success lies in identifying sectors with a broad market and no dominant players, making it easier to succeed in business competition.

4. Online Marketing

Online marketing is integral to both online and offline businesses. A robust online presence enhances visibility, trust, and customer interaction. Services like Google My Business help offline businesses appear on Google Maps, facilitating customer location discovery.

Industri 4.0 brings challenges and opens doors to innovative business ventures across diverse sectors.

Start Your 4.0 Business in Indonesia with InCorp

With all the data and statistics mentioned above, Indonesia is an alluring market for every foreign entrepreneur. Despite the challenges present as the country is keeping up with Industry 4.0, there are opportunities for you to seize. 

Contact us now for essential insights into a market entry in Indonesia and how InCorp can assist you with business incorporation in Indonesia.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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