Manufacturing Investment Soars 54% in September 2022

Indonesia remains a prime investment destination for national and global manufacturing industries. This is reflected in the realization of manufacturing sector investment, which reached Rp365.2 trillion (approximately US$24.3 billion) from January to September 2022.

“This achievement represents a 54% increase compared to the same period last year, which amounted to Rp236.8 trillion. Investor confidence in this industrial sector must be maintained, supported by various strategic policies,” said Minister of Industry Agus Gumiwang Kartasasmita on Tuesday (October 25th) in his official statement.

According to data from the Investment Ministry/BKPM, from January to September 2022, the manufacturing sector contributed 40.9% to total investment, which reached Rp892.4 trillion (approximately US$59.4 billion). Cumulatively, investment in Indonesia grew by 35.3% (y-o-y), and during these nine months, it has reached 74.4% of the Rp1,200 trillion (approximately US$79.9 billion) target for 2022.

Meanwhile, domestic investment (PMDN) in the manufacturing sector amounted to Rp104.9 trillion (approximately US$6.9 billion). The sub-sector contributing the most was the food industry, valued at Rp38 trillion (approximately US$2.5 billion), or 9.2% of the total PMDN realization of Rp413.1 trillion (approximately US$27.5 billion).

Foreign direct investment (FDI) in the manufacturing sector reached Rp260.3 trillion (approximately US$17.3 billion). The largest contributing sub-sector was the basic metal industry, metal goods, non-machinery, and equipment, reaching US$8.5 billion, contributing 25.3% of the total FDI realization of Rp479.3 trillion (approximately US$31.9 billion).

“Amidst the current global situation, plagued by food, energy, and financial crises, all countries are competing to attract investment. The reason is that investment leads to increased added value, job creation, and increased foreign exchange,” explained the Minister of Industry.

Therefore, the government focuses on creating a conducive business and investment climate by maintaining good economic and political stability domestically. “Moreover, various important development indicators continue to show improvement, and this signifies optimism for us all to accelerate recovery and growth, enabling us to move towards inclusive and sustainable economic transformation,” added Agus.

Furthermore, in line with President Joko Widodo's directives, industrial downstreaming is one of the keys to Indonesia's economic progress. This is because the downstreaming policy will significantly contribute to state revenue through export taxes, royalties, non-tax state revenue (PNBP), and dividends.

“As the President often mentions, industrial downstreaming is the top priority. As an illustration, when still exported as raw materials, the contribution of nickel commodities was around Rp15 trillion (approximately US$1 billion) per year. After entering industrialization, its value jumped sharply to US$20.9 billion, or equivalent to Rp360 trillion (approximately US$23.9 billion),” explained the Minister of Industry.

Still based on data from the Investment Ministry/BKPM, in the third quarter of 2022, investment in the basic metal industry, metal goods, non-machinery, and equipment sector reached Rp44 trillion (approximately US$2.9 billion). This figure contributed the highest (14.3%) to the total investment realization in the third quarter of 2022, which amounted to Rp307.8 trillion (approximately US$20.5 billion).

“We believe that the increase in investment in this sector correlates with the government's policy in accelerating industrial downstreaming, especially in the mining sector. This means that the government is very consistent in ensuring that investment realization is not only driven by the service sector but also by building downstream industries, thus deepening our manufacturing structure to become more competitive,” he concluded.