The country has become too dependent on its rich natural resources. Predictably, when the commodity boom went bust, the country was left with little to turn to.

Just four years ago, the world'€™s top producer of commodities from palm oil to coal enjoyed strong economic growth at around 6 percent with a current-account surplus. During this period, Indonesia was complacent.

Then, as it is with every cycle, the commodity boom ended. Starting in 2012, prices fell and global demand weakened alongside uncertainties in the world'€™s top economies, a condition that persists until now. In Indonesia, growth plummeted and the current account has been in deficit for the past few years.

In a desperate attempt to stoke growth, the government turned to the manufacturing industry only to find that it was no longer a mainstay in the economy. The share of labor-intensive manufacturing industries to Indonesia'€™s gross domestic product (GDP) has declined steadily from around 30 percent in 2003 to 20 percent presently, a striking figure for the new administration.

'€œThere was not enough motivation to support the birth of a manufacturing industry [during the commodity boom],'€ said Coordinating Economic Minister Darmin Nasution. '€œWhen the new administration rose to power, there was not enough of an industrial sector to get going.'€

The previous administration tried to encourage more exports of processed products instead or raw materials, but the move was far from a successful one. In addition to natural resources, footwear, gemstones and heavy equipment are the nation'€™s only high-growth manufacturing exports.

The new administration wants to change that by focusing on the potential of the manufacturing sector for exports that includes wood, furniture and textiles. Darmin said the government aimed to boost export capacity through a domestic institution to identify, promote and market the country'€™s export potential.

It also aims to significantly reduce burdensome imports of oil, petrochemicals, iron, steel and chemical and pharmaceutical products to ease pressure on the trade balance and current account.

'€œWise men would recognize that we should push for the development of industry to reduce our reliance on imports,'€ Darmin said, explaining that petrochemicals, iron, steel and chemical and pharmaceutical products topped the list for the country'€™s import of raw material and capital goods.

Next year, the government plans to roll out new policies and efforts at deregulation in order to develop petrochemical refineries and iron and steel industries as well as spareparts for power plants. It is hoped that the development of these industries will support the 35,000 megawatt electricity procurement program until 2019, and will ultimately reduce imports.

As for chemicals and pharmaceuticals, the government will offer incentives and regulatory aid to support local production to meet the growing demand for health spending for the National Health Insurance Program (JKN), given that around 90 percent of health equipment is imported.

It has also allowed full private participation in the development of oil refineries, a move that is expected to reduce dependence on oil imports.

These policies, coupled with three-hour permit facilities for businesses in industrial zones and incentives for labor-intensive industries, are a clear sign that President Joko '€œJokowi'€ Widodo'€™s administration is pushing industrialization efforts to stoke growth and provide jobs in Southeast Asia'€™s largest economy.

From September to December, the government rolled out eight economic policy packages designed to support investment and industrial growth in response to the country'€™s slowing economy.

'€œThe government has continued its efforts to add value into our raw products. We need more places [industrial zones] to become centers of manufacturing, processing and industrial activity,'€ Indonesian Industrial Estate Association (HKI) chairman Sanny Iskandar said.

Although deregulations and new rules were introduced in the eight economic stimulus packages, central government regulations have stayed the same even though they are considered by some to impede investment projects from toll roads to power plants.

'€œOne area we have not deregulated are the licensing procedures in regions. Like it or not, we have to enter into that area. Maybe it will take longer because we are up against the issue of regional autonomy,'€ Darmin said.

Hariyadi Sukamdani, chairman of local business lobby group Indonesian Employers Association (Apindo), said the government'€™s economic policy packages had boosted optimism regarding the country'€™s economic situation. Such measures, he said, indicated the government'€™s commitment to overseeing growth, especially in the manufacturing industry.

'€œWe commend the government'€™s ambition to revive growth in our industry,'€ said Hariyadi, noting that the current share of manufacturing to Indonesia'€™s economy was 20 percent, the highest of all sectors followed by trade and agriculture.

Following the issuance of the first few economic stimulus packages, the rupiah turned around its steep decline to level out at around Rp 13,000 per US dollar from more than Rp 14,500 previously.

'€œWith government policies that are more pro-industry, overseas investors are starting to take Indonesia seriously again,'€ Hariyanto said. '€œAlthough the policies have just begun to take shape, at least they offer positive sentiments to investors.'€

Industrial growth could reach between 10 and 20 percent per year over the next few years from the government'€™s 6.1 percent target this year, according to Johnny Darmawan, Apindo'€™s chairman for the industrial sector.

For 2016, the government is targeting overall economic growth of 5.3 percent, a target that can only be reached if infrastructure projects, industrialization and exports all go up together, according to Minister Darmin.

'€œThere is practically nothing else we can do other than trying to invite [investors] by giving out sweeteners,'€ he said.

'€” Prima Wirayani contributed to this story

_______________________________

Govt'€™s economic policy packages in 2015

First Sept. 9

* Cuts red tape, boosts industries through deregulation

* Enhances law enforcement and business certainty

* Provides LPG converter kits for fishermen to reduce operating costs

* More rice subsidies for the poor

* Allows foreigners to own luxury apartments and condominiums worth at least Rp 10 billion

* More fund transfers to villages

Second Sept. 29

* Interest-rate tax cuts for exporters

* Speeds up investment licensing for investment in industrial estates

* Relaxation of import taxes on capital goods in industrial estates and aviation

Third Oct. 7

* Lower fuel, electricity and gas prices

* Micro loan subsidies, expansion of loans for small business

* Simplifies land permits for investment activities

Fourth Oct. 15

* Fixed formula to determine increases in labor wages

* Soft micro loans for at least 30 small and medium, export-oriented, labor-intensive businesses

Fifth Oct. 22

* Tax incentives for asset re-evaluation

* Scraps double taxation on real estate investment trusts

* Deregulation in sharia banking

Sixth Nov. 5

* Tax incentives for investments in special economic zones

* Speeds up import permits for raw materials of medicines (paperless)

Seventh Dec. 4

* Waive income tax for workers in the nation'€™s labor-intensive industries

* Free leasehold certificates for street vendors operating in 34 state-owned designated areas

Eighth Dec. 21

* Nationwide one map policy with 1:50,000 scale

* Refinery development push, permission for private investment

* Aircraft maintenance, repair, overhaul industry support through incentives

Source: Various sources compiled by The Jakarta Post

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