After several years of weak manufacturing industry growth, the government hopes to spur the sector through a masterplan that will shift activities from Java and prioritize specific industries.

The government has set a target of boosting manufacturing by 8.4 percent by 2019 after five years of 4 percent annual growth, well below overall economic growth, amid signs of de-industrialization.

During the 1990s, manufacturing grew at twice the pace of GDP growth, with the labor-intensive sector accounting for 30 percent of GDP, a rate that has since dropped to well below 25 percent.

“We need to improve the manufacturing sector,” Industry Minister Airlangga Hartato said when opening the Indonesia Chamber of Commerce and Industry’s (Kadin) national coordination meeting in Jakarta on Tuesday.

In doing so, the government has drafted the National Industry Development Masterplan (RIPIN), which aims to even out industrial growth nationwide, not only in Java, by providing tax incentives and improving infrastructure outside the main island by 2019. Today, 70 percent of the manufacturing sector is concentrated on Java Island.

Under RIPIN, four manufacturing sectors are being prioritized: labor-intensive (food and beverages, furniture and footwear), import substitution (chemicals and pharmaceuticals, iron and steel), export orientation (electronics, palm oil and derivatives, pulp and paper, automotive) and downstream (cacao, sugar, smelter). Oil and gas products like petrochemicals are also prioritized.

“Since 1998, we’ve had no newcomer in the petrochemical sector — not because there’s no demand anymore, but it’s being met by imports from China,” Airlangga said. The government is planning to develop a petrochemical industry in Bintuni in West Papua.

Kadin vice chairman for industry Johnny Darmawan said businesspeople were discouraged from investing by the lack of infrastructure outside Java.

“The government needs to act fast in disbursing funds to develop infrastructure once the budget is set,” he said on the sidelines of the meeting.

High gas, electricity and logistics costs, as well as lengthy dwell times — the time taken for goods to be loaded and unloaded at ports — are also cited as impediments to growth in the manufacturing sector, industry players have said.

Unwillingness by local companies to use local products and government policy flip-flop are two others, said Kadin vice chairman for trade Benny Soetrisno and Indonesian Palm Oil Producers Association (Gapki) secretary general Togar Sitanggang.

Airlangga maintained that ASEAN economies, especially Indonesia as the largest, hoped to provide stable growth to the world amid China’s lackluster economic performance, with the manufacturing sector poised to expand to fill the gap left by the slowdown in the commodities sector.

The government is also considering the establishment of a development bank to finance manufacturers with long-term projects, boost the participation of small and medium enterprises (SMEs) in production, as well as marketing value-added products and developing the digital economy to expedite business transactions.

In 2015, non-oil and gas manufacturing grew 4.61 percent. Machinery, equipment and transportation led the growth, while the biggest contributors to the sector remained food and beverages, chemicals, pharmaceuticals and traditional medicines. On the other hand, textiles, garments, rubber and plastics all suffered contractions.

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