The industrial world is now entering a new stage called Industry 4.0, also known as the fourth industrial revolution. It was introduced worldwide in 2011 with the emergence of integrated networks of machines, or the so-called internet of things.

The first industrial revolution started in 1784, when the industrial steam engine was introduced. Meanwhile, the second stage introduced the technological revolution in 1870, when industries used machines to produce massive electric power or fuel.

The third stage came in 1969, when industries started using IT systems and automated engines. Afterwards, the world entered the fourth stage.

In Indonesia, the Industry Ministry issued in April a roadmap for the fourth industrial revolution, dubbed “Making Indonesia 4.0”. The roadmap contains a national strategy to pave the way for Indonesia to join the world’s 10 strongest economies in 2030.

The roadmap involves 10 steps to be taken in infrastructure, small and medium industries, as well as e-commerce platforms. Furthermore, it highlights five strategic sectors that are most demanded worldwide.

The first step in Making Indonesia 4.0 is improving the flow of materials to strengthen local production in the upstream and medium sectors through capacity building and accelerating the adoption of technology.

The second step is redesigning the industrial zone. Indonesia will optimize its policy on industrial zones.

The third step is improving the quality of Indonesia’s human resources, which is the most important target to achieve in Making Indonesia 4.0, Industry Minister Airlangga Hartarto has said.

This will be achieved through reforms in education, improving vocational schools and leveraging foreign talents.

The fourth step calls on all stakeholders to empower micro, small and medium enterprises (SMEs), as almost 70 percent of business operators in Indonesia are in that segment. The government is committed to supporting SMEs build e-commerce platforms, which can also be used by farmers and craftsmen.

It also will establish centers of technology development to provide SMEs access to technology and support, thereby encouraging innovation.

The fifth stage is offering incentives for investments in technology. The government will redesign its plan on incentives for adopting various technologies, including subsidies, tax cuts and waiving import duties for companies committed to implementing 4.0 innovations.

In step number six, the government will establish an innovation ecosystem. It will develop a national innovation blueprint, prepare a pilot center for innovation and optimize related regulations, including intellectual property protection and fiscal incentives to accelerate cross-sector collaboration between private entrepreneurs, state-owned enterprises and universities.

The seventh step focuses on attracting foreign investment, which will be able to encourage technology transfer to local companies. Domestic players are encouraged to engage with global top manufacturers, while the government initiates dialogues with its foreign counterparts for national-level collaborations.

The eighth step constitutes harmonizing rules and policies. Indonesia is committed to harmonizing rules and policies to support the competitiveness of industries, and ensure close coordination of policy makers among ministries and institutions with local governments.

In the ninth stage, the government will establish a national digital infrastructure. The program includes high-speed internet and enhanced digital capabilities through public-private partnerships to invest in digital technologies, such as cloud data centers, security management and broadband infrastructure.

Finally, the 10th stage will be accommodating standard sustainability. Indonesia sees sustainable challenges as an opportunity to build national industry capabilities, such as those based on clean technology, electric power, biochemistry and renewable energy.

According to the government, there are five priority sectors to Industry 4.0, namely food and beverages, automotive, chemicals, electronics as well as textile and apparels, growing at the rates of 9.23 percent, 3.68 percent, 4.53 percent, 2.79 percent and 3.7 percent in 2017, respectively. Their respective contributions to Indonesia’s gross domestic product (GDP) stood at 6.14 percent, 1.82 percent, 1.74 percent, 1.86 percent and 1.11 percent.

The Making Indonesia 4.0 roadmap is expected to significantly boost GDP, manufacturing contribution and employment. The Industry Ministry has estimated that the strategy will increase real GDP growth from around 5 percent to between 6 percent and 7 percent year-on-year from 2018 to 2030. It will also raise manufacturing’s contribution to the GDP from about 16 percent to around 25 percent in 2030. As for employment, the roadmap will create more than 30 million jobs by 2030 from currently 20 million.

World Economic Forum data shows that Industry 4.0 has the potential to increase the number of workers to 2.1 million by 2025. In addition, it could potentially reduce carbon emissions by 26 billion metric tons from three industries, namely electronics (15.8 billion), logistics (9.9 billion) and automotive (540 billion) between 2015 and 2025.

Meanwhile, the challenge going forward is the need to improve the nation’s technology and the skills of Indonesia’s workforce. Educational institutions should be able to adjust their learning focuses and skills in line with current market needs.

During this era, there will be a loss of positions and old job skills, but new positions and skills will be created. It is not only the government’s task, but also that of business players as well as educational and training institutions to ensure that current and future workers are ready to face the fourth industrial revolution.
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The writer is an analyst at The Mandiri Institute.

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