During the launch of the network recently, Industry Minister Airlangga Hartarto said the partnership was expected to match Indonesia’s manufacturing industry with “the sustainability philosophy of the Japanese manufacturers”.

“We believe this collaboration will provide a lot of strategic insight for the government to increase our competitiveness in the era of Industry 4.0.,” he said in his speech in Jakarta.

Airlangga said several Japanese manufacturers operating in Indonesia had agreed to provide pilot projects to kick off under the new network, including automotive giants Toyota and Daihatsu, as well as electronic companies Panasonic and Epson.

To attract Japanese companies, Airlangga mentioned several tax incentives the government had offered recently. For example, super deduction tax for research and development activities, in addition to five to 20 years of tax holiday for companies investing more than US$50 million and a 60 percent value-added tax cut for investment under $50 million.

“We also expect that this network will be able to serve as the spearhead of Indonesian diaspora to boost mainly our small and medium industries overseas,” said Airlangga.

Japanese Ambassador to Indonesia Masafumi Ishii lauded the network’s establishment, which followed the commemoration of the 60th anniversary of diplomatic relations between Indonesia and Japan on Jan. 20.

“The presence of Japanese [businesses] in Indonesia had increased from only 1,438 companies in 2013 to 1,911 companies in 2017,” Ambassador Ishii said during the same event. “However, their interest in developing [their businesses] in Indonesia has somehow gone down over the years.”

Data from Japan’s Finance Ministry show that even though the East Asian country has been among Indonesia’s top sources of investment, its interest in developing the manufacturing industry in Southeast Asia’s largest economy has declined over the years.

Indonesia was Japan’s top choice for manufacturing expansion in 2013, however the country’s position declined to fifth place last year. In 2017, Japan remained the second-largest investment source for Indonesia with investment of nearly $5 billion.

The establishment of the network, said Ambassador Ishii, was therefore expected to provide an incentive for the 2045 Project between Indonesia and Japan, or on the 100th anniversary of Indonesian independence, as the Southeast Asian country was seeking to become a global player among the top-five largest economies and enhance the quality of life of its people.

“By the end of this year, we will announce our report on [the 2045 project] and organize a high-level meeting on it,” he said.

The idea of establishing the network had come from Indonesian businesspeople who had studied in Japan and had seen the ongoing problems in Indonesia’s manufacturing industry. They expected that by establishing a new business hub solution, the trade balances of both countries could be improved, while companies could adapt to Japanese technologies and build synergy with both countries’ governments.

Indonesia’s special presidential envoy for Japan, Rahmat Gobel, who is also a former trade minister, said now was the best time for Indonesian workers to learn from the Japanese manufacturing industry, as the latter was experiencing a scarcity in young professionals aged 20 to 38, while transfer of knowledge from Japan to Indonesia remained rare, causing a lack of competitiveness.

The Japanese government had therefore set out a technical intern training program for 500 Indonesian young professionals this year in the factories of electronics company Panasonic across Japan, Rahmat said.

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