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Manufacturing decline in 2019 raises concerns about deindustrialization, Industry 4.0
While the manufacturing sector’s contribution to GDP remains large, its percentage contribution to GDP only amounted to 19.86 percent last year.
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Factory fashions: Workers operate sewing machines at a garment factory in Bogor, West Java, in September 2018. (Antara/Yulius Satria Wijaya)
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wo issues have been central to the Indonesian manufacturing industry throughout 2019; the sector’s growth continuing to stagnate and the digitalization of industries posing both new threats and opportunities.
In particular, the term “deindustrialization” garnered more attention this year following claims made in April by presidential candidate Prabowo Subianto, who argued the country’s manufacturing sector was in decline and was being left behind by its peers.
Former vice president Jusuf Kalla later sought to shed light on the situation, saying the declining percentage should not be prematurely perceived as a sign the country was experiencing deindustrialization.
But the numbers don’t lie: while the manufacturing sector’s contribution to GDP remains large, its percentage contribution to GDP only amounted to 19.86 percent last year, struggling to remain at the 20 percent mark, Statistics Indonesia (BPS) data showed.
The figure climbed to 20.07 percent in this year's first quarter but fell again to 19.52 percent in the second quarter and stagnated at 19.82 percent in the third quarter. Such numbers contrast the sector's achievement in 2001 when its percentage contribution to GDP was close to 30 percent.
Additionally, Indonesia’s Purchasing Managers' Index (PMI) — a benchmark for measuring manufacturing industry performance — stood at an average of 49.2 points in the third quarter, the lowest since 2016. A PMI reading under 50 represents a contraction.
In contrast, Bank Indonesia (BI) was more optimistic as it claimed that the central bank’s Prompt Manufacturing Index was at an “expansive” level of 52.65 percent in the first quarter of 2019. The figure stood at 52.66 percent in the second quarter and fell to 52.04 in the third quarter.
