Achieving these targets will require more than incremental change. In my view, the manufacturing sector will carry much of the weight in this transformation, a view that aligns closely with the government’s own positioning of manufacturing as the primary engine of national economic growth.

Last year, the Industry Ministry recorded the growth rate of the non-oil and gas processing industry (IPNM) at 5.3 percent, outpacing the national economic growth of 5.01 percent. The sector’s contribution to the national gross domestic product (GDP) is 19.07 percent, while also accounting for over 80 percent of Indonesia’s total exports. Beyond that, the sector is also a massive job creator, employing 20.26 million workers, as of the third quarter of 2025.

Looking ahead, the Industry Ministry is aiming for a manufacturing contribution of 18.56 percent to national GDP with a sectoral growth rate of 5.51 percent. By 2026, the sector is projected to employ 14.68 percent of the national workforce, underscoring its continued centrality to both economic output and job creation.

One of the key strengths of Indonesia’s economy also lies in the sheer variety of its manufacturing base, where different sectors act as interlocking pillars of support. In 2026, the food and beverage industry is expected to remain a dominant force, contributing 7.64 percent to the total GDP. At the same time, the chemical, pharmaceutical and textile industries are expected to grow by 4.77 percent, contributing 4.1 percent to the GDP while providing livelihoods for over 7.39 million workers.

A concrete illustration of this industrial impact can be seen in the bottled water industry, which has become a strategic part of the modern supply chain. With about 707 factories and a capacity of 47 billion litres per year, this sector employs roughly 46,000 direct workers. It is a clear demonstration of how specific subsectors contribute to broader goals like domestic consumption and regional development.

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Indonesia’s downstreaming agenda adds another important dimension to this outlook. By shifting from raw material exports toward higher-value processing at home, downstreaming strengthens domestic value chains, encourages technology transfer and supports more sophisticated industrial development. When aligned with stable regulations and market-driven incentives, downstreaming amplifies the competitiveness of manufacturing while driving regional diversification. It reinforces the government’s broader ambition: transforming Indonesia into a more resilient, higher-value industrial economy capable of sustaining strong and inclusive growth.

Indonesia’s manufacturing sector is not only vast in scale but also remarkable in its diversity. It encompasses a wide range of industries, including food and beverages, textiles, automotive, electronics, chemicals, leather, footwear, toys and tobacco, which represent Indonesia’s core labor-intensive manufacturing base. This variety creates deep economic interlinkages across more than 185 connected sectors. Kompas research shows that every rupiah of demand in manufacturing generates more than one rupiah in additional national output, highlighting its multiplier effect across agriculture, logistics, trade and other major pillars of the economy.

Within this expansive ecosystem, the tobacco processing industry remains a consistent contributor. It regularly ranks among the top-10 contributors to manufacturing GDP and accounts for approximately 4.2 percent of total manufacturing output. Its economic footprint is characterized by extensive employment and community-based supply chains, particularly through partnerships with farmers, small-scale suppliers and local processing networks. These attributes position tobacco as one of the industries that reinforces the broader strength and resilience of Indonesia’s manufacturing sector.

Currently, there are about 1,300 cigarette factories operating all over Indonesia, based on data from the Industry Ministry. While geographically dispersed, production is heavily concentrated in East Java, which accounts for roughly 45 percent of the national output. Despite the large number of producers, the market itself is highly concentrated, dominated by four major players: HM Sampoerna, Gudang Garam, Djarum and Bentoel.

From a labor perspective, the tobacco processing industry provides 2.6 million direct jobs and supports a total of 6 million workers across the full value chain, from tobacco and clove farmers to the workers, retailers and logistics providers. The industry contributes not less than Rp 250 trillion (US$14.65 billion) annually in excise, regional tax and VAT.

The industry also carries an important social dimension. In the hand-rolled cigarettes segment, employment opportunities for women are particularly significant. For many of these women, the jobs provide stable income and support household welfare. Additionally, for many families, this income goes beyond meeting daily needs, enabling access to better nutrition, health care and education, and improving overall quality of life.

Moreover, tobacco companies often engage in partnership programs with farmers. They provide technology and mentorship to improve land productivity. Tobacco is largely grown between food crop cycles, meaning it serves as an important seasonal income source for many farming household.

The broader economic impact of the tobacco processing industry can be seen in companies such as PT HM Sampoerna Tbk., which is often seen as a representative of the sector as a whole. With a market share of around 27.4 percent, the company’s scale generates a substantial “ripple effect” across the economy. Recent research by Kompas found that Sampoerna has a multiplier ratio of 1.7 times. This means that for every Rp 1,000 of business the company does, it actually generates Rp 1,700 in total value for the Indonesian economy. On an annual basis, this translates into an estimated Rp 204.1 trillion in national output, equivalent to around 1 percent of Indonesia’s GDP.

The company’s impact is distributed across multiple sectors. Manufacturing alone accounts for roughly Rp 146 trillion in output from Rp 119.7 trillion in final demand. Beyond that, Sampoerna’s activities translate into tangible cross-sector benefits, including Rp 27.8 trillion in added value for agriculture through the purchase of tobacco and cloves, Rp 6.9 trillion for modern retail and Rp 2.4 trillion for logistics.

Given manufacturing’s far-reaching impact, regulatory stability is essential. Labor-intensive industries rely on predictability to plan long-term investments and safeguard millions of jobs. Sudden policy changes can disrupt interconnected value chains. Supporting high–labor absorption subsectors, such as food, textiles and tobacco, helps maintain stability and protect livelihoods.

Ultimately, supporting sectors that employ millions and generate value across regions brings the government’s targets for poverty reduction and economic growth within reach. As Nobel laureate Muhammad Yunus has argued, an economy succeeds only when it improves the lives of ordinary people. Strengthening industries that deliver stable employment and broad-based economic benefits is therefore not only an economic imperative, but also a foundation for building a more resilient Indonesia for all.

The ideas expressed here do not represent The Jakarta Post's views and policies.

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