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Optimizing strategies to avoid deindustrialization

Diposting pada 8 Juni 2024 oleh admin / Dilihat: 1 kali

Jakarta (ANTARA) – Geopolitical uncertainty in the world poses a threat to global industrial progress.

Several countries in Europe are currently trying to maintain industrial stability so that it is not affected by deindustrialization due to the energy crisis caused by the Middle East dispute and the war between Russia and Ukraine.

Simply put, deindustrialization is a condition of decreasing the contribution of the industrial sector to the national economy. If this happens in a country, this makes the country’s government dependent on the tertiary sector, such as services, to support the country’s needs.

The Economic and Society Research Institute, Faculty of Economics and Business, University of Indonesia (LPEM FEB UI) stated that Indonesia is still far from deindustrialization because based on government records, the non-oil and gas processing industry (manufacturing) is still the backbone of national economic income.

The Central Statistics Agency (BPS) recorded that the Indonesian economy in 2023 will grow by IDR 20,892.4 trillion (1 US$ = around IDR 16,276)), with a GDP per capita of US$ 4,919.7. In that year, the manufacturing sector contributed 19 percent to overall GDP.

During the 2014-2022 period, the GDP of Indonesia’s manufacturing industry recorded an average growth of 3.44 percent per year. This figure is far above the average world industrial growth of only 2.35 percent.

In fact, Indonesia’s manufacturing added value is at an expansive level above several countries such as Canada, Turkey, Ireland, Brazil, Spain, Switzerland, Thailand and Poland with contributions of up to US$228 billion.

“This shows that Indonesia is one of the world’s manufacturing powers,” said Minister of Industry Agus Gumiwang Kartasasmita.

The large contribution of national industry to GDP cannot be separated from the role of the government and business actors who strive to maintain the stability of the industrial climate.

Based on the Industrial Confidence Index (IKI) in April 2024, industry players showed optimism regarding their business climate, where 72.3 percent of them believed that in the next six months, the business climate would continue to improve.

This high level of optimism is caused by business actors’ confidence in central government policies and the potential for economic improvement both nationally and globally.

However, it is not impossible that Indonesian industry will experience a decline in contribution. This is caused by the uncertainty of the geopolitical situation which continues to fluctuate today.

For this reason, the Ministry of Industry, which is tasked with maintaining the national industrial climate, has prepared a strategy to keep deindustrialization away from Indonesia.

This strategy includes implementing a program to update industrial machine technology and strengthening human resources through vocational education and training.

Technology update

Updating technology or restructuring machines is one of the Ministry of Industry’s main programs to maintain the stability of domestic industry.

This program provides opportunities for industrial players to increase their productivity by replacing old equipment with the latest equipment. The mechanism for providing incentives is reimbursement so that it is hoped that industry players can optimize their business.

Industrial players can propose to become program beneficiaries through several stages, namely first registering online via the National Industrial Information System (SIINas), administrative inspection, administrative verification, reporting equipment that needs to be replaced or reorganized, determination by the Ministry of Industry. , and finally, disbursement of funds.

One of the manufacturing subsectors that is given equipment renewal incentives is the fabric finishing and fabric printing industry.

The Ministry of Industry allocated funds of IDR 50 billion (around US$3.07 million) in 2024 for implementing the program, targeting 59 companies.

One of the beneficiaries of this program is a textile company from West Java, PT Mahugi Jaya Sejahtera, which is able to improve the quality of its fabrics because the technology they use has been replaced with the latest technology.

As a result, in May 2024, the company succeeded in exporting 300 thousand meters of fabric with a transaction value of US$ 350 thousand to Dubai.

It is hoped that this program will encourage other industrial players to increase their productivity so that the manufacturing industry’s contribution to the country’s foreign exchange can increase and market opportunities in non-traditional markets such as Central Asia and Eurasia can be opened.

In 2024, the Ministry of Industry has also allocated funds worth IDR 7.5 billion (around US$460,778) to renew equipment for the wood and furniture processing industry, with a target of 10 companies.

Based on reports from beneficiary companies in the previous year, this incentive had an impact on increasing company efficiency by 10-30 percent, product quality by 10-30 percent, and company productivity by 20-30 percent.

Strengthening human resources

Quality human resources are an important factor in avoiding deindustrialization.

To maximize this strategy, the Ministry of Industry through vocational education institutions provides learning opportunities for the younger generation.

In total, there are currently 22 educational units consisting of nine vocational schools, two Industrial Community Academies (Akom), and 11 Industrial Polytechnics spread throughout Indonesia, with a total of 17,536 students.

In 2024, through the Industrial Vocational Admission Scheme (Jarvis), the Ministry of Industry has provided a quota of 4,796 new students at the polytechnic and community college level and 2,730 new students at the vocational school level.

Apart from being given knowledge about national industrial management and processing, students are also given job guarantees after completing their education.

Apart from that, the Ministry through the Industrial Training Center also organizes “3 in 1 Training” for people who want to improve and update their industrial skills. This program provides training, competency certification, and job placement.

In 2023, 33,094 people will get jobs and certification through the program, exceeding the target of 27,070 people.

Workers who have completed this training are generally employed to strengthen the textile sector, food and beverage sector, seafood processing, animation, and the information technology (IT) sector.

By renewing industrial equipment and strengthening human resources, the Indonesian government hopes that the national industrial climate will remain stable and optimal to avoid a potential decline in the manufacturing sector’s contribution to the economy.

Related news: Deindustrialization signals for manufacturing industry to grow: minister

Editor: Rahmad Nasution
Copyright © ANTARA 2024

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Optimizing strategies to avoid deindustrialization

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