2012年-世界发展银行全球_Why_the_Manufacturing_Sector_Still_Matters_for_Growth_and_Development_in_Indonesia_19页_3mb

Summary of "Why the Manufacturing Sector Still Matters for Growth and Development in Indonesia"

Core Content

The manufacturing sector in Indonesia remains a crucial driver for economic growth and development, despite recent shifts in the structure of the sector and changes in global economic conditions. This policy note emphasizes the continued relevance of manufacturing in Indonesia's development strategy and highlights its contributions to job creation, productivity, and long-term prosperity.

Main Points

1. Role of the Manufacturing Sector in Indonesia's Economy

• The non-oil and gas manufacturing sector employs about 14 million Indonesians, accounting for 13% of total employment.
• It contributes one out of every four rupiahs of added value in the economy and generates half of the country's foreign exchange export revenues.
• The sector has evolved over the past 15 years, with a shift from labor-intensive industries (e.g., textiles, leather, and wood products) to resource-based and capital-intensive sectors (e.g., food, chemicals, and basic metals).
• Exports have increasingly focused on natural resource-based commodities, reflecting this structural change.

2. Linkages with the Rest of the Economy

• Over one-third of manufacturing output is value-added, while two-thirds are intermediate inputs.
• Intermediate inputs come primarily from other manufacturers (30%), followed by agriculture (17%), mining (14%), and services (22%).
• Manufacturing growth has a spillover effect on other sectors, particularly services (construction, transport), and to a lesser extent, trade.
• Domestic demand has been a key driver of recent manufacturing growth, with stable private consumption and recovery in real investment in machinery.

3. Context of Manufacturing Growth

• Manufacturing output growth has been strong in recent years, with a 4.5% year-on-year increase in 2009 and 5.6% in 2011.
• The sector has shown resilience since the 1997/98 Asian financial crisis, although it still lags behind pre-crisis growth levels.
• Foreign direct investment (FDI) in manufacturing has increased significantly, with a 106.8% year-on-year rise in 2011.
• Firms in labor-intensive industries like textiles, clothing, and footwear (TCF) have relocated to Indonesia due to rising wages in China, potentially boosting exports.

4. Creating Higher-Productivity Jobs

• Manufacturing is vital for generating higher-productivity jobs, which are more formal and offer better wages.
• It has higher labor productivity than agriculture and traditional services, with GDP per worker in manufacturing being more than six times that of agriculture in 2009.
• The manufacturing sector is a major source of formal employment, especially for secondary school graduates.
• Employment-value-added elasticity has declined over time, suggesting a shift from labor-intensive to capital-intensive industries.

5. Sustaining Economic Growth and Structural Change

• Manufacturing contributes significantly to GDP growth and structural transformation.
• It attracts more capital accumulation, which enhances productivity and supports economic growth.
• Manufacturing is less volatile than commodity sectors, providing more stable growth and reducing exposure to global price fluctuations.

6. Positioning for Long-term Prosperity

• Manufacturing growth is essential for long-term prosperity through technological progress and innovation.
• Integration into global production networks (GPNs) allows Indonesian firms to absorb knowledge spillovers, which can enhance local innovation capacities.
• Firms integrated into GPNs benefit from technology transfers, leading to increased productivity and growth.
• Indonesia's integration into GPNs is still limited compared to its neighbors, with only 23% of manufacturing trade consisting of components.

7. Conclusion

• The manufacturing sector is a key component of Indonesia's economic development strategy.
• It supports job creation, higher productivity, and more stable economic growth.
• The Master Plan for the acceleration and expansion of Indonesia's economic development (MP3El) recognizes the importance of manufacturing in achieving long-term growth and prosperity.

Key Information

• Employment: Manufacturing accounts for 13% of total employment and is a major source of formal jobs.
• Value Added: It contributes 25% of GDP in 2010, up from 20.6% in 1990.
• Export Composition: Manufacturing exports have shifted from labor-intensive to resource-based products, with natural resource-based exports increasing significantly.
• FDI Trends: FDI in manufacturing grew by 106.8% in 2011, driven by relocation of firms from China and increased domestic market potential.
• Demographics: Indonesia's young population and growing middle class are attracting market-oriented investments.
• Productivity: Manufacturing shows higher labor productivity than most other sectors, though growth in productivity has slowed since 2000.
• Gender Gap: Manufacturing offers relatively better wage equality and more employment opportunities for women.
• Global Integration: Indonesia is less integrated into GPNs than its neighbors, which may limit its access to knowledge spillovers and technology transfers.

Conclusion

The manufacturing sector remains central to Indonesia's economic growth and development. Its ability to create higher-productivity jobs, attract capital, and reduce economic volatility makes it a strategic focus for long-term prosperity. Continued investment and policy support are necessary to maintain and enhance its role in the economy.