The manufacturing industry of Indonesia is in need of a boost as its contribution toward Indonesia's gross domestic product (GDP) has declined from 28.0 percent to 20.8 percent of GDP over the past decade. An underdeveloped manufacturing industry gives rise to a fragile economy as Indonesia remains highly dependent on raw commodity exports and on the services industry. This causes problems in times of low commodity prices and Indonesians' weak purchasing power. Preferably, the manufacturing sector accounts for at least 35 percent of GDP.

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Industry players in Jakarta are somewhat relieved after Jakarta Governor Basuki Tjahaja Purnama (Ahok) signalled that he will allow a revision to the mandatory relocation of local industries to designated industrial zones. Based on Regional Regulation No. 1/2014 on Detailed Spatial Planning and Zoning Regulations, all local industries in Jakarta have to be (re)located into the designated industrial zones before 1 January 2017. Ahok is now expected to extend the deadline to the end of 2019.

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Indonesia's Ministry of Industry is optimistic that the country's manufacturing industry will grow 5.7 percent (year-on-year) in 2016, up from the estimated 5.3 percent growth pace this year. Indonesian Minister Saleh Husin said this optimism is based on higher domestic direct investment. Domestic investment realization in Indonesia's industry sector rose 7.45 percent (y/y) to IDR 20.1 trillion (approx. USD $1.5 billion) in the third quarter of 2015 from IDR 18.7 trillion in the same quarter last year. Foreign direct investment (FDI) into Indonesia's industry sector stood at USD $3.15 billion in Q3-2015.

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Through capital injections the Indonesian government aims to enhance the role of various state-owned enterprises (SOEs) within the process of economic development. In the recently unveiled 2016 State Budget draft, which still requires approval from Indonesia’s House of Representatives, the government allocated a total of IDR 48.2 trillion (approx. USD $3.6 billion) to 24 SOEs in five priority sectors: food security, infrastructure & maritime development, energy security, strategic industry development, and national economic autonomy.

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The non-oil & gas industry of Indonesia grew 5.56 percent in the first quarter of 2014. Although general economic growth in Southeast Asia's largest economy has slowed to 5.21 percent in the first quarter, several industries such as the Food and Beverage Processing Industry, the Transportation Equipment Industry, Machinery & Equipment Industry, as well as Farming & Plantation-based Industries post strong growth. The Indonesian Industry Ministry targets a 6.5 percentage rate for the country's industrial sector in 2014.

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The government of Indonesia unveiled the last installment of a series of three stimulus packages on Wednesday (07/10). The first two installments had been unveiled last month. In general, these stimulus packages aim to boost economic growth of Indonesia (which has slowed to a six-year low) and restore investors' confidence in the Indonesian rupiah and stocks. When markets believed that the Federal Reserve would soon raise its key interest rate, Indonesia was plagued by severe capital outflows pushing the rupiah to a 17-year low.

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State-owned electricity provider Perusahaan Listrik Negara (PLN) stated that consumption of electricity in Indonesia grew 7.2 percent to 90,48 terawatt hour (twh) in the first six months of 2013 compared to the same period last year. Head of PLN's Commercial Division, Benny Marbun, explained that Indonesia's industrial sector particularly consumed more electricity. Although industrial customers of PLN only grew by 4.5 percent in Semester 1-2013 (YoY), industrial electricity consumption grew 8.3 percent (YoY).

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