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Published on : Jan 15, 2015

Manufacturing industry of Indonesia may cripple due to many looming challenges and see another year of decline in growth, with its pace being slower than the previous year, analysts state. 

A decline in the country’s manufacturing activities was evident in the fourth quarter of 2014, as suggested by Purchasing Manager’s Index (PMI) of HSBC Indonesia. The PMI is an index that measures the strength of the manufacturing industry. Its fresh ratings show that Indonesia’s manufacturing industry has recorded stance that is lowest of the past three years because of waning new orders and declining output. 

This year again there are chances that the country’s manufacturing industry will observe decline due to a possible shrinkage in domestic consumption on account of the weaker purchasing power of the end user. Also, there are no signs of a quick improvement in the overseas market as well.

The sector also faces many notable challenges such as the rising costs of electricity, depreciating value
of rupiah against the American dollar, and rising labor wages. Amid the many factors that may help in improving Indonesia’s industrial performance, the government has targeted to improve condition of the gas and non-oil manufacturing industry and expand from 5.7% in the last year to 6.1% this year. If this industry does not reach the estimated growth, the country’s manufacturing sector will plunge to the slowest pace in the past three years. 

Growth will be driven by orders from industries that process mining and agriculture goods into finished and semi-finished goods, according to secretary general of country’s Industry Ministry, Ansari Bukhari.