Indonesia Industry 4.0 – Focus on Ready Made Garment (RMG) Sector

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Indonesia is one of the top largest manufacturing nations in the world, defined by output. The manufacturing sector employs more than 25 million workers and accounted for ~20% of Indonesia’s GDP in 2017, totaling roughly USD 203 billion. The sector has seen 67% growth annually for several years and is the backbone of the Indonesian economy.

Indonesia has rolled out a roadmap for industry 4.0 for its most vital sectors. Food & beverage, automotive, textile, electronics, and chemical jointly accounted for close to 2/3 of Indonesia’s total manufacturing output in 2017 and will be prioritized by the government under the new roadmap.

Manufacturing contributes significantly to employment in Indonesia with close to 1/5 of the working population being employed by the sector. The glory days of Indonesian manufacturing, however, has long since passed and Indonesia today faces immense competition from countries such as Vietnam, Thailand, and China.

The roadmap aims to improve the flow of goods, empower SMEs, increase foreign investments, strengthen the national digital infrastructure and sharpen the quality of human resources. This roadmap implementation will see new opportunities generated in IoT, automation and robotics, human-machine interface and AI…etc.

There’s a target of 5% of the global share, which may sound ambitious in the current situation but not impossible. There are lots of challenges, but the government has already taken lots of positive and potential initiatives to achieve the goal. These include funding and subsidies, as well as tax holiday programs. To ensure maximum impact by the roadmap, a wide range of stakeholders are being involved. Leading industry companies, industry associations, tech companies, as well as research and educational organizations are some of the stakeholders being engaged by the government.

Manufacturing, being one of the major priority sectors of Indonesia, it can become a global leader under this roadmap, with manufacturing forecasts to account for 21 to 26 percent of GDP by 2030, up from 18 percent in 2016. It will make seven million to nineteen million new jobs by 2030 and that will contribute a sustainable GDP growth 1 to 2 percent.

Efforts to advance Industry 4.0 implementation in Indonesia will bring massive opportunities for foreign companies and investors. Indonesia’s most important industries are in strong need of productivity improvements to increase efficiency and the government’s ambitions to support these industries will be vital in the coming years to increase effectiveness.