The Central Statistics Agency (BPS) recorded a decline in the growth of large and medium manufacturing industry in the first quarter of 2015 by 0.71% compared to October-November 2014. BPS noted that the weakening of the industry in the early part of the year was because it is affected by government expenditure pattern which is low in the beginning of the year. Statistics recorded that from 33 large and medium manufacturing industry sectors, 16 industry sectors experienced a decline in quarterly growth.
The largest decline is experienced by non metallic mineral product industry by 6.64%, followed by electrical equipment industry at 4.74%, and non wood furniture industry at minus 4.38%. A total of 21 cities recorded a decline in manufacturing performance in the first three months of 2015. The highest occurred in Bengkulu at minus 8.85% and Bangka Belitung at minus 7.39%.
Chairman of the Indonesian Employers association (APINDO), Anton J. Supit, in Jakarta, on Tuesday (May 5), admitted that the real sector performance deteriorated during the first quarter of 2015. APINDO reported that the sharpest decline is experienced by property and hotel sectors, i.e. up to 40%. Retail sector plunged 25%, followed by automotive sector at 20%, followed by automotive sector at 20%. Food and beverage sector which is usually immune to economic shocks, this time contracted 10%. APINDO also highlighted tax revenue target which is too high for the sake of government’s ambition to accelerate development in a short time. The too high target eventually distorts the company, including the business community.
According to anton, BPS data showed that industrial growth in the first quarter of 2015 slowed from the previous quarter, and this is proof that the development programs undertaken by the government is not in accordance with the needs of the business community. He said that the decline in purchasing power is compounded by sluggish global economic conditions. Nevertheless, the global economic slowdown should not be a reason for the decline in domestic industrial growth. The main problem which until now suppress the growth of the domestic industry is bad investment and business climate, legal uncertainty, poor infrastructure, and weak support of local government as the land owner for the industries.
Anton pointed out that in spite of the sluggishness of the global market, world demand for shoe products remain USD 200 billion per year, while until now the value of Indonesian exports is only USD 4 billion, far less than Vietnam which is able to increase exports to USD 10 billion. Not only that, in the textile market, the value of global textile demand each year reached USD 700 billion, while Indonesia was only able to contribute 1.8% or exported USD 1.3 billion.
He also sees that in an effort to attract foreign investment, the government has no clear design of priority industries. Currently, Indonesia requires more labor-intensive industries that absorb a large number of workforce rather than capital-intensive industries that require highly educated workforce. Because the majority of Indonesian workers are in that if the government attracts many capital-intensive investments, unemployment rate will increase because job vacancies are occupied by foreign professionals when ASEAN Economic Community is implemented.
Meanwhile, the Ministry of Industry said it will correct the manufacturing industry growth target in 2015 if the decline in growth in the first quarter of 2015 at 0.71% continues until the second quarter of 2015 (q-to-q). Syarif Hidayat, acting Secretary General of the Ministry of Industry, said that the decline in growth in this period was due to the decline in purchasing power in line with the slowdown of macroeconomic growth that resulted in production decline. Moreover, the high price of energy production has pressured the performance of the industry. Currently investors are still making calculation because of weak market demand. After the second quarter of 2015, there will be no adjustment or target correction from 6.1% for 2015. (E)
Business New -May 8, 2015