Faisal Maliki Baskoro – Indonesia is on track to achieve its growth target in the manufacturing sector on the back of planned incentives and increased investment, an official said.

Manufacturing rose by 5.75 percent in the first quarter from a year earlier, within the forecast range of 5.2 percent to 6.1 percent, Industry Minister M.S. Hidayat said on Friday. Growth would be supported by five main sectors – machinery and transportation, food and beverages, base metals, cement and textiles – he said.

"These sectors are performing very well and if they can keep it that way, the optimistic scenario [of 6.1 percent growth] will be achieved this year," he said. "In the first half, industry grew beyond our expectations, but we can't disclose details yet."

The Central Statistics Agency (BPS) will release first-half manufacturing data next month.

Preliminary figures from industry groups suggest manufacturing is growing. Cement sales increased more than 6 percent in the first half from the same period last year, boosted by higher property and infrastructure spending, according to the Indonesian Cement Association (ASI). Car sales surged 12 percent to 415,276 units in the first half, the Indonesian Automotive Industries Association (Gaikindo) reported.

Hidayat also said a number of large investments this year could help the ministry meet its targets in other areas. "We're also luring investments in the downstream sectors of mining and agriculture," he said. "On top of that we expect to create around 300,000 jobs in the second half, to complete our target of 530,000 [manufacturing] jobs this year."

Major investments, he said, included South Korean firm Posco's $6 billion joint venture with state steel maker Krakatau Steel; Astra Daihatsu Motor's Rp 2.1 trillion ($248 million) expansion plan; state miner Aneka Tambang's chemical-grade aluminium project in Tayan, West Kalimantan, valued at Rp 4.3 trillion; and the Sei Mangke palm oil industrial zone in North Sumatra, worth Rp 2.5 trillion.

Hidayat said his office would push the Finance Ministry to provide incentives, such as tax breaks or holidays, for foreign companies wanting to establish projects under Indonesia's Rp 4,000 trillion economic master plan.

However, Sofjan Wanandi, chairman of the Indonesian Employers Association (Apindo), said he doubted the government would be able to meet its most optimistic targets. "Incentives and disincentives are necessary to reduce exports of raw materials and boost domestic industry, but to develop the downstream sector could take years, even with strong will from the government."