Grace D. Amianti, Jakarta – The government expects to attract more foreign direct investments as growth in some of Indonesia's manufacturing sectors starts to pick up despite a general economic slowdown, top officials have said.
Industry Minister Saleh Husin said the government remained optimistic for the prospect of direct investment in the non oil-and-gas manufacturing industry, which grew 5.27 percent in the second quarter of this year, a slight increase from 5.21 percent in the first quarter.
"The percentage is higher than the overall economic growth rate of 4.67 percent in the second quarter. This has strengthened our optimism that we can improve the structure of our manufacturing industry, particularly in its downstream side," Saleh said on Friday evening.
Of all manufacturing sectors, Saleh said pharmaceuticals, food and beverages, metals and the automotive industries booked high growth of between 6 and 9 percent. On the other hand, negative growth occurred in some industries such as textiles.
Saleh acknowledged that several industries saw declining sales due to weaker demand, even though existing and new investments in the sector continued to increase.
For instance, Saleh said, German car manufacturer Volkswagen announced its plan earlier this year to build a factory in Indonesia, which was followed by similar proposals from US giant General Motors (GM) and its Chinese partner SAIC Motor Corporation.
GM and SAIC announced in February that it planned to build an Indonesian plant, which would produce 120,000 car units under the Wuling brand.
"GM-SAIC is ready for a ground-breaking ceremony on its 60-hectare plot of land. The company will invest around US$700-800 million for the project, which is expected to start production in 2017," Saleh said.
Investment Coordinating Board (BKPM) chairman Franky Sibarani confirmed that GM-SAIC was scheduled to start its factory construction in Cikarang, West Java this month.
The ministry's data showed that manufacturing industries booked total investments of US$5.07 billion in the second quarter, an increase of 14.5 percent from $4.43 billion in the same period of last year.
To support industry growth, Franky said BKPM aimed to increase the proportion of manufacturing investment to 52.7 percent, or equal to Rp 313.5 trillion (US$22.6 billion) of total realized investment next year.
Franky said the push in manufacturing production was based on President Joko "Jokowi" Widodo's speech at the House of Representatives' plenary meeting on Friday. During the speech, Jokowi delivered the proposed 2016 state budget.
"The president said that Indonesia needed a change in its economic paradigm from a consumption-based economy to a production-based one, a change that could be brought about by increasing realized investment in the manufacturing sector," Franky said.
In order to achieve the target, Franky said the BKPM would list manufacturing as one of Indonesia's prioritized sectors for investment marketing abroad, in addition to infrastructure, agriculture, maritime as well as tourism and special economic zones.
Franky said further that the investment board would coordinate with other ministries and state institutions to create pro-investment policies, such as a fixed formula of wages for five year periods as well as export-oriented trade partnerships.