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APSyFI: The national textile industry is headed for a trade deficit, 2018 exports grow 1% and imports grow 14% (yoy).--IKATSI: The growth of the national textile industry is still hampered by floods of imports, Indonesia needs a clothing security law.

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Home arrow Latest News arrow Manufacturing Performance Must Be Better

Manufacturing Performance Must Be Better PDF Print E-mail
Written by Maizer   
Wednesday, 06 May 2020

The Ministry of Industry assesses that the contribution of the processing industry is still the biggest contribution to the structure of the national gross domestic product (GDP) of 19.98 percent in the first quarter / 2020.


Director General of Chemical, Pharmaceutical and Textile Industries (IKFT) of the Ministry of Industry Muhammad Khayam said the government had mapped out the industrial sectors that were devastated by the Covid-19 pandemic.


The government is determined to spur the performance of the industrial sector to continue to drive the wheels of the economy, but by continuing to comply with health protocols.


"Many sectors affected, there are several sectors that still have high demand that can strengthen the trade balance," he said.


Khayam said the mapping began from the small, medium to large-scale industrial sectors. In summary, 60 percent of the industry is down, 40 percent is a moderate industry and high demand.


According to Khayam, that will certainly also cause pressured future industry growth. Based on data from the Central Statistics Agency (BPS), the growth of the non-oil and gas processing industry was at 2.01 percent during the first quarter / 2020. As a result, the impact on the pace of the national economy was only able to grow 2.97 percent.


However, a number of Indonesia's trading partner countries also contracted as a result of activity restrictions and lockdowns to control the spread of Covid-19. For example, China, whose economic growth dropped to -6.8 percent in the first quarter of 2020. Furthermore, the United States 0.3 percent, Singapore -2.2 percent, South Korea 1.3 percent, Hong Kong -8.9 percent, and the European Union -2.7 percent.


Khayam said the manufacturing sector which still has quite high demand in the market, namely the food and beverage industry. In addition, industries related to the health sector, such as the personal protective equipment (PPE) industry, the medical device and ethanol industry, the mask and gloves industry, and the pharmaceutical and phytopharmaca industry.


Still referring to the BPS report, several non-oil and gas manufacturing industry sectors that still recorded positive performance during the first three months of this year, among them the chemical, pharmaceutical and traditional medicine industries which grew 5.59 percent, then the transportation equipment industry 4.64 percent and the food industry and drinks 3.94 percent.


Meanwhile, the sectors hardest hit by the corona virus pandemic, including the automotive, metal, cable and electrical equipment, cement, ceramics, glass, rubber, machinery, heavy equipment, electronics and communication equipment, textiles, and furniture and crafts.


"As for the sectors that are moderately affected, among them are the petrochemical industry, the plastics industry and the pulp industry," Khayam said.


Previously, Industry Minister Agus Gumiwang Kartasasmita assessed the decline in Indonesian Manufacturing Purchasing Managers' Index (PMI) due to the decline in people's purchasing power during the pandemic (Covid-19). Based on the release from IHS Markit, Indonesia's manufacturing PMI for April 2020 is at the level of 27.5.


"Our economy, especially the manufacturing industry sector, is very dependent on the ability of the domestic market or domestic consumption. Our assessment of about 70 percent of the output of the manufacturing industry is absorbed by the domestic market, "Agus said.


As a result, Agus continued, when the people's purchasing power was depressed, it had an impact on the lack of market demand. Automatically the company or industry must make adjustments, including a drastic reduction in its utilization.


Not to mention being linked to the supply chain of its derivatives industry which depends a lot on the big industry or its parent industry, it will certainly also hit the supply chain.


According to Agus, the need and availability of raw materials is also an obstacle, because it is associated with existing demand. In addition, the declining manufacturing index was also caused by the weakening of the rupiah.


"Our sales and manufacturing input variables account for 74 percent of imports and with the addition of exchange rate pressures the input burden increases. As a result, output decreases significantly," he said.


However, Agus is optimistic that industrial activities will soon be normal if the Large-Scale Social Restrictions (PSBB) are lifted later. The manufacturing industry will be excited again, like the 51.9 PMI last February.


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