TEMPO.CO, Jakarta - The Institute for Development of Economics and Finance (Indef) viewed that Indonesia is currently in the middle of early deindustrialization. In addition, Indef believes that the country’s service sector, that is currently thriving, only supports foreign industries.

“Indonesia’s industry sector is at its lowest point over the last two decades,” Indef researcher Ahmad Heri Firdaus said during a press conference in Jakarta on Thursday, February 9, 2017.

Earlier, the Central Statistics Agency (BPS) and the Trade Ministry reported that the industry sector’s exports in 2016 declined by 2.59 percent when compared to those in 2015. In addition, imports of raw materials and capital goods also dropped by 8.6 percent and 11.8 percent in the same period.

Based on Indef’s records, the country’s economy is currently dominated by non-tradable sectors, such as the service sector, that make up 59 percent of the total gross national product (GNP). Meanwhile, the tradable sectors, such as manufacturing, agriculture, mining, and drilling, only account for 41 percent of the GNP.

According to Heri, the growth of the service sector was not surprising, but it is expected to support the domestic manufacturing industry.

“In reality, most of the manufacturing subsectors [medium and large] are showing a declining trend in growth in the fourth quarter of 2016 year-on-year,” Heri said.

Household consumptions in 2016 increased from those in the previous year and boosted the economic growth at 5.02 percent.

“However, imported consumption goods also climbed by 13.75 percent in 2016,” he added.

The growing service sectors, such as transportation and logistics, information and communications, the Indef researcher revealed, gave more supports to foreign manufacturing industries than to domestic industries.

“Such a situation caused early deindustrialization and service sector domination,” he pointed out.

Heri explained that the early deindustrialization occurred because the government has not yet optimized existing resources to create added value and create job opportunities.

FAJAR PEBRIANTO

