Indonesia’s manufacturing sector is showing resilience amid global headwinds, driven by strong domestic demand and strategic policy reforms. The government’s overhaul of the Domestic Component Level (TKDN) regulation is empowering local producers to scale operations and expand market reach. As optimism builds across industries, Indonesia positions itself to strengthen its industrial backbone and economic stability.
Key Facts & Background
- Minister of Industry Agus Gumiwang Kartasasmita stated that TKDN policy reform has boosted confidence among domestic manufacturers to increase production and expand consumer bases.
- Indonesia’s Manufacturing Purchasing Managers’ Index (PMI) stood at 50.4 in September 2025, indicating continued expansion despite a slight slowdown from August’s 51.5.
- The PMI has remained in expansion territory for two consecutive months, signaling sustained industrial activity.
- New orders have risen for two months in a row, fueled by robust domestic consumption.
- Manufacturers are increasing input purchases and inventory levels in anticipation of future production growth.
- Employment in the manufacturing sector reached its highest level in four months, reflecting business optimism and preparation for rising demand.
- Business confidence hit its peak since May 2025, supported by expectations of improving market conditions.
- The Ministry of Industry is coordinating with other government bodies to stabilize raw material prices and enhance supply chain efficiency.
- The government will not raise tobacco excise taxes in 2026, providing relief and incentives to the tobacco industry, which contributes significantly to employment and export revenue.
- The Ministry is committed to strengthening downstream industrial strategies, controlling raw material imports, and diversifying export markets to mitigate global demand pressures.
Strategic Insights
Indonesia’s industrial policy recalibration—centered on TKDN reform and supply chain resilience—marks a pivotal shift toward self-reliance and inclusive growth. By incentivizing the use of domestic components, the government is not only fostering local innovation but also reducing dependency on imported inputs. This approach aligns with global trends in reshoring and industrial sovereignty, especially as geopolitical and economic uncertainties disrupt traditional supply chains.
The sustained expansion of the PMI, despite global economic pressures, underscores the strength of Indonesia’s internal market. Domestic consumption continues to act as a stabilizing force, offering manufacturers a reliable growth engine while export markets remain volatile. The increase in employment and business confidence further validates the effectiveness of policy interventions aimed at empowering local industries.
Looking ahead, Indonesia’s industrial trajectory will hinge on its ability to maintain policy coherence, foster cross-ministerial collaboration, and adapt to shifting global dynamics. The emphasis on downstream processing, import control, and export diversification positions the country to build a more resilient and competitive manufacturing base. If sustained, these reforms could transform Indonesia into a regional industrial powerhouse, capable of driving long-term economic growth and job creation.