While headlines warn of layoffs in textile and footwear sectors, Indonesia’s industrial landscape tells a different story – a record 1,641 new production facilities under construction in H1 2025. With Rp803.2 trillion ($50 billion) in investments poised to create 3.05 million jobs, this manufacturing surge could redefine Indonesia’s economic trajectory. The 20-month expansion streak in the Industrial Confidence Index (52.50) confirms factories are betting big on Indonesia’s improved investment climate and commodity downstreaming push.
Key Facts & Background
Unprecedented Industrial Expansion
- 1,641 new facilities under construction (Jan-Jun 2025)
- Rp803.2 trillion investment ($50bn) – largest H1 commitment in decade
- 3.05 million jobs potential – outweighs reported layoffs 10:1
Sectoral Momentum
- Industrial Confidence Index: 52.50 (20-month expansion streak)
- Export-oriented production: 52.19 sub-index
- Domestic demand: 51.32 sub-index
Policy Drivers
- OSS licensing reforms cutting red tape
- Tax holidays for strategic industries
- Downstreaming mandate for nickel, bauxite processing
- TKDN certification overhaul to boost local content
Strategic Implications
This industrial renaissance reveals Indonesia’s pivot toward value-added manufacturing, though structural challenges persist. The 1,641 new facilities – ranging from nickel smelters to electric vehicle battery plants – demonstrate how downstreaming policies are redirecting commodity windfalls into industrial capacity. Notably, 42% of projects are located outside Java, potentially rebalancing economic geography. However, the real test lies in execution: can Indonesia overcome its history of stalled mega-projects to deliver these facilities on schedule?
The investment surge creates both opportunities and pressure points. While the 3.05 million job potential dwarfs the 150,000 layoffs reported by Apindo, skills mismatches loom large. Vocational training systems must urgently align with industries’ needs, particularly for advanced manufacturing roles in EV and semiconductor supply chains. The government’s planned “labor-intensive industry financing facility” could help bridge this gap if properly structured. Meanwhile, import dependency remains a vulnerability – the new factories will only strengthen Indonesia’s trade position if paired with raw material self-sufficiency strategies.