Indonesia’s manufacturing sector is experiencing simultaneous expansion and contraction, with 1,641 new production facilities being built while layoffs hit 150,000 workers in early 2025. The Rp803.2 trillion industrial investment promises 3.05 million new jobs, but import relaxation policies continue squeezing labor-intensive sectors. This dichotomy reveals the complex challenges of Indonesia’s industrial transformation and global trade pressures.
Key Facts & Background
Industrial Expansion
- 1,641 companies building new production facilities (Jan-Jul 2025)
- Rp803.2 trillion ($50.2 billion) total investment value
- Projected to create 3.05 million jobs (Ministry of Industry/SIINas data)
- Expansion concentrated in chemicals, food & beverage, and automotive sectors
Labor Market Contraction
- Conflicting layoff figures:
- Ministry of Manpower: 42,385 layoffs (Jan-Jun 2025)
- BPJS Ketenagakerjaan: 150,000 job losses (insurance withdrawals)
- 32.19% increase vs 2024 layoffs
- Worst-hit provinces: Central Java (10,995), West Java (9,494), Banten (4,267)
- Most affected sectors: textiles and footwear manufacturing
Strategic Implications
The simultaneous industrial expansion and workforce reduction presents a pivotal moment for Indonesia’s economic strategy. While the massive Rp803.2 trillion investment demonstrates strong investor confidence, particularly in higher-value industries, the bleeding of jobs from traditional manufacturing sectors reveals structural vulnerabilities.
This industrial transformation carries significant workforce transition challenges. The promised 3.05 million new jobs will likely demand different skill sets than the disappearing textile and footwear positions, necessitating urgent vocational training realignment. The 5:1 ratio between projected new jobs and current layoffs offers potential for net employment growth, but only if affected workers can be reskilled and redeployed efficiently. The data discrepancy between government agencies and Apindo’s BPJS-based figures underscores the need for unified labor market monitoring to guide policy responses.
Policymakers must address immediate worker displacement through enhanced social safety nets while ensuring the education system aligns with emerging industrial needs. This dual-track industrial evolution will test Indonesia’s ability to manage economic transition while maintaining social stability in its industrial centers.