ASIATODAY.ID, JAKARTA – Indonesia’s manufacturing sector is sending early warning signals as massive investment inflows fail to translate into strong production output.
Lawmaker Putra Nababan, a member of Indonesia’s House of Representatives Commission VII, has described the situation as a “yellow light” for the country’s industrial health—while the government has now moved to set a clearer production target for 2026.
During a working meeting with the Minister of Industry on Monday, January 26, 2026, official data showed that realized industrial investment reached IDR 552 trillion, equivalent to approximately USD 35 billion.
However, average utilization in Indonesia’s non-oil and gas manufacturing sector stood at just 61.89 percent, leaving nearly 40 percent of installed production machinery idle.
“In industrial economics, utilization below 70 percent is already a yellow light,” Putra said at the Parliament complex in Jakarta.
“We can reasonably assume that many factory machines are not operating. The gap between USD 35 billion in investment and only 61 percent utilization is simply too wide.”
Push for a Clear Utilization Target
Putra stressed that setting a firm utilization target is critical to guide industrial policy, particularly to curb excessive imports and ensure domestic production capacity is fully utilized.
“I am asking the Minister to set a utilization target for 2026, even though there are many variables,” said Putra.
“Having a target means having something concrete to pursue—including how to tighten import controls so our domestic production machines can start moving again.”
Responding to the call, Minister of Industry Agus Gumiwang Kartasasmita welcomed the proposal and agreed to adopt 70 percent as a “psychological” and policy benchmark for national industrial utilization in 2026.
“Seventy percent is something we fully agree on. It is indeed a psychological threshold and an ideal target,” Agus said.
“We want to reach that number, provided there is strong support from other ministries and government institutions.”
Joint Commitment for 2026
Following the exchange, the meeting’s chair formally approved a joint commitment between Commission VII and the Ministry of Industry to raise national industrial utilization to 70 percent in the 2026 fiscal year, with cross-sectoral government support.
The agreement came after sharp criticism of the Ministry’s 2025 performance, as investment surged while production capacity remained underutilized.
Putra warned that the large output gap has created high cost inefficiencies for manufacturers and may be linked to an influx of imported goods that weakens demand for domestically produced products.
“High investment figures mean very little if factories continue to operate far below capacity,” Putra said.
“This situation ultimately hurts industrial efficiency, competitiveness, and job creation.”
Broader Structural Challenges
Beyond utilization rates, Putra also highlighted limitations in Indonesia’s industrial vocational training programs. With only around 6,000 vocational graduates—roughly 0.03 percent of the country’s estimated 20 million industrial workforce—the programs remain too small to significantly impact productivity, he argued.
He further raised concerns over a 30 percent reduction in credit ceilings for labor-intensive industries in 2026, questioning the commitment of state-owned banks, particularly Bank Negara Indonesia (BNI), which reportedly plans to have zero borrowers in this segment.
Minister Agus acknowledged that achieving the 70 percent utilization target would require coordinated policies, especially tighter import management and stronger inter-ministerial collaboration.
Balancing Investment and Output
The newly agreed utilization target is seen as an attempt to close the widening gap between capital inflows and real economic output.
For policymakers, the focus in 2026 will be on aligning investment, domestic demand, and industrial capacity to strengthen Indonesia’s manufacturing base and overall economic resilience. (AT Network)
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