Domestic industries maintain growth

30 May, 2012 | Source: Jakarta Post

Indonesia’s manufacturing industry continued to grow in the first quarter, as robust domestic consumption countered the adverse impact from slowing global demand, the Industry Ministry reports.

The nation’s non-oil-and-gas manufacturing sector grew 6.13 percent year-on-year at the end of the first quarter, driven by growth in fertilizer, chemicals, rubber, and food, beverage and tobacco sectors, while growth in the first quarter was up 5.9 percent over the same period last year.

The fertilizer, chemical and rubber-goods sector expanded 8.19 percent, while the food, beverage and tobacco sector grew 9.1 percent, the ministry’s said.

Other sectors that grew significantly were transportation vehicles and machinery, which expanded by 6.23 percent; and cement, which grew 6.11 percent.

Sectors that posted slower growth in the first quarter included basic metal and iron at 5.57 percent, down from 17.56 percent in the first quarter last year; and wood and forestry products at -0.86 percent, down from 0.4 percent.

Industry Minister MS Hidayat said that growth would likely pick up in subsequent quarters as demand increased and supplies of raw materials, particularly basic metals and iron, improved.

Starting in late January, more than 2,000 containers carrying scrap metal have been detained at Tanjung Priok Port in North Jakarta for contamination by hazardous toxic waste according to customs officials.

Hidayat said he had discussed the contaminated metal with Coordinating Economic Minister Hatta Rajasa and Finance Minister Agus Martowardojo, and expected a resolution to issued made this week.

Hidayat said he was optimistic that domestic manufacturers would maintain steady growth despite protracted economic problems in the nation’s traditional export markets.

“If we can reach the same growth as last year, it will good already. I want to be realistic, although I do want it to grow by around 7 percent,” Hidayat said.

The Industry Ministry previously set a target of 7.1 percent growth for domestic manufacturers, over the 6.83 percent growth recorded last year.

Despite the government’s optimism, Ahmad Erani Yustika, an economist at the Institute for Development of Economics and Finance, said the prolonged impact of declining global demand would be larger than expected.

“The domestic manufacturing sector can only grow at 6.7 percent at the most this year, as demand from major buyers, such as China, the United States, Japan and European countries, has significantly declined,” Erani told The Jakarta Post.

Domestic manufacturing would likely grow between 6.2 percent and 6.3 percent in the second quarter, driven by sectors that relied mostly on domestic consumption, such as the food and beverages, automotive, and cement industries, Erani said.

Meanwhile, Indonesian Institute of Sciences economist Latif Adam said that the government should develop an industrial policy that would focus on locally processing locally-sourced materials instead of importing raw materials, to avert rising production costs in times when the local currency depreciated and in turn, affected the overall performance of domestic manufacturers.

—JP/ Linda Yulisman

 

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