The Ministry of Industry is optimistic that the country’s manufacturing sector will still attract investment early this year amidst reports of layoffs in the non-oil and gas processing industry. 

This condition is reflected in the 198 production facilities under construction in January-February 2025. However, during the same period at least six factories have laid off 14,769 workers.

"The manufacturing sector in Indonesia is still an attraction for investors to invest. The plan to absorb workers in the manufacturing sector is much greater than the number of layoffs," Ministry of Industry Spokesperson, Febri Hendri Antoni Arief, said on Wednesday, March 26, 2025.

He said that the 198 factories under construction are predicted to absorb 24,568 workers, while stressing that the government is confident that the manufacturing sector will be in an expansive condition in the first quarter of 2025.

This is reflected in the number of industrialists who said their business conditions were stable or unchanged, rising from 46.1 percent in February 2025 to 47 percent this month. In addition, 24.5 percent of manufacturing entrepreneurs assessed that the stable conditions in March would continue until September 2025.

Febri cited that 21 of the 23 manufacturing sub-sectors were recorded as being in an expansionary condition. The two manufacturing sub-sectors that are currently in a contractionary condition are the Indonesian Standard Industrial Classification (KBLI) 31 or the furniture industry and KBLI 22 or the rubber and plastic goods industry.

At the same time, the Industrial Confidence Index (IKI) was recorded to have fallen 18 basis points on a monthly basis to 52.98 points this month.

The slowdown in the index was caused by a decline in the new order variable. However, Febri uncovered that two of the three variables in the IKI formula were still growing, namely production and product inventory.

Furniture industry

Director of Forestry and Plantation Products Industry at the Ministry of Industry, Krisna Septiningrum, said there were two things that drove the decline in the furniture industry.

First, the market is still waiting for a decline in selling prices in the export market due to prolonged geopolitical tensions.

Second, the increase in import duties to the United States market to 25 percent. Krisna noted that the United States market contributed up to 60 percent of the total export value last year.

Krisna assessed that the potential for growth in the furniture industry is still there this year. This is reflected in the enthusiasm of foreign buyers in the Indonesia International Furniture Expo 2025.

Meanwhile, The Indonesian Furniture and Craft Industry Association (HIMKI) projects that the value of furniture exports to the U.S. could be lower this year compared to the 2024 achievement.

This is considered to be possible if import duties on furniture products to the U.S. reach 25 percent by the end of this year.

Currently, Indonesia's furniture market share is ranked 6th after China, Vietnam, Mexico, Canada and Italy. However, the ranking could potentially drop if Indonesian products are subject to additional tariffs.

In contrast, Malaysia and Vietnam have trade agreements with the U.S. that make their products more competitive.

HIMKI Chairman Abdul Sobur recorded that the value of Indonesian furniture exports to the United States increased by 16.64 percent annually, reaching US$1.2 billion (Rp19.9 trillion) last year. The figure is projected to grow by 16.6 percent this year to US$1.4 billion.

"Indonesia should have an FTA (Free Trade Agreement) trade agreement with the United States to avoid this threat. That's what we hope for now," said Sobur, on Wednesday, March 26, 2025.