Despite the Ministry of Industry’s projected growth of 5.36% in the manufacturing, two industries will not survive in 2023: Textile and garment as well as furniture and craft.
The export value projection of the manufacturing will reach between US$ 225 billion and US$ 245 billion, an increase from the 2022 at US$ 210.38 billion. Meanwhile, investment is expected to reach IDR 450 trillion (US$ 29.87 billion) to IDR 470 trillion in 2023. The manufacturing will also see a rise in the number of labors of 19.2 million to 20.2 million in 2023.
The rosy projections bring optimism as reflected in the increasing Purchasing Managers’ Index (PMI) at 53.7, compared to August 2022 which was at 51.7, as recorded by Information services provider IHS Markit.
Textile and garment industry’s negative growth
In the last quarter of 2022, the Indonesian Textile Association (API) predicted that the textile and garment industry would be bleak in 2023. It will see a negative result in growth whereas the government’s policy prompted industry players to increase labor wage annually. Consequently, the intensive labor industry is also shadowed by work termination and will create thousands of jobless people.
Until now, the import price of raw materials is still considered high. For an example, the import value of cotton reached US$ 1,866.1 million. The price of energy also burdens companies as Indonesia’s electricity price reaches US$ 10 cents per kilowatt hour (Kwh).
Meanwhile, obsolete machines and technology causes the industry productivity to fall behind.
Rising labor wage burdens furniture and craft industry
The annual increase of labor wages in furniture and craft industry has overburdened companies. The Indonesian Furniture and Craft Association (HIMKI) Secretary General Heru Prasetyo said the annual increase of labor wages could lead to widespread work termination.
HIMKI projects that the furniture industry declines by between 6% to 8% in 2023. The major reason is the ongoing Russo-Ukrainian war that affects the export demand.
Recession threat overshadows manufacturing
In 2022, the manufacturing sector was consistent for the whole year although there has been threat of global recession in 2023. Three industries topped the manufacturing sector in 2022: The base metal industry at 20.16%; the machine industry and equipment at 17.6% and the footwear industry at 13.44%.
However, the Indonesian manufacturing sector is optimistic that its output will increase in 2023.
According to ZipRecruiter economist Julia Pollak, the manufacturing sector that requires a lot of capital will tend to suffer during a downturn in economic growth because it is less recession-resistant.