Leaving Middle-Income Country, Indonesian Economy Not Enough If It Only Grows 8%!

Minister of National Development Planning (PPN)/Head of the National Development Planning Agency (Bappenas) Rachmat Pambudy is pushing for reindustrialization as a strategic step to accelerate national economic growth. He called reindustrialization a game changer in an effort to escape the middle-income trap. 

Indonesia's dream of escaping a middle-income country is considered insufficient if economic growth is only in the range of six to eight percent. The Indonesian economy must be pushed to reach double digits. 

"Reindustrialization is a game changer to increase economic growth," Rachmat emphasized in the National Seminar on the Outlook for Indonesian Industrialization held at the Indonesia Convention Exhibition (ICE) BSD City, Tangerang, Saturday, July 5, 2025. 

However, he said this effort is not an easy matter. Indonesia needs to boost the manufacturing industry because its contribution is still low at below 19 percent to gross domestic product (GDP). "We want to restore the contribution of the industrial sector to above 20 percent as before the monetary crisis, or even higher if possible," said the Professor of Development Extension Science at the Bogor Agricultural Institute (IPB). Furthermore, he highlighted the shift in employment in Indonesia, from high-income sectors to low-income sectors. According to him, this is due to the dominance of unskilled labor. 

In the 2025-2029 National Medium-Term Development Plan (RPJMN), Bappenas has established a reindustrialization strategy through the Great Industry framework. Rachmat emphasized that the acceleration of industrial development is the main key, based on Indonesia's comparative advantages. "If this potential is developed and fully supported by the involvement of domestic engineers, Indonesia is believed to be able to jump to a stage of competitive advantage that is difficult for other countries to match," he said. 

Reindustrialization is a 'non-negotiable' 

On the same occasion, the General Chairperson of the Indonesian Engineers Association (PII) Ilham Akbar Habibie emphasized his party's commitment to encouraging reindustrialization in the country. According to him, Indonesia should not experience the phenomenon of premature deindustrialization, namely a decline in the contribution of the manufacturing sector before the country has truly reached a mature industrialization stage. "I emphasize that reindustrialization is important. Indonesia has not experienced that," said Ilham. He considered that Indonesia has been too dependent on exports of raw commodities for too long. Although Indonesia is a major producer of palm oil or crude palm oil (CPO), 60 percent of these exports are said to still be in raw form. High-value derivative products such as oleochemicals and biofuels have not been optimally developed. Coal is also the same, from 600 million tons of production, only 30 percent is utilized domestically. The potential for downstreaming such as gasification has not been optimally developed. 

According to him, now is the time for Indonesia to build technological independence and strengthen the manufacturing sector so that it does not continue to be a country downstream of the global supply chain. 

Tag: Bappenas PPN Rachmat Pambudy