Tangerang. The manufacturing industry accounts for only around 18% of Indonesia's gross domestic product (GDP) and remains heavily dependent on certain subsectors, an economist said on Tuesday.

One of the main obstacles to expanding the manufacturing sector is the substantial investment required and the lengthy period needed to generate returns, according to Hendri Saparini, an economist at the Center of Reform on Economics (CORE) Indonesia.

“Manufacturing accounts for only 18% of GDP. That is not large enough,” Hendri said during a discussion at the B-Universe Media Holdings office in Tangerang, Banten.

She said investment prospects vary considerably across manufacturing subsectors. Labor-intensive industries such as garments and footwear, for example, are facing greater pressure under current economic conditions.

Industries involved in processing natural resources, on the other hand, continue to offer stronger prospects for investment and growth.

“Investment in smelters and other downstream natural resource industries will remain high, and their growth will also remain strong,” Hendri said.

She argued that Indonesia’s industrialization strategy should not stop at a single stage of production. Instead, the government needs to foster an integrated industrial ecosystem connecting various sectors from upstream to downstream.

Relying on only a handful of manufacturing subsectors would make it difficult to significantly increase the sector’s contribution to GDP, Hendri said.

She therefore called for broader industrial development to strengthen manufacturing’s role in the Indonesian economy.

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