Indonesian Manufacturing PMI Declines Again, Minister Of Industry: There Is A Flood Of Cheap Imported Goods

JAKARTA - The Indonesian manufacturing Purchasing Managers' Index (PMI) for August 2024 has contracted again, which is at the level of 48.9 or down 0.4 points compared to July 2024, which is 49.3.

Based on the release of S&P Global, Indonesia's manufacturing PMI contraction in August 2024 was influenced by a decline in output and new demand that was sharpest since August 2021. Foreign demand has also fallen rapidly to the sharpest since January 2023.

"Once again, we are not surprised by the deeper contraction in the Indonesian manufacturing industry. The decline in the value of the manufacturing PMI in August 2024 occurred due to no significant policy from other ministries/institutions that were able to improve the performance of the manufacturing industry," said Minister of Industry (Menperin) Agus Gumiwang Kartasasmita in her official statement, Monday, September 2.

S&P Global also mentioned a weakening of sales which caused an increase in stock of finished goods for two months.

The Minister of Industry said that the weakening of sales was influenced by the entry of cheap imported goods in large quantities into the domestic market, especially since May 2024.

"The existence of cheap imported goods makes people prefer these products for economic reasons. This can cause domestic industries to decline in sales of their products and utilize their production machines," he said.

Meanwhile, Spokesperson for the Ministry of Industry Febri Hendri Antoni Arif added, industry players are observing developments in the implementation of regulations by the government. This can affect the slowdown in expansion in industrial sub-sectors.

"For example, in the food and beverage industry, business actors seem to be holding back with the plan to enforce excise duty for packaged sweetened drinks," said Febri.

Likewise with the unclear data content of 26,415 containers from the Ministry of Finance (Kemenkeu), which until now have not found a bright spot.

"Currently, the Ministry of Industry has not been able to formulate policies or steps to anticipate the flood of domestic markets by these imported finished products," he explained.

According to Febri, the Coordinating Ministry for the Economy has indeed facilitated meetings between related ministries/agencies, but the realization of the data still does not exist.

On the other hand, said Febri, importers are also accelerating the process of importing finished goods to anticipate the implementation of policies to limit imports in the future, such as the implementation of Anti-Dumping Import Duty (BMAD), a limited prohibition (lartas) or the transfer of import goods entrances for seven commodities to three East Indonesia ports, namely Sorong, Bitung and Kupang.

Febri explained that to encourage the expansion of the manufacturing industry, his party will continue to encourage the acceleration of the expansion of the Certain Natural Gas Price (HGBT), accelerating the implementation of BMAD, especially for affected industries such as ceramics, paper as well as the application of SNI and accelerating restrictions on imported goods and law enforcement on illegal imports.

"In addition, the Draft Government Regulation (RPP) of Natural Gas for Domestic Needs also needs to prioritize its ratification so that it can become a game changer for the manufacturing industry," he explained.

Then, to face challenges in reaching the export market due to logistics shipments that burden suppliers' performance, it is necessary to encourage the reuse of domestic products. Thus, these products can be absorbed domestically. For example, in holding the 2024 simultaneous regional head elections (Pilkada).

"We remind the Pilkada organizing institutions and Pilkada contestants to increase the use of domestic products, especially small and medium industrial products (IKM) in the momentum of the 2024 Pilkada," he said.

S&P Global Market Intelligence Economist Paul Smith said the decline in Indonesia's manufacturing sector in August resulted in the company responding by reducing employees, although many believed that this was temporary.

"This is in accordance with the survey results which states that the panelists hope that economic conditions will be more stable and encourage the good of new production and demand within one year," he added.