Static Export Value at 5 Percent, Indonesia Threatened to Fall Behind in High Technology Industry Race

Executive Director of the Center for Strategic and International Studies (CSIS) Indonesia Yose Rizal Damuri (far right). (Theresia Agatha/VOI)

JAKARTA - The projection of strengthening the global economy next year is not necessarily a big opportunity for Indonesia. The reason is that the world's economic growth engine is now shifting towards high-tech industries, while Indonesia's industrial and export structure is still dominated by natural resource-based products (SDA).

The Executive Director of the Center for Strategic and International Studies (CSIS) Indonesia Yose Rizal Damuri said that a number of projections showed that global economic growth would be better in 2027 after being overshadowed by uncertainty throughout 2026.

However, the drivers of growth are different from the previous cycle which was largely supported by the conventional manufacturing sector.

"Various projections say global demand, global growth will be better. But from the more solid growth in 2027 or even in 2026, this is various activities related to high tech, the development of AI for example. Or also the development of data centers, then semiconductors," said Yose in the ILF-IGT Manufacturing Forum 2026 event in Jakarta, Wednesday, August 5.

According to Yose, this shift is a major challenge for Indonesia because the national industry does not yet have a strong high-tech base to capture the opportunities for new economic growth.

"So, it is very clear that we may not be ready to enter into the conditions that exist at this time, where economic growth is more driven by high tech, coming from the development of AI, semiconductors and others. Indonesia is still far away," he said.

Yose explained that this condition is reflected in the structure of Indonesian exports. The share of exports of high technology products, he said, has stagnated at around 5 percent since the mid-1990s.

On the other hand, the increase in national exports is more supported by primary products and manufacturing based on natural resources, including downstream results.

In addition, the contribution of labor-intensive industry exports also continues to shrink. Yose noted that the share of exports of labor-intensive products has decreased from around 14.5 percent to only 7.2 percent in recent decades.

According to Yose, this condition shows that Indonesia is facing structural problems that have lasted for more than 20 years. In the midst of changes in the global economic direction towards high-value-added industries, the competitiveness of national manufacturing is considered to have not undergone adequate transformation.

Therefore, Yose emphasized, Indonesia needs to accelerate industrial transformation and policy reforms so as not to be further behind in the global trade transformation driven by innovation and high technology.

"Commitment to reform and its implementation is very important," he added.