Indonesia’s manufacturing sector remains a critical engine for economic growth, job creation, and export performance. However, to achieve its ambition of becoming a high-income economy, Indonesia must significantly enhance productivity, global competitiveness, and labor demand in this sector over the next two decades.
Achieving this goal requires a forward-looking, strategic approach to industrial policy—learning from the successes and challenges of regional peers. Vietnam, Thailand, and Malaysia have implemented distinct yet impactful policy frameworks that strengthened their manufacturing bases and deepened integration into global value chains. A rigorous comparative analysis of these experiences—particularly their responses to the People’s Republic of China’s (PRC’s) dominance—will offer valuable insights for designing a robust and adaptive industrial strategy for Indonesia.
In this study, SMERU conducts a comprehensive analysis of Indonesia's manufacturing competitiveness and productivity, benchmarking its performance and policies against three key regional peers: Viet Nam, Thailand, and Malaysia. The results of this analysis are used to develop a clear, evidence-based, and prioritized set of policy recommendations to inform and inspire national strategies aimed at unlocking the full potential of Indonesia's manufacturing sector, decisively boosting its productivity, and securing a sustainable competitive advantage in the post-pandemic global economy.
The primary objective of this study is to develop high-level and actionable policy recommendations to enhance Indonesia’s manufacturing competitiveness and productivity over the next 10–20 years.
To this end, the study provides Indonesian policymakers with a practical, evidence-based roadmap, drawing lessons from a comparative analysis of industrial policy reforms and institutional approaches in Indonesia, Vietnam, Thailand, and Malaysia.
To provide a rigorous, actionable, and contextual analysis and policy recommendations, this study employs a rigorous mixed-methods approach to ensure a robust and nuanced analysis of Indonesia’s manufacturing competitiveness and productivity.
The research is structured around two complementary components.
- Comparative analysis
This component provides systematic, data-driven benchmarking across key thematic areas. This component compares performance indicators and policy frameworks between Indonesia and its key regional peers—Vietnam, Thailand, and Malaysia—all of which have implemented distinct yet impactful policy frameworks that have strengthened their manufacturing bases and deepened integration into global value chains.
- Qualitative study
This component grounds the findings in the practical realities and strategic insights of Indonesian stakeholders. This component draws on in-depth interviews with subject matter experts and practitioners, as well as discussions with business leaders, investors, and private sector associations. It captures nuanced, on-the-ground perspectives on Indonesia’s manufacturing ecosystem and provides essential context for understanding the persistent implementation gap.
The synthesis of objective metrics with contextual perspectives forms a comprehensive evidence base for the study’s conclusions and policy recommendations.
