economy

Manufacturing Industry Needs Policy Adjustment As Optimism Declines

The manufacturing sector in June 2024 still shows positive performance, as indicated by the expansion of the Purchasing Manager's Index (PMI) of manufacturing at 50.7 which has been sustained for 34 consecutive months.

As of June 2024, thankfully the manufacturing sector still shows positive performance. We express our gratitude for the hard work of industry players who continue to maintain productivity and keep their business hopes for the next 12 months, especially in business conditions affected by the current demand slowdown," said Ministry of Industry Spokesperson Febri Hendri Antoni Arif in Jakarta, Monday (1/7).

Furthermore, Febri emphasized the S&P Global report stating that the growth of the manufacturing sector lost momentum in June 2024. This was due to slower increases in output, new demand, and sales. This condition also affects confidence in output for the next 12 months, which has not moved from its lowest position like last May and is among the lowest on record.

"The industrial sector is currently in an alarming condition. Industry players are losing their optimism about future business developments. This is influenced by the weakening growth of new orders affected by market conditions, trade restrictions in other countries, and regulations that are not supportive," said Febri.

The regulations referred to, according to Febri, are Minister of Trade Regulation Number 8 of 2024 concerning Import Policies and Regulations. This regulation relaxes the import of goods from abroad that are similar to domestically produced products. This has led to a decline in optimism among industry players, which has affected the decrease in PMI.

"Unlike some peer countries experiencing an increase in manufacturing PMI, Indonesia has experienced a significant decline. There is a need for policy adjustments to boost the optimism of industry players," emphasized the Ministry of Industry Spokesperson.

Policy adjustments needed include reverting import regulations to Permendag No. 36 of 2023, as well as implementing Security Import Duty (BMTP) and Anti-Dumping Import Duty (BMAD) for certain commodities.

Global manufacturing countries, such as China, India, Taiwan, South Korea, Thailand, and Vietnam, are experiencing expansion. In the ASEAN region, Thailand's manufacturing PMI rose from 50.3 in May 2024 to 51.7 in June 2024, while Vietnam saw a sharp increase from 50.3 in May 2024 to 54.7 in June 2024.

The emergency situation faced by the manufacturing industry can be seen from the phenomenon of layoffs caused by a decrease in global market demand and the flooding of imported products 'dumped' into the domestic market due to trade restrictions by other countries. According to Febri, if Indonesia does not implement regulations related to this matter, imported products will further flood the market and push back domestic products.

Industry players also express the need for adjustments to current regulations. The Human Resources Department of the Indonesian Textile Association (API), Harrison Silaen, stated that the government needs to have a clear direction in handling textile industry issues if it deems the industry important. Currently, local entrepreneurs find it difficult to compete with massive textile imports.

Economics Director at S&P Global Market Intelligence, Trevor Balchin, mentioned that the PMI is still above the long-term average trend, but the Future Output Index forecast has not moved from its position in May and is at one of the lowest levels on record. This reflects a lack of hiring in June, and the first decline in job backlogs in seven months. The direction of movement indicates a drastic decrease in new demand at the beginning of the second semester of this year, marking the second contraction since mid-2021.

Tag: BMAD Febri Hendri Antoni Arif Manufacturing Industry