DIGIVESTASI - The issue of premature deindustrialization that has plagued Indonesia over the past decade poses a potential obstacle to President Prabowo Subianto’s ambition to drive economic growth to 8%. This concern was voiced by senior economist and founder of the Institute for Development of Economics and Finance (INDEF), Didik J Rachbini, who emphasized the crucial role of industrialization in achieving high economic growth rates.

“If the industrial sector fails, forget about the 8% growth target,” Didik said on CNBC Indonesia’s “Cuap Cuap Cuan” program on Monday, December 23, 2024.

Didik explained that during President Soeharto's administration, the economy grew by 7% thanks to a manufacturing industry growth rate of 10–20%. In contrast, the current growth rate of the manufacturing sector is only around 3–4%.

“It is impossible for the economy to grow at 8% if the industry grows only 3–4%,” Didik asserted.

Furthermore, he noted that early deindustrialization is evident from the decline in the manufacturing sector’s contribution to the Gross Domestic Product (GDP) over the past decade, particularly during President Joko Widodo's administration. Data from the Central Statistics Agency (BPS) showed that in the third quarter of 2014, the manufacturing sector contributed 23.37% to GDP. By the first quarter of 2024, this contribution had dropped to 19.02%.

“This has been happening for almost 10 years. During the first ‘100 Economists Symposium,’ I told President Jokowi that the biggest challenge at the time was deindustrialization,” said Didik.

He stressed the importance of the current government, particularly President Prabowo’s economic team, addressing this issue promptly to achieve the ambitious economic growth target.

“This can be achieved with focus. The key lies in deregulation and debureaucratization. Exports must not be hindered,” Didik concluded.

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