The manufacturing industry recovered in May 2021. IHS Markit noted, Indonesia's Manufacturing Purchasing Managers' Index (PMI) was at 55.3 or up from 54.6 in April 2021.
Even so, Enny Sri Hartati, Executive Director of the Institute for Development of Economics and Finance (Indef), gave a different assessment. In fact, so far, the largest proportion of Indonesia's industry is raw materials and auxiliary goods and capital goods. According to him, the manufacturing industry is still experiencing contraction.
"Well, this is already "Jaka sembung" and makes sense. It is true that imports of raw materials and capital goods have a very large proportion in the composition of Indonesia's imports, the growth before the pandemic was more than 20%. However, the growth of our manufacturing industry is only in the 4% range," said Enny.
Although PMI noted that the manufacturing industry was increasing, while Enny assessed that the Indonesian manufacturing industry was still in a minus state and relatively sluggish.
The reason is that most manufacturing industries import components of raw and auxiliary materials, such as automotive and textile raw materials, which only need to be assembled. This is what makes the value of its creation to be low.
In addition, according to Enny, the correlation of PMI data which has increased sharply has no correlation with the performance of the manufacturing industry. The meeting point of the problem is that the average manufacturing industry is only aware of textiles. If the demand for textile orders increases, it will increase imports.
"Only once again, here imports of raw and auxiliary materials are in disarray because the performance of our manufacturing industry is still low. This means that actually this import pressure will definitely disrupt the trade balance, the trade balance which in the end will definitely affect the exchange rate," continued Enny.
Importing raw materials is no problem, if it is fully entered into the global supply chain. Enny added that if it happened, it would result in re-export.
Only, there are conditions. Namely, said Enny, the government must provide export incentives. If export products increase, it is a good achievement so that Indonesia does not import too much from other countries.
Looking at the facts on the ground, according to Enny, there are a lot of consumer goods that can cause dangerous effects.
“If that happens, it will have a counter effect and kill the domestic manufacturing industry. The fact is that what is imported is concrete or in fact a lot of consumer goods, which will become dependent," said Enny.
Meanwhile, Enny predicts that the business sector that will increase its imported raw materials will still be in the textile and automotive industries.