BIG OPPORTUNITIES

Indonesia 2018 | INDUSTRY | INTERVIEW

TBY talks to Airlangga Hartarto, Minister of Industry, on human resource capacity, regional development, and value-added industries.

Airlangga Hartarto
BIOGRAPHY
Before joining the public sector, Airlangga Hartarto had an extensive career in the private sector and held key positions in various industries, amongst others as President Commissioner & Chairman of PT Fajar Surya Wisesa, President Commissioner of PT Sorini Agro Asia Corporindo, President Director of PT Bisma Narendra, and Chairman of PT Ciptadana Sekuritas. His political career began when he was chosen as Vice Treasurer of the Central Leader Council of Golongan Karya Party from 2004-2009, after which he became a member of parliament until 2014. During this period, he chaired House Commission VI, overseeing industry, trade, investment, and state-owned enterprises.

What are some of the Ministry of Industry's key accomplishments and achievements over the last two years?

The Ministry of Industry is in charge of developing the manufacturing sectors in Indonesia. President Joko Widodo's vision for industry is to develop the country's human resources. As part of this, the ministry is transforming middle schools, especially vocational schools, so they become the mainstream of Indonesian education in the future. We would like technical training to be a main part of our human resources development, focused on science, math, engineering, and technologies. Through these vocational schools, we will develop students who can then go on to polytechnic training. We are following industrial countries such as Germany and Switzerland. The objective is to enhance the competitiveness of our labor, talent, and supervisory pools on the manufacturing floor. The second aspect is the inclusiveness of the Indonesian economy. There are large disparities between socioeconomic classes. We need to narrow the gap by introducing new opportunities for SMEs. We will use the digital platform as a way to transform the SME ecosystem to create inclusive growth in the economy.

Indonesia has incredible potential to grow its industrial sector on several fronts. What key strategies drive your work today?

Our strategy is strengthening the value chain. In Indonesia, we have a few industries that are competitive. One is based on our natural resources and the second is based on our plantations or agriculture. Both are key for Indonesia's manufacturing sector. Another area is based on metals and electronic manufacturing, and we also have chemicals and textiles manufacturing. With these kinds of industries, we can develop a proper base for participating in ASEAN's Industry 4.0, also known as the fourth industrial revolution. The fourth issue is to advance regional development within the country. Outside Java, we have developed 14 special economic zones (SEZs) and industrial estates based on the availability of raw materials in those regions. For example, in the North Sumatra region we have developed an industrial estate in Sei Mangkei for the capital development of crude palm oil (CPO). We have also developed areas in West Kalimantan based on bauxite mining and in East Kalimantan with all the petrochemicals, gas, and palm oil. We have a new hydropower development in North Kalimantan where we are going to install 7,000MW of generation capacity under our master plan, as well as a smelting and refinery complex. In West Papua, we will develop LNG and gas for petrochemicals. In the Southeast of Maluku, there is gas for petrochemicals as well.

What work is the ministry doing to promote value-added industries that are less susceptible to price volatility?

Over the last 10 years, commodity prices have been volatile; however, that is no longer the case with most commodities going down in price. This is an opportunity for Indonesia to move further into manufacturing. We have a roadmap for 10 million tons of carbon steel in Cilegon, for instance. We have also built a ferronickel plant in central Sulawesi. By YE2017, we will have the capacity to produce around 3 million tons of stainless steel per annum. With increases in production in Sulawesi, this capacity will increase to 4 million tons in the next year. This will make Indonesia the second-largest producer of stainless steel after China. This is the value addition from USD60 per metric ton of ferronickel raw material to around USD2,000 per ton of stainless steel. This is a real indicator that Indonesia is enhancing its value-added manufacturing. We have done the same thing with CPO from plantation into chemicals and with other commodities as well, such as bauxite to aluminum and aluminum alloy. Therefore, the commodity price drops are in fact a big opportunity for Indonesia.