Heaptalk, Jakarta — The Industrial Confidence Index (IKI) for December 2024 remained in the expansion zone at 52.93, though it declined slightly by 0.02 points from November 2024. Compared to December 2023, however, it registered a notable increase of 1.61 points.
“This December’s IKI reflects the expansion of 19 subsectors, which collectively contributed 90.5% to the GDP of the non-oil and gas manufacturing sector in Q2 2024,” stated Febri Hendri Antoni Arif, Spokesperson for the Ministry of Industry, during the release of the December IKI report in Jakarta.
The December IKI was supported by expansions across all component indices, namely new orders, production, and inventory. The production index saw the most significant improvement, rising from contraction to expansion at 55.53, a gain of 5.81 points. Meanwhile, the new orders index and inventory index both experienced declines, dropping by 3.49 points to 50.71 and by 0.1 points to 54.58, respectively.
Impact of Relaxed Import Regulations
The marginal decline in IKI was attributed to relaxed import policies. According to Febri, the December IKI could have been higher without this factor. “The Ministry of Industry urges other ministries and agencies to implement pro-industry policies, particularly restricting finished goods imports,” Febri emphasized.
He elaborated that increasing the Value Added Tax (VAT) to 12% would raise the cost of raw materials and intermediates. While industries could adapt by slightly reducing utilization and increasing product prices, they struggle to compete with the ultra-cheap prices of imported goods.
Sectoral Performance
The three subsectors with the highest IKI scores were the Transportation Equipment Industry, the Electrical Equipment Industry, and the Paper and Paper Products Industry. However, four significant subsectors experienced contraction: the Beverage Industry, the Textile Industry, the Computer, Electronics, and Optical Products Industry, and the Tobacco Processing Industry.
Febri attributed the contraction in these subsectors to declining new orders. “Global instability has led to a drop in demand for industrial products, exacerbated by additional factors such as higher retail prices for processed tobacco products, discussions on sugary drink excise, and the implementation of nutri-level labeling,” he explained.
The Ministry of Industry remains optimistic about future growth, emphasizing the need for supportive policies to mitigate the adverse effects of import competition and global economic challenges.
