November 30, 2020

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Accelerated digital transformation for Indonesia Industry 4.0

The Indonesian manufacturing sector is seeing comprehensive changes in businesses across the spectrum, that is leading to accelerated progress to Industry 4.0 standards. This increased pace is being driven by efforts to increase productivity, efficiency and safety to adapt to the new normal brought about by the pandemic. Speaking at a virtual event, Webinar of Industrial Powerhouse in the Making: Invest in Industry 4.0, Director-General of Resilience, Territorial and International Industrial Access (KPAII) of the Ministry of Industry, Dody Widodo felt that current transformation efforts are critical to encouraging economic growth and competitiveness of the country.

Digitisation and technology have brought a marked improvement in the productivity of the domestic manufacturing industry after being hit by the COVID-19. As of September 2020, the utilisation of the manufacturing sector reached 55.3%, an increase of 15-25% from the previous 30-40% at the start of the pandemic. He was confident that efficient and effective digitalisation would connect companies with domestic and international markets through an integrated supply chain network. Countries that have low transformation performance characteristics will face high costs due to unreliable capacity and efficiency, as well as major barriers to integrating and competing in global supply and value chains.

Dody acknowledged the undeniable role of the internet has had in changing the way of doing business, including in the industrial sector. Industry 4.0 is driving the increasing trend of automation, such as through the Internet of Things (IoT), machine-to-machine and human-to-machine interfaces, artificial intelligence, digitisation in manufacturing, and other advanced technologies. According to him, the new paradigm shift in manufacturing today is the result of the use of the internet which allows real-time communication between machines and humans- leading to an era of smart products and smart services.

To prepare for the Industrial 4.0 era, the Indonesian government has launched a road map for Making Indonesia 4.0. Initially, there were five sectors that received development priority – food and beverages, textiles and clothing, automotive, electronics and chemicals. However, learning from the pandemic, the Ministry of Industry has added two critical sectors to be included in the Making Indonesia 4.0 program – pharmaceutical industry and medical devices. With this, there are seven priority sectors.

These seven sectors are key sectors in the world economy and Indonesia is striving to become one of the major global players in these. The main goal is to have Indonesia in the top 10 countries that have the strongest economy in the world by 2030.

OpenGov Asia recently reported on the Ministry of Industry’s launch of the Startup4industry programme as another concrete step to implementing the Making Indonesia 4.0 roadmap. The nation is confident that this strategic initiative will bridge the needs of industry and the community with the role of startups as technology providers. Startup4industry, built on the theme “Indonesia Is Confident in Domestic Technology” 2020 aims to deeply technology to have a positive social impact on citizens and mitigate the impact of the pandemic in the industrial sector.

Investment in Industry 4.0 technology will increase competitiveness and added value and, to that end, the government has carried out various strategic activities as part of the implementation of Making Indonesia 4.0. These include 2019 Indonesia Industrial Summit, preparation of Indonesia’s 4.0 Industry Readiness Index (INDI 4.0), the IKM e-Smart program and the appointment of an Industry 4.0 lighthouse company in Indonesia.

To attract investment related to industrial technology 4.0, the Ministry of Industry has proposed various incentives for industry players, including a super tax deduction of 300% for industrial companies investing in R&D (including technology 4.0) and 200% for industrial companies investing in vocational education.

Further, to maintain business continuity of the industrial sector in the country, the Ministry of Industry has granted an Operational Permit and Industrial Activity Mobility (IOMKI) for business actors who meet the requirements based on Circular (SE) of the Minister of Industry Number 4 of 2020, SE of the Minister of Industry No.7 / 2020 and SE of the Minister of Industry No.8 / 2020. As of October 2020, 18,183 IOMKIs have been issued for various industrial sectors with total employment of 5.15 million people.