Widodo Pushes Industrialization as Indonesia Economy Seen Slower

Joko Widodo
Indonesian President Joko Widodo. Photographer: Dimas Ardian/Bloomberg

Indonesia has begun to construct its biggest ammonia plant to produce fertilizer, as President Joko Widodo seeks to revitalize a slowing economy through industrialization.

Widodo inaugurated the groundbreaking at the $830 million project by PT Panca Amara Utama on Sulawesi island this week, along with a gas processing plant. The country’s commodities, including natural gas and palm oil, need to be developed domestically to create jobs and add value, he said.

The president, known as Jokowi who took office last October, is trying to develop the country’s manufacturing to reduce reliance on imports and cut a persistent current-account deficit that is hurting the rupiah. His government’s spending on infrastructure has missed targets, leading to expectations for economic growth in the second quarter to slow to the weakest since the Asian financial crisis.

“Our economic growth in the last few years rested on domestic consumption; this must be reversed,” Jokowi said on Sunday at the gas project in Banggai, Central Sulawesi. “It has to rest on production. We have to start the idea of massive re-industrialization.”

The ammonia plant will have a production capacity of 700,000 metric tons a year, using gas as a feedstock. Indonesia is the third-largest exporter of liquefied natural gas, yet the country is reducing shipments as domestic demand rises, with the issue of reserving more of the country’s commodities at home a theme in last year’s elections.

The government plans a rule on the import of strategic commodities, including rice, corn, soybeans and sugar, to protect local farmers. Jokowi is looking to boost agricultural productivity to lift rural incomes and reduce inequality in the world’s fourth-most populous nation. Domestic consumption, which makes up over half the economy, has slowed this year.

Gross domestic product is expected to expand 4.64 percent versus a year earlier from April through June in data due on Wednesday, according to the median of a Bloomberg News survey of economists. That compares to a weaker-than-expected 4.71 percent in the January-March quarter, a level that led to a stock market sell-off and a flurry of micro policy measures by Jokowi’s economic team.

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