Sanken Factory Closure Fuels Deindustrialization Fears in Indonesia

Table of Contents

• Sanken Factory Closure Fuels Deindustrialization Fears in Indonesia
  • • Interview with Industry Expert on the Sanken Factory Closure and Indonesia’s Deindustrialization Concerns
      • How does the Sanken factory closure serve as a stark indicator of wider vulnerabilities in Indonesia’s manufacturing sector?
      • What are the potential social and economic repercussions for Indonesia if this trend of deindustrialization continues?
      • In the face of such challenges, what policy measures should the indonesian government prioritize to strengthen its manufacturing sector?
      • Considering the importance of a skilled workforce, what role does education and vocational training play in reversing deindustrialization trends?
      • Looking forward, how can Indonesia balance immediate remedial actions with long-term strategic planning to revitalize its manufacturing sector?
      • what key insights should Indonesian policymakers and the general public take away from the Sanken factory closure and its broader implications?

The impending closure of PT Sanken Indonesia‘s factory in Cikarang, West Java, has ignited widespread concern about potential deindustrialization adn important job losses within Indonesia’s manufacturing sector. The planned June 2025 shutdown, located in the MM2100 Industrial Estate, has prompted calls for immediate government action to address the economic and social fallout.

According to Setia Diarta,Director General of Metal,Machinery,Transportation Equipment,and electronics (ILMATE) at the Ministry of Industry,the Japanese parent company is shifting its production focus to semiconductors. This decision comes against a backdrop of declining production at the Indonesian facility. The factory’s production had been steadily decreasing, with a utility rate of just 14% in 2024, Diarta stated in Jakarta on Wednesday. The closure highlights vulnerabilities within Indonesia’s manufacturing sector, particularly its reliance on foreign investment.

House member Bane Raja Manalu, a member of Commission VII of the House of Representatives (DPR) overseeing industrial affairs, voiced strong concerns on Friday. He emphasized the urgent need for government intervention, stating, The government must be proactive in responding to this issue. The rights of employees facing layoffs must be upheld, and we need to assess whether this poses a risk of deindustrialization. manalu warned that the closure serves as a stark warning sign of a broader threat: deindustrialization, characterized by a decline in manufacturing output, employment, and export share.

The potential consequences are severe. Manalu highlighted the economic ramifications, stating, If factories are closed and thousands of people are affected, the number of poor people will increase. He advocated for thorough data collection, similar to that used in the financial and banking sectors, to accurately assess the situation and develop effective responses. The Manpower Ministry reported approximately 80,000 workers were laid off in 2024, a significant increase from 60,000 in 2023. The Sanken closure will exacerbate this trend, impacting the purchasing power of thousands of families.

manalu proposed concrete solutions, including regulatory improvements and stricter controls on finished goods imports to bolster the competitiveness of domestic manufacturers. he also stressed the importance of enhancing the quality of Indonesian-made products. Regulations must be improved and imports of finished goods should be tightened to protect the competitiveness of the domestic market, alongside efforts to enhance the quality of domestic production, he stated. This multifaceted approach aims to create a more resilient and competitive Indonesian manufacturing sector.

The Sanken factory closure underscores the urgent need for Indonesia to address the challenges facing its manufacturing sector. The government’s response will be crucial in determining the extent of the economic and social fallout and in shaping the future of Indonesian industry. The situation demands a comprehensive strategy that balances immediate relief for affected workers with long-term plans to strengthen the nation’s manufacturing capabilities.

Interview with Industry Expert on the Sanken Factory Closure and Indonesia’s Deindustrialization Concerns

Navigating the Tides of Change: Indonesia’s Manufacturing Sector Faces a Crucial Juncture Ahead of sanken Factory Closure

In a recent shockwave through Indonesia’s manufacturing industry, the impending closure of the Sanken factory in Cikarang has reignited fears of deindustrialization. This development raises critical questions about the domestic sector’s future and its ability to withstand global shifts. To dive deeper into this pressing issue, we spoke with Dr. Rika Gunawan, a distinguished economist and expert on Southeast Asian industrial policies.

How does the Sanken factory closure serve as a stark indicator of wider vulnerabilities in Indonesia’s manufacturing sector?

The Sanken factory closure is emblematic of a significant broader issue—Indonesia’s reliance on foreign companies for its industrial base. With production dwindling due to the Japanese parent company’s pivot towards semiconductors, it raises alarm bells about Indonesia’s economic vulnerabilities. This situation underscores the sector’s susceptibility to shifts in global investment trends and the need for sovereign industrial strategies. Historically, economies that have heavily relied on foreign investments face challenges in sustaining growth when these companies decide to relocate or close operations.

What are the potential social and economic repercussions for Indonesia if this trend of deindustrialization continues?

Deindustrialization is particularly concerning for Indonesia because manufacturing has traditionally been a pivotal driver of employment and economic growth. The closure of the Sanken factory, coupled with rising layoffs—spiking from 60,000 in 2023 to around 80,000 in 2024—illustrates the immediate threat of increased unemployment and poverty. If this trend continues, not only will poverty levels rise, but it will also widen economic disparities, stifle domestic consumption, and reduce overall economic resilience. Countries experiencing deindustrialization often find their workforce with diminished skills, leading to a vicious cycle of limited job opportunities.

In the face of such challenges, what policy measures should the indonesian government prioritize to strengthen its manufacturing sector?

strengthening Indonesia’s manufacturing capabilities requires a multi-pronged approach. Primarily:

• Regulatory Improvements: Streamlined regulations can make it easier for domestic businesses to operate and compete globally.Clear, supportive policies can attract investments and reduce bureaucratic red tape.
• Support for Domestic Products: Implementing stricter controls on finished goods imports will protect local industries from global competition and provide them a platform to grow.
• Enhancing Product Quality: Investing in research and development, pairing up with educational institutions for knowlege transfer, and promoting innovation can enhance the competitiveness of Indonesian-made products.

By catalyzing these policy changes, Indonesia can build a more resilient manufacturing sector. Historically, nations that bolstered domestic industries through similar strategies have achieved greater economic stability.

Considering the importance of a skilled workforce, what role does education and vocational training play in reversing deindustrialization trends?

education and vocational training are foundational to reversing deindustrialization. A robust educational framework tailored to industry needs creates a skilled workforce ready to meet modern manufacturing demands. Vocational training programs targeting emerging technologies and modern manufacturing processes can help workers transition from declining sectors to growing ones. South Korea’s emphasis on technology education fueled its change into a manufacturing powerhouse, a model Indonesia could emulate.

Looking forward, how can Indonesia balance immediate remedial actions with long-term strategic planning to revitalize its manufacturing sector?

Indonesia must act on two fronts concurrently:

1. Immediate Support: Providing financial aid, retraining programs, and social security nets for displaced workers can mitigate the current social impact.
2. Strategic Long-term Planning: Developing a national industrial strategy that focuses on diversifying industries, enhancing self-sufficiency in critical sectors, and fostering innovation will build long-term resilience.

By balancing these immediate and long-term actions,Indonesia can not only address current challenges but also pave the way for a sustainable industrial future.

what key insights should Indonesian policymakers and the general public take away from the Sanken factory closure and its broader implications?

The Sanken factory closure should serve as a wake-up call for Indonesia. The key takeaways for policymakers are:

• Diversification is Essential: Avoid over-reliance on foreign investments by nurturing local industries and exploring new markets.
• Invest in Human Capital: Focus on education and vocational training to ensure a skilled, adaptable workforce.
• Enhance Competitiveness: improve product quality and capitalize on low import barriers to strengthen the local market.

Public engagement and awareness of these issues can drive policy changes that are in the country’s best long-term interests.

We hope this interview provides valuable insights into the challenges and opportunities facing Indonesia’s manufacturing sector. We invite readers to share their thoughts on these pressing issues and discuss potential solutions in the comments below or on social media. Together, we can drive meaningful dialogue and action toward a resilient industrious future.