Most of Indonesia’s industrial activity is predominantly focused on Java. Despite being the center of the country’s industrial activity, Java’s environmental capacity to effectively accommodate continued activity is declining. 

On the other hand, the spread of economic activity outside of Java is still unequally distributed and remains ineffective due to barriers concerning the quality of connectivity infrastructure and the human resource pool, as well as inadequate urban services to ensure a good quality of life. The effectiveness of policies related to this matter is crucial towards tackling the challenges in doing business in rural areas. 

Regardless of current conditions, the construction of industrial zones in rural areas are continuing for the sake of improving the comparative strength of Indonesia’s natural resources as well as diversifying the economy. Working models on investment cooperation, infrastructure development, regional interconnection, human resource talent management and funding must be sharpened to improve conditions. 

Small steps towards improving conditions can be done through efforts such as organizing micro, small and mid-scale industry actors into proper small and mid-scale industry centers. Doing so will help gradually improve capacity growth according to the potential and the capabilities of certain areas. Results from these strategies are expected to support the industry’s role in redistributing development progress and economic growth, and to improve national competitiveness.  

Key Terms

Growth centers, policy effectiveness, industrial zones, economic diversification, investment cooperation, infrastructure provision, regional interconnection, talented workforce, industrial zone funding, development of IKM centers, redistribution of development across regions.  

Key Ideas

1. Highlighting the best practices regarding the development of new industry-based economic hubs, considering post-Covid-19 conditions. 
2. Improving policy ecosystems needed to properly and adequately do business in these new economic hubs.  
3. Establishing industrial zone development as a key part of economic diversification. 
4. Improving investment and funding models, including strategies on identifying alternative funding methods to continue developing the interconnectivity infrastructure needed to support these new hubs. 
5. Highlighting the best practices to maintain and manage facilities at industrial zones as well as improving urban services in the surrounding area. 
6. Strategies on supplying talented workers from outside of Java.
7. Strategies on developing IKM centers as part of industrialization efforts.  
8. Strategies on developing industrial activity in certain regions (Sumatra, Kalimantan, Sulawesi, Maluku, Papua and Nusa Tenggara).