In the midst of increasingly heated global politics, from President Trump's threat of tariff hikes to geopolitical and military upheaval, Indonesia's business world is faced with challenges that are not easy.
One indicator of the sluggish economy is reflected in aggregate production. In July 2025, Indonesia 's Manufacturing Purchasing Managers' Index (PMI) fell to 46.9 - the lowest level since August 2021.
This extended the contractions for three consecutive months. And, these contractions are not just numbers, they are red flags that demand a quick response.
"The uncertainty of global conditions, weakening purchasing power, indeed the overall economic condition is not good. We see the data in the Manufacturing PMI last June remains on the verge of contraction, below 50," Shinta Kamdani, Chairperson of the Indonesian Employers Association (Apindo) in a press conference ahead of the Apindo 2025 Rakerkonas (29/7/2025).
The Manufacturing PMI, which is still stuck in the contraction zone, reflects the weak manufacturing production activity amid global uncertainties.
"And especially in sectors that are also labor-intensive sectors, such as PPT, textiles, sectors that are very depressed today," continued Shinta. This decline is felt hard because the labor-intensive sector is the foundation of job creation.
Meanwhile, S&P Global's July data showed new demand fell at the fastest pace in nearly four years.
According to Usamah Bhatti, Economist at S&P Global Market Intelligence, this is an unfavorable sign for the next few months.
"Sales have fallen sharply since August 2021 forcing manufacturers to cut production, reduce purchasing activities, and even cut labor," said Usamah in his official statement (01/07).
"Looking ahead, firms are less optimistic about output forecasts, confidence fell to an eight-month low," he continued. All of this comes amid concerns about the still uncertain state of the global economy.
In fact, this new drop in demand came mainly from the domestic market. Indonesian manufacturers recorded stable export sales, but the sluggish domestic market suppressed factory output to the point that production capacity had to be reduced.
This situation triggered a third consecutive month of declines in employment and purchasing activity, although the pace of decline was still moderate.
Rakerkonas Apindo: looking for a turning point
Seeing the pressure that is so real, ahead of the XXXIV National Work and Consultation Meeting (Rakerkonas) on August 4-6, 2025 in Bandung, Apindo provides statements and recommendations addressing this situation through a press conference (29/07). Themed "With the Spirit of Indonesia Incorporated Towards a Golden Indonesia 2045", the Apindo Rakerkonas will be a consolidation space to follow up on practical steps to keep the economy moving in the midst of this situation.
Shinta emphasized that the biggest concern is not only the economic growth rate, but also the narrowing job opportunities.
"So if we look at it, our concern is once again job creation. We have seen so many job candidates waiting for job opportunities, while job vacancies are very limited and responding also to the surge in layoffs, the threat of deindustrialization," he explained.
In this forum, Apindo stated that in the future it will discuss concrete steps so that companies not only survive, but are also able to create added value amid global pressures.
However, internal efforts alone are not enough. Shinta mentioned the importance of synergy between the business world and the government. "We hope that there are supportive policies, not only for large businesses, but also UMKM and the labor-intensive sector," she said.
From the UMKM sector, this year Apindo introduced the Lestari Guide as a strategic step to help UMKM and cooperatives become more resilient and responsive to changing times. "The Lestari Guide is a strategic ESG (environment, social, governance) report guide for resilient and responsive businesses," explained Dewi Meisari, Apindo's UMKM and Cooperative Division, during a press conference.
Through this guide, UMKM players are expected to be better prepared to penetrate international markets, while strengthening their position in the global business ecosystem which now increasingly demands innovation accompanied by social and environmental responsibility.
"Through the launch of the Lestari Guide, Apindo invites all business actors to make sustainability a new identity in doing business," said Dewi.
Incentives and reforms, a breather for labor-intensive sectors
As one of the results of the discussion, Apindo encourages the provision of incentives that are measurable and have a direct impact on the sustainability of the labor-intensive sector which is now depressed. "Apindo emphasizes the importance of providing incentives that are measurable and have a direct impact on industrial diversity, especially the labor-intensive sector," said Shinta.
Several concrete proposals emerged, such as exemption from VAT on office storage services and certain raw materials, acceleration of VAT refunds, and elimination of import duties on raw materials. "We also propose the expansion of Income Tax 21 borne by the government," he added. This step is expected to help companies maintain competitiveness in an increasingly competitive market.
Apindo also highlighted the high cost of borrowing as a big barrier. "No less important, Apindo also encourages easy access to financing, because our interest rate is also still very high and this is part of the company's sustainability, affordable costs, and supporting production capacity," said Shinta.
Apart from fiscal, cost and energy efficiency are also a concern. "We set stimulus protection to reduce limited costs and energy costs, such as BPJS Health subsidies for the affected sector, affordable energy schemes through electricity installations, gas subsidies, and renewable energy schemes such as rooftop solar power plants," he said. Regulatory reform is also proposed so that licensing barriers and logistics costs can be reduced.
Maintaining optimism amidst gray clouds
Although the PMI data and manufacturing contraction signal a strong warning, businesses are still trying to maintain hope. Apindo believes that if these steps are supported by the right government policies, the Indonesian economy still has a chance to move forward.
"With a number of challenges faced by the business world, the growth stagnation that has occurred in recent years has the potential to threaten the achievement of this national vision," said Eddy Hussy, Vice Chairman of Apindo, as well as Commissioner at PT Rezeki Graha Mas Utama.
However, Apindo's Economic Policy Analyst, Ajib Hamdani, emphasized that Apindo will consistently guard priority issues that have a direct impact on the national economy, especially job creation. "Apindo consistently continues to oversee the priority issues of the business world that have a direct impact on the national economy, especially those related to job creation," Ajib added.
Going forward, the Rakerkonas is an important moment: not only to share complaints, but also to develop real solutions, from product innovation, digitalization, to efficiency. With synergy, the business world hopes to keep moving even though global pressures have not subsided.
Behind the red numbers of PMI, there is a spirit to adapt, collaborate, and continue to find room to grow. Because, as Shinta said, "the economy must still move," in order to maintain the hopes of millions of workers and business sustainability towards 2045.
Pursuing labor-intensive sector opportunities amid contraction
The concerns of the business world were captured by the Financial System Stability Committee (KSSK). Through a press conference last Monday (28/07), Finance Minister Sri Mulyani Indrawati also highlighted the importance of maintaining the resilience of the national manufacturing sector, especially the labor-intensive sector, amid increasingly complex global pressures.
"The role of the private sector as a driver of growth will continue to be encouraged through policy and deregulation speed, including encouraging cross-sector collaboration to be more optimal," Sri Mulyani explained.
He acknowledged that the PMI condition, which is still below the expansion level, should be a serious concern, as it is closely related to labor absorption and the threat of deindustrialization. Especially, in sectors such as textiles, footwear, and garments.
To offset the pressure, the government is actively exploring strategic measures, such as negotiating a reciprocal US tariff reduction to 19% for Indonesian products. "This step is expected to boost the performance of the labor-intensive sector," he said.
On the other hand, the import policy with 0% tariffs for some US products is also expected to reduce the price of oil and gas and food raw materials, thereby easing the production costs of national manufacturing.
The government believes that these measures, supported by cross-sectoral synergies and collaboration with Bank Indonesia, can help maintain the liquidity and competitiveness of the manufacturing industry. "Various strategic policies will continue to be improved to create a greater multiplier effect, so that the Indonesian economy in 2025 is still projected to grow in the range of 5%," Sri Mulyani concluded, emphasizing the importance of rapid adaptation and innovation so that the manufacturing sector remains the backbone of the national economy.
From an expert's perspective: it's time to think outside the box
In the midst of PMI contraction and global pressures, economic experts believe that businesses need to adopt strategic measures that are more creative and adaptive. Bhima Yudhistira, Director of the Center of Economic and Law Studies (Celios), emphasized that collaboration is not just a slogan, but a real key to survival.
"Collaboration can take the form of co-investment or joint project investment, syndicated loans from several financial institutions, or factory sharing," Bhima explained (29/07).
He gave an example of a factory sharing scheme where businesses share roles in the provision of machinery and production facilities. "For example, UMKM in the metal sector cooperate with PLN for electrical components," he added. Such a move is considered important to reduce investment costs and strengthen competitiveness.
Bhima also suggested that businesses pivot to more resilient sectors. "One of them is in the leisure economy sector or entertainment business, and lipstick economy or body care," he said. These sectors tend to be more stable because they are still needed by consumers, despite weakening purchasing power.
In addition, product adaptation is also key. "For example, large food and beverage products can be broken down into sachet packaging," said Bhima. This strategy answers the reality of declining purchasing power, by making products affordable without losing the market.
And last but not least, Bhima reminded businesses to maintain liquidity.
"Cash is the king amidst uncertainty," he said.
By ensuring that cash flow remains healthy, companies have the breathing space to adapt, reorganize strategies, and face the global pressures that still linger.
