But let’s face it: this stagnation is not only due to external factors. Poor governance, poor strategic industrial policy choices, low productivity and an inability to adapt to changing global dynamics have all played a role in the country’s inability to maintain its industrial momentum. While other countries in East Asia and Southeast Asia have moved ahead, we have been hampered by indecision. The manufacturing sector’s share of gross domestic product (GDP) has fallen to less than 19 percent. Insufficient investment and a lack of focus on upskilling the workforce has prevented abundant labor from moving into high-productivity, value-added sectors and has instead been siphoned off towards low-productivity sectors such as retail and construction.

Revitalizing the manufacturing sector should be at the top of our agenda to escape the middle-income trap. Manufacturing is the sector that adds value to our primary sectors and natural resources, while providing the backbone and markets for our service sector. It is impossible to sustain economic growth of 7% without a strong manufacturing industry.

But the global economic landscape has changed dramatically. China’s dominance and rapid technological progress in the 21st century mean that the old industrial model, which led to East Asia’s meteoric rise, simply will no longer work for us. The only viable path is to move to more complex, high value-added and sustainable manufacturing production. The objective must therefore be clear: we must encourage closer integration with international markets, but this can only happen if we break free from old industrial models and adopt new ones. And we are running out of time.

One of the most glaring weaknesses in Indonesia’s current industrial strategy is the lack of a coherent vision for the manufacturing sector. Should we focus on becoming an export-driven power, or is our destiny tied to supplying and dominating the domestic market? Should we open up to more imports for the benefit of domestic consumers and industrial users or should we protect local producers at all costs? Should we locally process our natural resources from downstream to the last mile or should we join global production networks and focus on multiple segments of the production chain to achieve the greatest added value?

These questions have plagued policymakers for too long and indecision is holding us back. An example is one of the government’s favorite talking points: the downstream processing of minerals or hilarity. We were told about the supposed success of the bauxite and nickel export ban. Of course, banning commodity exports seems patriotic and forward-thinking. Yes, the value of nickel exports increased from US$2 billion in 2017 to US$84 billion in 2021.

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But let’s be honest, this story is not universally positive and certainly not without cost. The capital and technology needs to support such policies are astronomical, and we do not have the national capacity to keep pace. This affects the competitiveness of our products. If our downstream industries cannot compete globally, we will only create new problems, including domestic oversupply and falling mineral prices. The government should be much more strategic. Instead of rigid export bans, we can leverage our positions to negotiate agreements allowing a greater influx of foreign direct investment (FDI) to ensure more cost-effective integration into global production networks.