But let’s face it: this stagnation is not exclusively due to external factors. Poor governance, poor strategic industrial policy choices, low productivity and failure to adapt to changing global dynamics played a role in the country’s inability to maintain its industrial momentum. While other nations in East and Southeast Asia took the lead, we were shackled by indecision. The share of manufacturing in gross domestic product (GDP) fell to less than 19%. Underinvestment and a lack of focus on upskilling the workforce prevented abundant labor from moving into high-productivity, value-added sectors, and instead were absorbed into low-productivity sectors such as retail and construction.

Revitalizing the manufacturing sector should be high on our agenda to escape the middle income trap. Manufacturing is the sector that provides value to our primary sectors and natural resources, while providing the backbone and markets for our service sector. Chasing 7% economic growth without strong manufacturing is impossible.

But the global economic landscape has changed drastically. China’s dominance and the rapid technological advances of the 21st century mean that the old industrial playbook that led to East Asia’s meteoric rise simply won’t work for us anymore. The only viable way forward is to move to more complex, high-value and sustainable manufacturing. The objective should therefore be clear: we must promote 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 of Indonesia’s current industrial strategy is the lack of a coherent vision for the manufacturing sector. Should we focus on becoming an export-led 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 process our downstream natural resources locally up 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: downstream processing of minerals or hilirisasi. We were told about the alleged success of the bauxite and nickel export ban. Sure, banning crude exports sounds patriotic and forward-thinking. Yes, the value of nickel exports increased from $2 billion in 2017 to $84 billion in 2021.

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But let’s be honest, this is not a universally positive story, and certainly not without cost. The sheer capital and technology requirements to support such policies are astronomical, and we lack the internal capacity to keep up. This affects the competitiveness of our products. If our downstream industries cannot compete globally, we are only creating 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 that allow a greater flow of foreign direct investment (FDI) to ensure we integrate more profitably into global production networks.