By Sonia Adriaty, Industrial Parks
The manufacturing industry holds an important role in shaping Indonesia’s structural economy. According to the Ministry of Industry,the manufacturing sector contributes to a large percentage of 19.25% towards the national PDB, making it the biggest consistent contributor in the last decade. Next to this, the manufacturing sector also represents Indonesia’s main non-oil-and-gas export–reaching a score of US$258,77 million in 2023.
However, the growths of Indonesia’s manufacturing exports are not free from global challenges, one of which is the reciprocal tariffs that were applied by the USA. This policy represents a calculated response towards the global trade imbalances and protectionist efforts to protect US domestic industries. For Indonesia, this has a direct impact on the decline in the competitiveness of manufactured products in the American market, putting pressure on the sustainability of the national export supply chain.
According to the data given by BPS (2024), the United States of America is Indonesia’s second highest main export destination, with an export value of US$23,2 million in 2023. Contributing to about 1.92% towards the PDB, this pressure can have wide-ranging impacts on the economy and employment. High dependence towards international markets (USA and China) creates structural vulnerability, especially when external pressures occur. To counter this, a long-term strategy is needed to strengthen the resiliency of the national manufacturing industry, one of which is through the diversification of export markets.
Market Diversification and Manufacturing Industry Resilience
Market diversification is known as a strategy to expand export shares towards non-traditional countries or new markets that haven’t been optimally developed. This step is essential in expanding market opportunities and reducing the risk of dependency, thus strengthening Indonesia’s position in the dynamic global trade.
The diversification of the export market is a strategy used by country and industry players to expand export goals to wider markets, specifically non-traditional markets, which benefit the country by reducing the risk of dependency towards main export destinations. By doing diversification, industries are able to increase economic stability towards fluctuation requests, geopolitical risks, and regulation changes from dominant trading partners.
Market diversification doesn’t only increase the number of destination countries, but also expands the types of products that can be exported to each market. This strategy walks in line with the international economic portfolio theory, where trading risks have the potential to be reduced through market exposure.
In the context of Indonesia, the Trade Research and Development Agency as well as the Ministry of Trade presses on the importance of expansion towards the African, Middle Eastern, and South Asian markets. This forms a part of the national strategy to expand non-oil-and-gas exports which had been previously dominated by China, USA, and Japan.
Market diversification represents a factor that is able to strengthen the manufacturing industry’s resilience. This concept refers to the ability of a sector to recover from external pressures, maintain its function, and adapt to change in the context of an industrial setting. In the context of global trading, this resilience can be greatly affected by export structure, market diversity, production flexibility, and thus government policies.
The World Bank has stated on the importance of hour realities industries tend to cultivate a more innovative ecosystem where supply networks are diversified, resulting in wide, multi-oriented exports. Because of this, widening the market access and reducing a concentrated export towards specific country destinations becomes an important element to strengthen long-term resiliency in the manufacturing sector.
The Export Market and Market Diversification Opportunities
According to the data presented in BPS, the structure of Indonesia’s export markets during 2023 showcases a high concentration throughout main varying partners. Three countries with the highest contribution towards exports are China (US$ 64.8 million), USA (US$ 23.2 million), and Japan (US$ 20.3 million). The data presented in graph 1 illustrates how more than 40% of Indonesia’s exports are fully dependent on these three countries. This highlights a high dependence which can be exposed as a weak spot if trade policies occur, one of which is the reciprocal tariffs from the USA.
As shown in the Main Export Commodities Chart, natural resource-based products and heavy industry dominate Indonesia’s exports. Among them:
- Coal (US$ 38.3 billion): Although not a manufacturing sector, this mining product is the mainstay of exports.
- Palm oil (US$ 31.2 billion): Palm oil derivatives still dominate the Asian and European markets.
- Iron and steel (US$ 23.9 billion): Becoming the strongest manufacturing industry commodity, especially towards China and India.
- Rubber and textile products: Have great export prospects to the African and South Asian markets.
However, the dependence towards prime commodities allows Indonesia’s export structure to be susceptible to global price and tariff competition volatility. Because of this, diversification remains important because more than 60% of Indonesia’s net exports are still dependent on traditional partners (East Asia and America). However, newer markets such as the Middle East, Africa, Eastern Europe, and South Asia show prominent requests that increase towards halal-certified and organic goods, light steel and construction products, products for consumption (processed food, textile, household electronics) and intermediate building blocks for industries. Market diversification becomes a strategic move for Indonesia’s increasing bargaining power in both regional and bilateral trading, thus reducing pressure from large reciprocal tariffs.
In facing the trade protection challenges (such as reciprocal tariff policies from the USA)), Indonesia needs to expand export goals towards non-traditional countries which haven’t been optimally worked out. Regions such as the Middle East, Africa, East Europe, South Asia, and ASEAN offer lots of opportunities including demographic, economic growth, and demand towards manufactured products, which as given by the countries below:
The Middle East: Halal Products, Food and Light industry
Countries located in the Middle East such as the UAE, Saudi Arabia, Qatar, and Egypt depict an increasing trend for consumption on halal goods, processed foods, cosmetics, textile, and furniture. These territories have high purchasing power and customer orientation towards quality goods yet price-competitive products.
According to data from the ITC Trade Map, Indonesia’s exports to Saudi Arabia amounted to only around US$1.3 billion, despite the halal consumption potential in the region reaching over US$50 billion per year. Indonesia’s flagship products—such as certified halal processed foods, Muslim clothing and textiles, herbal products and cosmetics, and lightweight construction materials (e.g., light steel, ceramics)—hold high potential if packaged and promoted in alignment with local preferences.
To optimize Indonesia’s exports to the Middle East, a comprehensive strategy is required—one that involves bilateral cooperation, halal product promotion, and industrial partnerships with local importers and distributors. The UAE can function as a distribution hub for Indonesian exports across the Middle East and Africa through a re-export system. Meanwhile, Saudi Arabia offers a vast domestic retail market and opportunities to establish joint ventures in local manufacturing or packaging, which would allow Indonesian products to gain preferential tariffs and broader consumer acceptance.
Ultimately, the Middle East region is not only a high-value export market but also a long-term strategic partner. A combination of cultural similarities, open economic structures, and supportive bilateral policies presents an opportunity for Indonesian industry players to expand their reach into Middle Eastern markets. With the backing of economic diplomacy, harmonized halal certification, and intensive product promotion, Indonesia holds significant potential to broaden its export share and strengthen the national industry’s presence in an increasingly diverse global market.
Africa: A Developing Market with High Basic Needs
Sub-Saharan Africa and North Africa are experiencing rapid population growth and urbanization. One of Africa’s strengths lay in the rapid increase of the middle class, specifically in the Sub-Saharan location. This class wishes access to modern products but at prices that are in line with purchasing power. Indonesia’s exports to Africa are still relatively small (only around US$ 4 billion in total), even though there is high demand for products such as instant food, Muslim clothing, kitchen equipment, modular furniture, and household electronics.
In this context, Indonesia’s industries’ actions contain a huge potential to export manufactured products with an efficient fashion, whether it’s related to design, price, or function. With the urbanization trend and new infrastructure being built in several major cities in Africa, the need towards light building materials, ceramics, heavy equipment, and light steel products are also increasing.
In addition, Africa is a region highly responsive to halal-certified products. Countries such as Nigeria, Egypt, and Senegal have large Muslim populations and are increasingly seeking products with verified halal certification. As the country with the world’s largest Muslim population, Indonesia is in an ideal position to export halal-certified food products, halal cosmetics, herbal beverages, and modest (shar’i) clothing.
To fully take this opportunity, Indonesia must develop a long-term strategy for reaching African markets. One key approach is to establish regional distribution centers or export warehouses in East and West Africa to accelerate logistics and reduce shipping costs. At the same time, trade cooperation must be expanded—both through bilateral FTA negotiations with countries like South Africa and Kenya, and by leveraging regional trade blocs such as the African Continental Free Trade Area (AfCFTA), which is currently forming the world’s largest free trade zone by number of member states.
Overall, Africa is a market that can no longer be overlooked. The continent is rapidly going through structural transformation, and Indonesia must position itself as a strategic economic partner. Through an approach based on product innovation, cost efficiency, and alignment with local cultural values, Indonesia holds substantial potential to make Africa a new export pillar—one that not only mitigates the risks of over-dependence on traditional markets, but also paves way for Indonesia’s manufacturing sector to take on a leadership role in the developing world.
South Asia: Consumer Growth and Infrastructure Needs
South Asia has developed to be one of the most dynamic economic locations in the world. With a massive population of 1,9 million lives and more, it has a stable economic growth. This region presents a significant market opportunity for exporting countries such as Indonesia. As the United States’ reciprocal tariff policies begin to put pressure on Indonesia’s exports to traditional markets, South Asia is emerging as a strategic alternative for export destination diversification—particularly through strengthened cooperation with India, Pakistan, Bangladesh, and Sri Lanka.
India, one of the strongest economies in the region, represents a strategic trade partner for Indonesia. In 2023, Indonesia’s export value towards India alone reached US$ 15,7 million, making it the third highest export partner after China and USA. The main commodities exported are coal, palm oil, copper, rubber, and industrial chemicals. The rapid growth of India’s automotive and energy sectors has generated high demand for energy raw materials and base metals. This opens doors for Indonesia’s space expansion, specifically in the area for nickel batteries, electrical vehicle components, as well as downstream palm oil products such as oleochemicals and biofuels.
In addition, India’s demand for halal consumer products is also on the rise, in line with its Muslim population, which exceeds 200 million lives. This presents promising opportunities for Indonesian industries in halal-certified food and beverage, cosmetics, and Muslim fashion to enter the Indian retail market. The Indonesian government is also accelerating the finalization of the Indonesia–India Comprehensive Economic Partnership Agreement (CEPA), which will open wider access in goods exports, cross-border investment, and logistics services.
Beyond India, other South Asian countries also present promising potential. In Bangladesh, impressive economic growth over the past decade has expanded the middle class and triggered massive urbanization. This has driven increasing demand for building materials, household appliances, and affordable electronics. Indonesia stands to benefit from this trend by exporting cement, ceramics, electrical equipment, as well as processed food and home textiles. Additionally, halal products are gaining popularity among Bangladeshi consumers, further strengthening the export prospects of halal food, beverages, and personal care items.
Meanwhile, Pakistan faces serious challenges in meeting its energy needs, alongside a growing requirement for fuel and construction materials to support its rapidly expanding population. Indonesia can tap into this gap by boosting exports of coal, LPG, fertilizers, and building supplies. Pakistan also shows strong demand for halal consumer products, making it a promising market for Indonesian MSMEs providing competitive halal goods.
Indonesia’s strategy to penetrate the South Asian market must be built on a foundation of active trade diplomacy, logistics partnerships, and product down-streaming. Finalizing CEPA with India, alongside exploring bilateral Free Trade Agreements (FTAs) with Bangladesh and Pakistan, will be key in reducing tariff barriers and unlocking wider market access. On the logistics front, strengthening port infrastructure in western Indonesia—such as in Sumatra and Batam—can serve as a strategic export gateway to South Asia via the Andaman Sea.
Moreover, industry players must tailor their product strategies to local needs. Design adaptation, packaging, and internationally recognized halal certification will be essential. For example, modular furniture, Muslim fashion, or ready-to-eat meals with halal labeling may hold high market value in Pakistan and Bangladesh. There is also strong potential for forming joint ventures or local manufacturing operations in India and Bangladesh, allowing Indonesian products to undergo partial processing in the destination country—resulting in lower tariffs and better access to large domestic markets.
Overall, South Asia is not merely an escape route from the pressures of U.S. tariffs—it represents fertile ground for Indonesia’s long-term export growth. Through a strategic approach combining trade diplomacy, product adaptation, and manufacturing relocation, Indonesia can position this region as a new driver of non-oil-and-gas exports and strengthen its manufacturing industry’s presence in a broader global supply chain.
ASEAN: Integrated and Stable Strategic Regional Partners
Regions in Southeast Asia, which are bound as part of the ASEAN organization, have become one of the most stable and integrated partners for Indonesia. Not only does it offer geographical proximity, cultural collections, and similarities in economical structure, ASEAN represents a main foundation for Indonesia’s exports as a way to strengthen competition and expand its products’ penetrative efforts towards a global market.
Indonesia’s export values reached US$ 41,59 million towards countries in ASEAN in 2023, making it one of the highest contributors towards total national exports. Although ASEAN is more commonly known as a traditional market, these regions are relevant in the context of market diversification because of their stable politics, regional economy, geographical and cultural proximity, thus an optimally running free trade agreement.
According to the data in BPS (2024), Indonesia’s total exports towards countries in ASEAN in 2023 reached US$ 61 million, with these main countries:
The main advantage of Indonesia’s exports to this region lies in the logistical efficiency and lower shipping costs. With a well integrated intra-ASEAN shipping system and directly connected ports, Indonesia can export more quickly and cheaply compared to other regions. This provides a structural competitive advantage for high-volume products such as textiles, processed foods, and automotive components. Not only that, the tourism, e-commerce, and modern retail sectors in ASEAN also create significant opportunities for the export of Indonesian MSME products, including snacks, herbal products, Muslim fashion, and handicrafts.
Furthermore, Indonesia’s export potential to ASEAN is further strengthened with the implementation of RCEP (Regional Comprehensive Economic Partnership) — the world’s largest free trade agreement, covering 15 countries, including all ASEAN members, China, Japan, South Korea, Australia, and New Zealand. RCEP provides preferential tariffs and simplifies customs procedures, which is crucial for small and medium-sized enterprises. With broader market access and more efficient export procedures, Indonesian manufactured products can compete in premium markets such as Japan and South Korea, and enter Australia with significantly lower barriers.
For manufacturing industry players, RCEP is not just a trade agreement, but also a roadmap for regional integration. Indonesia can capitalize on this opportunity to strengthen regional supply chains, particularly in sectors such as electronics, automotive, and basic chemicals. For example, Indonesia can supply raw materials or components to factories in Thailand or Vietnam, which are then exported back to other RCEP markets. This system enhances the added value of Indonesian products in global value chains, while also strengthening the position of national industry players in international markets.
On the other hand, ASEAN and RCEP also open up opportunities to develop exports of industrial services, such as logistics, construction, vocational education, and technology services. With the increasing integration of labor markets and services, Indonesia has the chance to send skilled manufacturing workers, technicians, engineers, and industry trainers to partner countries, while also exporting physical industrial products. This broadens Indonesia’s export spectrum from just goods to a complete industrial ecosystem.
China and BRICS: Strategic Repositioning in the New Dynamics of Global Exports
Although China is one of Indonesia’s main trade partners, it’s important to not overlook this connection in the context of strategic repositioning. China’s domination as Indonesia’s main export destination–reaching a value of US$ 64,8 million in 2023 (BPS, 2024)– indicates a high structural dependence towards a singular market. In the context of a resilient strategy, reducing over-dependence towards China while benefiting market strength becomes vital.
China and other BRICS countries (Brazil, Russia, India, China, and South Africa) are playing an increasingly central role in the global economic landscape. As traditional multilateral trade systems face growing tensions and fragmentation, BRICS is emerging as an alternative economic bloc that promotes South-South trade cooperation. For Indonesia, deeper integration with BRICS markets—particularly China—offers long-term opportunities to export higher value-added products, expand geographical diversification, and strengthen bargaining power within global supply chains.
China remains Indonesia’s largest trading partner, with export values reaching USD 56.52 billion in 2023. Major commodities exported to China include coal, nickel, bauxite, palm oil, copper, and base metal products. Strong demand from China’s energy, heavy industry, and automotive manufacturing sectors positions Indonesia as a key supplier of raw materials. However, what is increasingly critical is the shift toward downstream industrialization. The Indonesian government is encouraging the export of processed goods—such as ferronickel, copper cathodes, and EV battery materials—instead of raw ores, to ensure that more value remains within the domestic economy.
Beyond China, three other BRICS members—Brazil, Russia, and South Africa—also offer considerable potential as non-traditional markets. In Brazil, for example, there is high demand for fertilizers, palm oil, household textiles, packaged foods, and tropical commodities. Bilateral relations between Indonesia and Brazil have grown closer, marked by the opening of opportunities for a free trade agreement (FTA) and active engagement in South-South cooperation forums. Russia, despite current geopolitical pressures from Western nations, remains a potential market for tropical commodities, halal food products, and Asian consumer goods—particularly if Indonesia can leverage alternative payment systems and strengthen cross-northern maritime logistics cooperation.
South Africa, as the BRICS representative in the African continent, serves as a potential gateway for Indonesian products to access broader Southern and Sub-Saharan Africa. With relatively strong port and logistics infrastructure and a stable political environment, exports of FMCG, light electronics, halal foods, and construction materials can be expanded through partnerships with local distributors and government-to-government (G2G) cooperation frameworks.
While Indonesia is not yet a formal BRICS member, it has actively participated in various forums as a BRICS Plus partner. This momentum presents an opportunity to establish a dedicated trade cooperation framework, including preferential tariff systems, industrial technology exchange, and joint economic zone development. Such initiatives would strongly support Indonesian industries in expanding exports—not only to individual BRICS members but across a network that represents over 40% of the world’s population and approximately 25% of global GDP.
With multilateral trade pathways outside of Western-led schemes becoming more accessible, China and the broader BRICS bloc are positioned to become central pillars in Indonesia’s long-term export strategy. Key challenges to anticipate are differing technical regulations, logistical distance, and the need for business culture adaptation. However, through a strategy centered on downstream industrialization, proactive trade diplomacy, and product innovation, Indonesia holds strong potential to position BRICS markets as a new and sustainable source of export-driven growth.
Data-Driven Strategic Diversification and Trade Diplomacy
Indonesia’s substantial export potential in non-traditional regions—such as the Middle East, Africa, Eastern Europe, and South Asia—alongside key strategic partners like ASEAN, must be addressed through a data-driven and well-planned diversification strategy. Similarly, trade relations with China and BRICS countries (Brazil, Russia, India, China, and South Africa) also play an increasingly vital role. While China remains Indonesia’s dominant trading partner, this relationship must be managed strategically to avoid long-term structural dependence.
The BRICS economies present significant potential as alternative trading partners, particularly within the context of South-South trade cooperation. Diversifying Indonesia’s export products to China, while expanding trade with Russia, Brazil, and South Africa, will enhance the country’s positioning within global value chains and simultaneously open new financing access through institutions such as the New Development Bank (NDB).
If market diversification strategies into new regions—alongside a re-energized ASEAN approach—are implemented effectively, Indonesia holds a strong opportunity to increase its export value. Export growth into Africa and South Asia can help increase the expansion of new market shares. Meanwhile, trade with China, as a dominant partner, should focus on diversifying into consumer goods, green technology components, and intermediate goods.
Growth in exports to BRICS members beyond China (such as Brazil and South Africa) can also help strengthen Indonesia’s market resilience against external pressures from the United States and G7 economies. When it’s Indonesia’s time to formally join BRICS+, its bargaining position within global economic integration frameworks would be heavily reinforced.
The Strategic Role of Industrial Parks in Market Diversification
Industrial parks are no longer just ‘centers of production’, they have evolved into strategic promoters that enhance Indonesia’s export competitiveness. In the context of market diversification, industrial parks serve five key strategic functions:
- Facilitators of Production and Export Logistics Integration
Modern industrial parks are designed not just as clusters of factories but as national logistics centres connected to seaports, toll roads, railways, and airports. For example, the JIIPE Industrial Park in Gresik integrates port facilities, industrial zones, and power generation in one location. This clever layout accelerates delivery to non-traditional markets such as the Middle East and Africa, reduces logistics costs, and improves delivery reliability. This integration is crucial for industries aiming to enter new markets that demand efficiency and consistent supply chains. - Incubators for Product Diversification Targeting New Markets
Each export market comes with unique preferences, technical regulations, and quality standards. Industrial parks are equipped with R&D facilities, testing laboratories, and business incubation services that allow manufacturers to adapt products to the requirements of target markets. For example, food and beverage companies in MM2100 (Kendal Industrial Park or Safe & Lock Industrial Park) are able to develop halal, organic, or certified product variants tailored for markets in South Asia and the Middle East. These adjustments could be made due to the availability of on-site research and technical support. - Platforms for Business Collaboration and Global Supply Chain Participation
Market diversification depends not only on individual corporate strategies, but also on collaboration at the industrial park level. In these parks, businesses are able to share resources, exchange market intelligence, and even engage in co-exporting initiatives. In Jababeka Industrial Park, for example, small and medium-sized enterprises can act as component suppliers to large exporters who have access to the export market. This helps expand their participation in global export supply chains. - Investment Magnets for Export-Oriented Market Reorientation
Industrial parks outside Java (such as Sei Mangkei in North Sumatra or those in Sumatra, the Riau Islands, and Sulawesi) can be positioned to attract investment from global firms seeking to relocate operations to lower-cost production zones with access to new markets. Such relocations not only expand domestic production capacity, but also facilitate market penetration into potential economies like those in Africa and the Middle East. Indonesia thus stands as an alternative production zone outside of China and Vietnam. - Policy Instruments to Boost Non-Traditional Exports
Both central and regional governments use industrial parks as platforms to implement fiscal and non-fiscal policies that push exports to non-traditional markets. Policies such as tax holidays, streamlined export licensing, and the development of logistics hubs make industrial parks ideal for export-oriented manufacturing. These zones can also serve as strategic sites for implementing bilateral and regional agreements (RCEP, IA-CEPA, or preferential trade agreements (PTAs) with African nations) thus expanding export opportunities for domestic industries.
Conclusion
External challenges, specifically reciprocal tariff policies from the USA, are able to affect the dynamic exports and industrial operations in the country. This dependence towards traditional markets such as the USA and China have given our manufacturing sector exposure towards global policy fluctuations.
In these situations, market diversification is no longer just a strategic option but rather a necessity. It has become a key into continuing the national manufacturing industry by expanding our efforts into lesser-known regions, such as the Middle East, Africa, Eastern Europe, and South Asia. These regions show prominent demand that have allowed Indonesia’s manufactured products to grow–from textile and construction products, to halal-certified goods, furniture, and industrial components.
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