Jakarta, INTI - The Center for Indonesian Policy Studies (CIPS) has emphasized that regulatory certainty and faster business licensing services are essential to sustaining Indonesia's manufacturing growth, following the country's Purchasing Managers' Index (PMI) reaching 54.0 in October 2026, its highest level since March 2024.
CIPS Senior Fellow Krisna Gupta said the improvement in manufacturing activity must be supported by consistent policies to enable industrial players to expand production capacity and proceed with new investment plans.
According to Krisna, faster, more transparent, and predictable licensing procedures are necessary to help businesses respond effectively to rising market demand.
"This momentum needs to be sustained by prioritizing policy certainty and continuously improving service level agreements (SLAs) for business licensing," Krisna said in a statement issued in Jakarta on Wednesday, November 4, 2026.
Indonesia's Manufacturing PMI Reaches Its Highest Level Since March 2024
Data from S&P Global showed that Indonesia's Manufacturing PMI climbed to 54.0 in October 2026.
This marks its highest reading since March 2024, indicating that the country's manufacturing sector remains in an expansionary phase.
The strengthening manufacturing performance is also reflected in the Industrial Confidence Index (IKI) published by the Ministry of Industry.
The IKI increased by 1.84 points to 53.77, marking its highest level since February 2026.
According to Ministry of Industry data, the new orders index within the IKI rose to 56.08, representing its second-highest reading since November 2022.
Growing demand also contributed to an increase in the industrial production index, which reached 55.38.
These developments indicate that stronger new orders are being accompanied by increased manufacturing output.
CIPS Calls for Faster and More Transparent Business Licensing
Krisna believes that rising market demand must be matched by companies' readiness to expand their operations.
However, investment decisions and production capacity expansion require regulatory certainty and predictable licensing procedures.
To address these challenges, CIPS is calling for stronger implementation of service level agreements (SLAs) within the business licensing system.
SLAs are expected to provide companies with greater certainty regarding administrative processing times and licensing completion.
More efficient public services would enable businesses to plan their operational activities and investment decisions with greater confidence.
Krisna also stressed that increasing industrial orders must be supported by sufficient production capacity.
Without supportive policies and adequate production readiness, manufacturers may struggle to fully capitalize on emerging growth opportunities.
Production Capacity and Raw Material Costs Remain Key Challenges
Beyond regulatory certainty, CIPS has identified production capacity constraints and rising input costs as additional challenges facing Indonesia's manufacturing sector.
Both factors could affect manufacturers' ability to meet increasing market demand.
Krisna emphasized that government support should focus on helping industries overcome production bottlenecks while maintaining their competitiveness.
According to IKI data, 19 out of 23 industrial subsectors were operating in an expansionary phase.
These expanding subsectors accounted for 94.4% of Indonesia's non-oil and gas manufacturing gross domestic product (GDP) in the second quarter of 2026.
Meanwhile, the proportion of businesses reporting a decline in activity fell to 19.5%, representing its lowest level since November 2022.
Ministry of Industry Encourages Policy Coordination to Sustain Industrial Growth
The Ministry of Industry views the improvement in manufacturing indicators as an opportunity to strengthen cross-sector policy coordination.
Such coordination is necessary to ensure smoother raw material supplies and improve production cost efficiency.
Investment development and broader market access are also important priorities for maintaining sustainable industrial growth.
Stronger policy coordination across different sectors is expected to help manufacturers increase production in line with evolving market demand.
CIPS has reiterated that regulatory certainty and more efficient licensing procedures are essential to sustaining the manufacturing expansion momentum recorded in October 2026.
Conclusion
Indonesia's manufacturing sector is showing stronger expansion, with its PMI reaching 54.0 in October 2026. However, sustaining this growth will require more than increasing market demand. Regulatory certainty, faster business licensing, sufficient production capacity, and competitive input costs will be essential to attracting investment and strengthening industrial competitiveness. Improving these conditions will help Indonesia maximize its manufacturing potential and maintain long-term industrial growth.
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