Why patents matter to Indonesia

August 23, 2022

As the Indonesian economy recovers from Covid, the government is looking to target new sources of economic growth to counter the country’s reliance on natural resources, avoid the middle-income trap and become a high-income economy.

Economists generally agree that sustainable economic growth depends on higher value services, manufacturing, research and development (R&D), and less reliance on commodities and natural resources. Companies’ increasing desire to diversify high-tech manufacturing supply chains presents a great opportunity.

Indonesia’s domestic manufacturing sector is focused on the low-value assembly of products designed and manufactured elsewhere. It generates low-quality jobs and little economic value or tax revenue. Export of commodities such as oil and gas is prone to cyclical fluctuation and does not present a long term solution given the global transition to zero carbon.

For Indonesia to join the ranks of high-income countries in the longer term it needs to diversify beyond these sectors and further build its nascent knowledge economy. Knowledge-based industries – such as biopharmaceuticals, information technology, chemicals and entertainment – underpin sustainable growth and employment in the economies of high-income countries.