The dependence of Indonesian industry on raw materials, auxiliary materials and imported capital goods is one of the obstacles to accelerating economic growth in general and the processing industry in particular. Even though during the Covid-19 pandemic the trade balance recorded a large surplus, in the medium and long term strengthening the supply chain and domestic upstream production is absolutely necessary. It is not surprising that the government, through the Ministry of Industry, has set a target for import substitution of raw materials, auxiliary materials and capital goods of 35 percent by the end of 2022. With a total import value of input goods worth IDR434 trillion in 2019, the target for diverting production of input goods to domestic industry is equivalent to IDR153 trillion . This month's Trade and Industry Brief discusses the challenges to achieving the import substitution target.

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