Fueled by a variety of leading business sectors, East Java offers a diverse and dynamic economy for your next investment. East Java presents equal investment opportunities across agriculture and manufacturing sectors, enabling investors to facilitate regional and national growth and achieve success.
The economic growth of East Java
Governor of East Java, Khofifah Indar Parawansa, stated that the achievement of East Java’s Gross Regional Domestic Product (GRDP) shows a contribution of 14.22% to the formation of Indonesia’s Gross Domestic Product (GDP).
Additionally, it contributed 24.99% to Java Island’s GRDP in the third quarter of 2023. The manufacturing sector in East Java plays a significant role in driving regional economic growth.
In East Java, the non-oil and gas processing industry contributed 30.06% to the province’s GRDP in the third quarter of 2023. These data also affirm the vital role of the industrial sector in boosting the national economy.
Read more: 10 industrial parks to start business in East Java
A look at East Java’s four main economic sectors
The business sectors in East Java play a crucial role in its contribution to economic growth. Data shows that four industries make the most significant contributions.
1. Food and beverage industry
The food and beverage (F&B) industry is the most influential business sector in East Java. It accounts for 38.87% of the manufacturing industry. According to BPS data, in 2020, 191,000 companies were involved in the small-scale F&B industry. The industry’s transactions in East Java reached IDR 115.73 trillion.
2. Tobacco processing industry
Despite encountering significant challenges, such as stricter regulations and evolving consumer behavior, the tobacco processing industry continues to be a major contributor to the economy of East Java.
In 2021, the tobacco processing industry was ranked second in terms of total manufacturing output in East Java, making up 23.65% of the region’s manufacturing GDP. Moreover, the industry generated tobacco excise revenue of IDR 115.10 trillion, which accounted for 61% of the national tobacco excise revenue of IDR 188.80 trillion.
3. Chemical, pharmaceutical, and traditional medicine industry
East Java has long been a national chemical industry base. The chemical industry is characterized by high capital and technology intensity. According to BPS data in 2020, East Java had 348 medium—to large-sized chemical industries employing more than 38,000 workers.
As for the pharmaceutical sector, according to data from the Pharmaceutical Entrepreneurs Association (GP Farmasi), East Java has 30-35 pharmaceutical companies contributing 30% to the national pharmaceutical industry.
4. Paper industry
According to the Governor of East Java, the paper industry in East Java ranks among the top five in Indonesia. Regarding paper industry exports from East Java, they contribute 23% to the national paper industry. East Java is also an attractive investment destination.
According to data from the Ministry of Industry, from 2020 to the first quarter of 2021, investments in the paper and paper product industry amounted to IDR 4.62 trillion, making it the second largest after South Sumatra with IDR 11.11 trillion.
Top 9 factories for partnership in East Java
When it comes to product development, partnering with the right manufacturer can make all the difference. To help you in your journey, here’s a list of 9 highly recommended factories located in East Java that could be a great production partner for you.
| Factories | Descriptions |
| PT Maspion | Known for making household appliances like kitchen tools and plastic items. |
| PG Krebet Baru | A sugar factory with a long history of producing high-quality sugar. |
| PT Ispat Indo | A steel manufacturing company known for its high production capacity. |
| PT Istana Tiara | Specializes in motorcycle spare parts and has a vast distribution network. |
| PT Darmi Bersaudara Tbk | Engaged in trading wood products. |
| PT Gaya Baru Paperindo | Produces paper products with a focus on eco-friendliness. |
| PT INKA Banyuwangi | Specializes in manufacturing railway products. |
| PT Mutiaracahaya Plastindo | Produces plastic packaging and laminated paper. |
| PT Lotus Indah Textile Industries | Engaged in the textile industry, producing various textile products. |
The massive impact of the manufacturing sector in East Java
According to data from the BPS, throughout 2018, the manufacturing industry contributed 29.8% to East Java’s economy. This figure increased to 30.7% in 2022, during economic disruption due to the Covid-19 pandemic from 2020-2022. The manufacturing industry’s contribution to the national economy in East Java reached 25%.
Furthermore, during a decline in raw material imports, the manufacturing industry was the most significant contributor to national exports from January to April 2023, amounting to USD 60.63 billion.
East Java’s manufacturing industry is centered in Surabaya Raya (Surabaya, Sidoarjo, Gresik) and contributes at least 50% to the province’s economy. The industry is also developed in particular areas in Pasuruan and Mojokerto.
In the manufacturing industry, processing is the main driving force, including food and beverage, tobacco, chemicals, pharmaceuticals, traditional herbal medicines, and paper.
Government initiatives and the future economic outlook
Enhancing the well-being of residents remains the primary goal of the province’s progress. The East Java government has identified seven key areas for development:
- Boosting the local economy by enhancing the value of industries and tourism.
- Improving connectivity between regions to distribute development outcomes and upgrade infrastructure services evenly.
- Enhancing education and healthcare quality, increasing workforce productivity and competitiveness, and reducing poverty.
- Promoting social consciousness and preserving local cultural heritage.
- Enhancing food security and managing energy resources.
- Strengthening disaster resilience and improving environmental conditions.
- Enhancing peace, public order, and the quality of public services for residents.
Challenges and considerations
Several challenges need to be addressed for the development of East Java. Accelerating infrastructure development, such as toll roads, ports, and road accessibility, is necessary to create new economic centers outside Java. This will help attract investors to East Java, boosting its economic growth.
The East Java government also focuses on maintaining and enhancing the investment climate through incredibly sustainable green investments. Additionally, welfare and job opportunities in East Java are important; therefore, SMEs must be involved in implementing various projects.
Guide to Doing Business in Batam & Surabaya
Explore business opportunities in East Java with InCorp
The business sectors in East Java boast enormous economic potential, making it an attractive destination for investors. If you’re considering investing there, InCorp Indonesia can assist you.
We provide thorough assistance with incorporation, obtaining business licenses, and streamlining your market entry process. Our skilled professionals ensure adherence to local regulations, freeing you to focus on expanding and strategizing your business.
Click the button below to confidently navigate the complexities of setting up your business in East Java.
Teddy Willy
Branch Manager – Surabaya Office at InCorp Indonesia
With 10 years of experience in business consultancy, Teddy Willy offers expertise in financial and production auditing, sales and marketing, channels and distribution, supply chain management, and human resources for every business sector in Indonesia.
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