Indonesia Economic Development Through Downstream Industries


In the continuous effort to boost Indonesia’s economic growth, President Joko Widodo has stated that there are three economic strategies: the green economy, the digitalization of micro, small and medium enterprises (MSMEs), and the development of downstream industries. The latter is a particular focus for the next year.

As stated by the Minister of Investment/Chairman of BKPM, Bahlil Lahadalia, 2022 will be the year of downstream industries in Indonesia. Further, Lahadalia expressed that Indonesia should focus on processing commodities into ready-to-use products, starting from nickel.

Indonesia possesses 21 million tons of nickel, the largest reserve in the world. Downstream raw nickel into products such as electric car batteries will add value to the commodity and stimulate economic growth. Indeed, partnerships within the industry have already commenced— for example, the partnership between Indonesia’s State-Owned Enterprise and LG with the value of USD9.8 billion.

On downstream industries, three of Indonesia’s top focuses are the mining and mineral industry, the coal and fuel industry, and the agroindustry. The Minister of Industry Agus Gumiwang Kartasasmita, in Beritasatu Economic Outlook 2022 event last November, stated that the focus on downstream Indonesia’s raw commodities is also expected to increase the nation’s export capabilities and ability to compete in the international market. One of the targets regarding the downstream industries is that little by little, Indonesia will be able to stop relying on exports for commodities, like bauxite and tin.

Kartasasmita continued to explain that the progress of mining and mineral-based downstream industries can be seen through the development programs of the smelter industry. Currently, the annual capacities of the smelters that are already in operation reach 12.3 million tons for nickel, 6 million tons for aluminum, 3.2 million tons for copper, and 19 million tons for steel. From 2015 to the third quarter of 2021, there were 69 companies in the metal smelter industry, with a total investment value of USD51.43 billion.

On coal and fuel-based downstream industries, current developments include the coal gasification project in Tanjung Enim and Kutai Timur (coal to chemical factory). Other project is in Meulaboh, Aceh (coal to methanol factory). The projects are supported by Indonesia’s abundant coal reserve, which amounts to 38.84 billion tons. It is expected that these projects could pioneer a change in Indonesia’s larger industrial ecosystem.

Of all the downstream industries’ potential, The Ministry of Investment/BKPM is also committed to facilitating investors to get into the industries. Efficiency and cost in managing the necessary permits, transparency, and expeditiousness are the aspects that BKPM focuses on to ease investments. For regions outside the Island of Java, the government provides other incentives and services to promote well-distributed national development.

Aside from creating job opportunities and added value to domestic commodities, the development of downstream industries will also help stabilize the national economy amidst the fluctuating market conditions for the commodities.