By : Arzan Malik Narendra )*
President Joko Widodo, on various occasions, has emphasized the importance of natural resource downstreaming as a key strategy to improve Indonesia’s economic competitiveness. Downstreaming is considered a long-term solution to drive more inclusive and sustainable economic growth.
At the opening ceremony of the XXII Congress of the Indonesian Economists Association (ISEI) and the 2024 National Seminar in Surakarta, the President reiterated that the downstreaming process in the nickel and other resource sectors has had a significant positive impact on the national economy.
In recent years, the nickel industry downstream policy has resulted in a huge leap in state revenue. If in 2015 Indonesia’s nickel exports were only worth IDR 45 trillion, then after the downstream policy was implemented, in 2023 the value of nickel exports jumped sharply to IDR 520 trillion.
This shows how much potential can be achieved if Indonesia is able to process its natural resources independently, without having to rely solely on exports of raw materials. This increase not only benefits mining companies, but also provides a major contribution to the country through taxes and other revenues, such as corporate taxes, employee taxes, export duties, and non-tax state revenues (PNBP).
The importance of downstreaming is not only limited to the nickel sector, but also extends to the copper and bauxite sectors. The President said that two large smelters being developed in Amman-Sumbawa and Freeport-Gresik with an investment value of Rp50-60 trillion will soon be operational.
These two smelters are projected to provide a major economic impact through increasing the added value of raw materials processed into semi-finished products. Thus, Indonesia is no longer just an exporter of raw materials, but also a major player in the global supply chain.
In addition, Jokowi also directed attention to other labor-intensive sectors that have the potential to provide great economic added value, such as the seaweed industry. Indonesia has great potential in this industry, considering that the length of Indonesia’s coastline is one of the longest in the world.
Seaweed can not only be processed into food products, but also has various derivatives, such as organic fertilizer, agar-agar, cosmetics, flour, and even oil for airplanes. The President emphasized the importance of developing this industry as one of the sectors that can help Indonesia escape dependence on raw commodities.
However, the challenges in this downstream process are not few. President Jokowi highlighted weaknesses in research and development (R&D) in the agricultural sector which caused low productivity, especially in commodities such as coffee and cocoa.
Compared to other countries, such as Vietnam, which has managed to increase its coffee production rapidly, Indonesia is still lagging behind, despite having a longer history in producing this commodity. This shows that without adequate research support, Indonesia’s great potential in various economic sectors cannot be optimally utilized.
On the other hand, the government has also taken concrete steps to support this downstream process, especially through the provision of adequate infrastructure. One example is the support of PT PLN (Persero) in providing a reliable electricity supply for the PT Freeport Indonesia (PTFI) smelter in Gresik.
With the operation of the PTFI smelter, Darmawan Prasodjo, President Director of PLN, is optimistic that other derivative industries will also grow, creating a multiplier effect for the economy of East Java and Indonesia as a whole.
Therefore, President Jokowi’s hope is that this downstreaming will continue to grow and cover more economic sectors. Although he will soon retire from the presidency, President Jokowi is optimistic that the direction of the downstreaming policy that has been initiated will continue and become a main pillar in realizing Indonesia’s vision as a developed country.
Regarding downstreaming, Economic Observer from the University of Indonesia (UI), Athor Subroto, appreciates President Jokowi’s efforts in maintaining economic stability, one of which is through downstreaming. According to him, the downstreaming policy implemented by Jokowi is one of the important factors that strengthens the domestic economy because it can provide a multiplier effect.
Thus, support from various parties, both government, private sector, and academics, is needed to ensure that this downstreaming can run well and provide maximum benefits for all Indonesian people.
With all the challenges and opportunities that exist, downstreaming natural resources is the best way for Indonesia to increase economic competitiveness and strengthen the country’s position in the global market. Under President Jokowi’s leadership, concrete steps have been taken to realize this vision, from the mineral sector to labor-intensive sectors such as seaweed.
However, the hard work is not over yet. The sustainability of this policy requires full support from all parties. Let us together support this downstreaming effort for a more advanced and highly competitive Indonesia.
)* The author is a contributor to the Nusa Cyber Institute