By: Doni Wicaksono )*
In an effort to promote inclusive and sustainable economic growth, downstreaming has become a key strategy promoted by the government. This step is not simply an industrialization policy, but a strategic leap to transform the economic structure from being based on raw material exports to high-value-added domestic processing. One of the most tangible impacts of downstreaming is its ability to absorb a massive workforce, particularly in sectors that have previously only served as raw material suppliers without any deeper involvement in the production process. By developing the domestic industrial value chain, downstreaming becomes a driving force for widespread and sustainable job creation.
The transformation from raw material exports to industrial processing has opened up significant opportunities in various regions, particularly those producing natural resources. For example, the construction of smelters in mining areas not only creates direct jobs for thousands of workers but also stimulates the growth of local economic ecosystems, such as logistics, catering, transportation, and other supporting MSME sectors. The government notes that downstream projects in the nickel, bauxite, and copper sectors have created thousands of jobs, even before the industrial facilities are fully operational.
The Minister of Energy and Mineral Resources (ESDM), Bahlil Lahadalia, stated that 18 priority downstream projects are expected to create nearly 300,000 jobs. These projects have now entered the pre-feasibility study stage. His office has also submitted the pre-feasibility study documents for priority downstream projects and national energy security to Danantara Chief Executive Officer (CEO), Rosan Roeslani. Danantara’s involvement in financing downstream projects will create economic growth and job opportunities for the community. This is because the added value from downstream projects will eventually flow into the country.
In addition to creating new jobs, downstreaming also encourages improvements in the quality of human resources. Workers are no longer merely manual laborers in the resource extraction process, but are increasingly involved in the technical, managerial, and operational processes of the processing industry. This encourages increased workforce capacity through training, vocational education, and technology transfer facilitated by both the government and the private sector. Therefore, downstreaming not only creates jobs but also improves the quality and competitiveness of the national workforce globally.
The downstreaming policy also provides significant added value to the country’s economy. By processing raw materials domestically, Indonesia not only achieves a higher selling value for its derivative products but also strengthens its position in the global supply chain. This opens up opportunities for exporting finished or semi-finished products to various countries at a higher value than exporting raw materials. This increases state revenue, boosts foreign exchange reserves, and further safeguards national economic stability.
Meanwhile, Muhammad Ishak Razak, a senior economist at the Center of Reform on Economics (CORE) Indonesia, stated that downstreaming can increase the economic value added of primary commodities and boost the processing industry’s contribution to gross domestic product (GDP). Furthermore, these projects can boost employment, thereby reducing unemployment, particularly in resource-rich regions, particularly in Eastern Indonesia.
The government has consistently pushed for accelerated downstreaming through various strategic policies. One such policy is the provision of investment incentives to the domestic processing industry, including tax breaks, simplified licensing, and the provision of supporting infrastructure. Furthermore, the regulation banning the export of raw materials is a decisive step in strengthening the position of the domestic downstream industry. While this policy initially presented challenges, it has proven to have positive impacts in the medium and long term, including creating a competitive investment climate conducive to the growth of natural resource-based industries.
Collaboration between the government, the private sector, and the community is key to the success of downstreaming as a driver of national labor absorption. Central and regional governments need to work together to provide supportive regulations, adequate infrastructure, and education and training relevant to industry needs. The private sector, on the other hand, is expected to play an active role in developing sustainable, environmentally responsible downstream industries that are oriented toward improving the welfare of surrounding communities. Meanwhile, the community also needs to respond to this opportunity with enthusiasm to improve skills and competencies to compete in the new, more complex and dynamic industrial era.
Going forward, downstreaming will continue to be a crucial pillar of the national development strategy, particularly in addressing global challenges such as decarbonization, the energy transition, and digitalization. Downstreaming is not only relevant in the mining sector but can also be expanded to the plantation, fisheries, and creative industries sectors. With abundant natural resource potential and a large working-age population, Indonesia has the strong potential to make downstreaming a key catalyst for job-creation-driven economic development. With a strong commitment from all elements of the nation, downstreaming will become not only an economic strategy but also a path to national independence, equity, and prosperity.
)* Public policy observer
