Once doubted, ignored, and underestimated, the natural resource\ndownstreaming programme has finally borne fruit. Impressively,\ndownstreaming no longer relies solely on nickel, but has expanded to\nbauxite, copper, tin, and other strategic commodities.<\/p>\n
According to data from the Ministry of Investment and\nDownstreaming\/Investment Coordinating Board (BKPM), downstreaming\ninvestment realisation reached Rp152.7 trillion in Q2 2026, growing 5.7%\ncompared to the same period in 2025 (year-on-year) and contributing\nnearly 30% of total national investment.<\/p>\n
Remarkably, bauxite investment surged 193% to Rp40.1 trillion\ncompared to the previous quarter (quarter-to-quarter). This means that,\nfor the first time, bauxite investment surpassed nickel at Rp29.4\ntrillion, copper at Rp16.7 trillion, and iron and steel at Rp13.2\ntrillion.<\/p>\n
\u201cBauxite is now number one. This is a sign that downstreaming is\nbeginning to grow more evenly,\u201d said Minister of Investment and\nDownstreaming\/Head of BKPM, Rosan Perkasa Roeslani.<\/p>\n
In terms of employment, downstreaming has also produced concrete\nresults. From January to June 2026, downstreaming investment absorbed\n1,448,862 workers, up around 15% year-on-year. In Q2 2026 alone,\ndownstreaming employed 742,263 workers, up 5.1% year-on-year.<\/p>\n
Nickel is the most dramatic downstreaming story. When Indonesia was\nstill exporting raw ore (2010\u20132019), the country only earned an average\nrevenue of US$710 million per year, with export value in 2017\u20132018 at\njust US$3.3 billion.<\/p>\n
The ban on raw nickel ore exports in 2020 forced investors to build\nsmelters. As a result, total exports from the nickel downstreaming\nsector \u2014 including ferronickel, nickel matte, and stainless steel \u2014\nreached US$35\u201340 billion in 2023\u20132024, an increase of more than tenfold\nfrom 2017\u20132018.<\/p>\n
The impact has certainly reached nickel-producing regions. North\nMaluku\u2019s economy grew 19.64% in Q1 2026 year-on-year, the highest in\nIndonesia for 22 consecutive quarters. North Maluku\u2019s economy is\nsupported by the processing industry, particularly nickel, which surged\n37.09%.<\/p>\n
Bauxite is even more astonishing. Over two decades (2006\u20132025), the\naverage price of raw bauxite ore was only around US$38 per tonne.\nHowever, when processed into pure aluminium metal, the price soars to\nUS$2,154 per tonne \u2014 a 59-fold increase.<\/p>\n
In 2024, raw bauxite prices were around US$59 per tonne. Once it\nenters a domestic smelter and is processed into a white powder called\nalumina, the price immediately jumps to US$478 per tonne.<\/p>\n
Bauxite processing projects continue to develop. On 6 February 2026,\nInalum held a groundbreaking for the second phase of an integrated\nbauxite\u2013alumina\u2013aluminium facility in Mempawah worth Rp104.55 trillion.\nThis facility will boost national alumina capacity to 2 million tonnes\nper year, so that Indonesia, which is still a net importer of aluminium,\nis targeted to become a net exporter of the commodity.<\/p>\n
The copper story is no less extreme. Since commencing operations in\n2024, Freeport\u2019s smelter in Gresik has processed copper into cathodes\nwith 175% added value compared to raw concentrate. If processed into\nelectrical cables, the added value is 71 times greater, with export\npotential of US$282 million and 253,583 new jobs.<\/p>\n
The downstreaming transition is also reflected in export data. Since\nthe ban on copper concentrate and anode slime exports took effect on 1\nJanuary 2025, export value from January to November 2025 plunged 40.5%\nyear-on-year to US$4.55 billion, despite Amman Mineral receiving limited\nexport relaxation (October 2025\u2013April 2026).<\/p>\n
Crude palm oil (CPO) has a similar story. Previously, most CPO was\nexported in raw form at US$800\u20131,000 per tonne. After being processed\ninto biodiesel and oleochemicals, its value soared 5\u201310 times.<\/p>\n
After successfully implementing the B40 programme (40% CPO blend in\ndiesel) with realisation of nearly 14.9 million kilolitres, the\ngovernment raised the blend to 50% (B50) starting 1 July 2026, making\nIndonesia the first country in the world with a B50 mandate. This policy\nwill reduce fossil fuel imports while stabilising the domestic\nmarket.<\/p>\n
Tin is not left behind. Indonesia has disbursed Rp1.2 trillion for\ntin chemical and tin solder plants in Batam. Construction began in early\n2025, and the plants are targeted to operate by mid-2026. Indonesia has\nan ambitious target: to become the world\u2019s second-largest downstream tin\nproduction hub after China.<\/p>\n
However, downstreaming is facing a severe test. The national\nmanufacturing industry in general is not in good shape. Unfavourable\nmanufacturing conditions could spill over into downstreaming\nprojects.<\/p>\n
Indonesia\u2019s Manufacturing Purchasing Managers\u2019 Index (PMI) plunged to\n46.9, falling into contraction territory in June 2026, down from 50.0\n(expansion zone) the previous month.<\/p>\n
The contraction occurred because demand weakened, factories reduced\nproduction, production costs soared, and global uncertainty increased.\nManufacturing companies cut back on raw material purchases and\ninvestment, and some reduced hiring and operating hours.<\/p>\n
Fortunately, Indonesia\u2019s Manufacturing PMI in July 2026 rose back\ninto expansion territory at 50.2. This was the highest level since\nFebruary 2026. The PMI increase was driven by a return to growth in\nproduction activity after four consecutive months of decline.<\/p>\n
However, in August 2026, Indonesia\u2019s Manufacturing PMI fell back into\ncontraction territory, dropping to 49.8. The decline was triggered by\nweakening production output and reduced labour absorption due to\nsluggish demand and intense competition.<\/p>\n
Indonesian manufacturing has also been hit by the weakening rupiah.\nThe Garuda currency has now slumped to Rp18,000 per US dollar, far below\nthe 2026 state budget assumption of Rp16,500 per US dollar. The rupiah\u2019s\ndepreciation has an immediate impact because around 70% of national\nindustrial raw materials are still imported.<\/p>\n
It does not stop there. The manufacturing industry must also face\npressure from the policies of US President Donald Trump. The US has just\nimposed new tariffs of 10\u201312.5% on 60 trading partner countries,\nincluding Indonesia.<\/p>\n
There is also the geopolitical problem in the Middle East, triggered\nby Iran\u2019s war against the US and Israel. Besides causing oil price\nvolatility, the war in the Middle East threatens supply chain\ncontinuity.<\/p>\n
\u201cWe are experiencing externally driven cost pressure. The strongest\npressure is felt by subsectors with high dependence on imported raw\nmaterials and energy,\u201d said Chairwoman of the Indonesian Employers\nAssociation (Apindo), Shinta Widjaja Kamdani.<\/p>\n
Beyond external pressures, downstreaming also has a number of\nhomework items. It turns out that downstreaming currently often stops at\nsemi-finished products. Yet the greatest added value lies in downstream\nindustries. In fact, Indonesia still imports high-technology materials\nsuch as aluminium alloy, copper foil, silicon wafers, and semiconductor\nchips.<\/p>\n
\u201cThese components should be able to be built from minerals that have\nbeen processed domestically,\u201d said Executive Director of the Centre for\nEnergy and Mining Law Studies (Pushep), Bisman Bhaktiar.<\/p>\n
Despite being battered from all directions, downstreaming is still\nbelieved to be a game changer for the national economy. \u201cAs long as\nIndonesia remains an investment destination and its market continues to\ngrow, the industry will certainly develop,\u201d said Chairman of the\nIndonesian Chamber of Commerce and Industry (Kadin), Anindya Novyan\nBakrie.<\/p>\n
For that reason, Anindya is pushing for the expansion of\ndownstreaming to agriculture, plantations, livestock, fisheries, marine\naffairs, and the data-based economy.<\/p>\n
The government itself is determined to accelerate downstreaming to\ndrive 8% economic growth. \u201cDownstreaming is a strategy to transform\nIndonesia from a raw material exporter into an industrial country, with\nadded value, technology transfer, jobs, and control in the hands of the\nnation itself,\u201d asserted Minister of Energy and Mineral Resources,\nBahlil Lahadalia.<\/p>\n
The government has taken a number of strategic steps. To reduce\nmanufacturing production costs, the government extended the certain\nnatural gas price (HGBT) policy and cut industrial liquefied natural gas\n(LNG) prices to US$13 per MMBTU until the end of 2026.<\/p>\n
To improve the investment climate in the mining sector, the\ngovernment established the Task Force for Accelerating Government\nProgrammes to Support Economic Growth (Satgas P3M-PPE) through\nPresidential Decree Number 4 of 2026.<\/p>\n
In addition, the government has disbursed investment incentives,\ntechnology facilities, and simplified licensing for downstreaming\nindustries, while establishing PT Perusahaan Mineral Nasional\n(Perminas), a new state-owned enterprise tasked with leading downstream\nmineral industrialisation, particularly critical minerals.<\/p>\n
The government even plans to establish a national mineral and\nstrategic commodity exchange to strengthen Indonesia\u2019s position in the\nglobal commodity market. The mineral exchange is scheduled to begin\noperations on 1 January 2027.<\/p>\n
The government\u2019s persistence in pushing downstreaming is truly\nreassuring. These various efforts further strengthen the confidence of\nthe business community and the public that the downstreaming programme\nis not merely a promise. The downstreaming programme will not wither\nbefore it develops, despite facing a steep and winding road.<\/p>\n
President Prabowo Subianto has repeatedly affirmed his commitment to\nmaking downstreaming a vehicle to bring Indonesia to become a developed\ncountry.<\/p>\n
By processing natural resource commodities domestically, Indonesia is\nprojected to become an industrial country with per capita income above\nUS$33,000 by 2045, from around US$5,000 today. That means that when\ncelebrating 100 years of independence, the Indonesian nation will\nalready be a developed and prosperous nation. Hopefully!<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/downstreaming-is-not-a-promise-1788691826", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }