Downstream Processing Programme Shows Tangible Results in Strengthening National Economy
The downstream processing (hilirisasi) programme continuously promoted by the government throughout 2025 has demonstrated tangible results in strengthening the foundations of the national economy. Through an industrialisation approach based on added value, Indonesia has begun to move away from dependence on raw material exports and is transforming into a processing-based industrial nation.
Since the beginning of the year, the government has prioritised downstream processing in strategic sectors such as mining, plantations, fisheries, and energy. The primary focus has been directed towards increasing the added value of domestic commodities and creating a sustainable industrial ecosystem capable of strengthening the national economic structure and fostering industrial self-sufficiency.
The latest data from the Ministry of Investment/BKPM shows that realised downstream processing investment in the first quarter of 2025 reached Rp136.3 trillion, a sharp increase of 79.8 per cent compared with Rp75.8 trillion in the same period last year. The largest investments remained dominated by the mining subsector, particularly nickel processing at Rp47.8 trillion, followed by copper at Rp17.7 trillion, bauxite at Rp12.8 trillion, as well as contributions from oil, gas, and palm oil.
This increase pushed the share of downstream processing investment relative to total national investment up significantly to 29.3 per cent of the Rp465.2 trillion total first-quarter investment, compared with an average of 23 to 24 per cent over the past three years.
From a macroeconomic perspective, the downstream processing programme plays an important role in mitigating current account deficit (CAD) pressures, strengthening the trade balance, and developing domestic industrial structures. Permata Bank Chief Economist Joshua Pardede assessed that downstream processing extends domestic supply chains, thereby creating higher added value and reducing dependence on volatile raw material export markets.
This is reflected in the contribution of the non-oil and gas manufacturing sector to gross domestic product (GDP), which reached 17.50 per cent in the first quarter of 2025, slightly up from 17.47 per cent in the same period the previous year. Additionally, the World Bank recorded Indonesia's Manufacturing Value Added (MVA) reaching US$255.96 billion in 2023, up 36.4 per cent from the previous year, strengthening Indonesia's position on the global industrial map.
The success of downstream processing is also expected to have a positive impact on employment absorption and regional revenues. Research from the University of Indonesia shows that downstream processing activities increase Regional Own-Source Revenue (PAD) and Revenue Sharing Funds (DBH) through motor vehicle taxes, vehicle title transfer fees, and street lighting taxes.
Minister of Investment/Head of BKPM Rosan Perkasa Roeslani added that downstream-based industries create quality formal employment and transform Indonesia's image into an added-value investment destination, rather than merely a raw commodity exporting nation.
A concrete example of downstream processing success can be seen in the Morowali industrial zone in Central Sulawesi, which has become the world's largest nickel processing centre. Total investment in the Indonesia Morowali Industrial Park (IMIP) reached US$34.3 billion by the end of 2024, with more than 11 smelters actively operating in 2025. The zone has become the backbone of electric vehicle battery and stainless steel production, whilst simultaneously driving regional economic growth in Sulawesi.
Nevertheless, social and environmental challenges have also emerged, including pollution, high demand for basic infrastructure, and environmental pressures that remain outstanding issues. To address these, the government has emphasised the importance of inclusive and sustainable industrial transformation.
Minister of Industry Agus Gumiwang Kartasasmita stressed that policies on Increasing the Use of Domestic Products (P3DN) and Local Content Requirements (TKDN), strengthened since early 2025, form the primary foundation for long-term downstream processing. The government is also promoting the integration of research and innovation between universities, research institutions, and industry to create downstream products capable of competing in international markets.
Although downstream processing achievements have been highly significant, some quarters consider further strengthening necessary, particularly regarding end products and industrial human resource development. The quality of human resources in the industrial sector remains insufficient to support accelerated industrialisation. Vocational education and technical training development must be strengthened to align with industrial needs.
Another challenge is the infrastructure development disparity outside Java, which hampers the optimisation of new industrial zones. The government continues to accelerate infrastructure development outside Java to drive the optimisation of new industrial zones. Equally important, the integration of fiscal policy, investment incentives, environmental sustainability, and social oversight must also be strengthened so that downstream processing delivers not only economic but also social and ecological impacts.
Looking ahead, downstream processing is expected to become the primary foundation for realising the Golden Indonesia 2045 vision. In the National Long-Term Development Plan (RPJPN) 2025–2045, downstream processing is one of the strategic priorities for elevating Indonesia to developed nation status based on a green economy and high technology. The government is targeting growth in mineral and energy downstream processing investment to reach Rp2,100 trillion by 2045, along with the development of downstream products based on research and digitalisation.
With increasingly mature policy direction, downstream processing is not merely political rhetoric but a concrete strategy driving industrial self-sufficiency, opening millions of jobs, strengthening Indonesia's position in the global value chain, and creating a more resilient economy in the face of global volatility. The success of this programme will be largely determined by the ability of the government and business community to maintain continuity, efficiency, and sustainability at every stage of national industrial development.
Since the beginning of the year, the government has prioritised downstream processing in strategic sectors such as mining, plantations, fisheries, and energy. The primary focus has been directed towards increasing the added value of domestic commodities and creating a sustainable industrial ecosystem capable of strengthening the national economic structure and fostering industrial self-sufficiency.
The latest data from the Ministry of Investment/BKPM shows that realised downstream processing investment in the first quarter of 2025 reached Rp136.3 trillion, a sharp increase of 79.8 per cent compared with Rp75.8 trillion in the same period last year. The largest investments remained dominated by the mining subsector, particularly nickel processing at Rp47.8 trillion, followed by copper at Rp17.7 trillion, bauxite at Rp12.8 trillion, as well as contributions from oil, gas, and palm oil.
This increase pushed the share of downstream processing investment relative to total national investment up significantly to 29.3 per cent of the Rp465.2 trillion total first-quarter investment, compared with an average of 23 to 24 per cent over the past three years.
From a macroeconomic perspective, the downstream processing programme plays an important role in mitigating current account deficit (CAD) pressures, strengthening the trade balance, and developing domestic industrial structures. Permata Bank Chief Economist Joshua Pardede assessed that downstream processing extends domestic supply chains, thereby creating higher added value and reducing dependence on volatile raw material export markets.
This is reflected in the contribution of the non-oil and gas manufacturing sector to gross domestic product (GDP), which reached 17.50 per cent in the first quarter of 2025, slightly up from 17.47 per cent in the same period the previous year. Additionally, the World Bank recorded Indonesia's Manufacturing Value Added (MVA) reaching US$255.96 billion in 2023, up 36.4 per cent from the previous year, strengthening Indonesia's position on the global industrial map.
The success of downstream processing is also expected to have a positive impact on employment absorption and regional revenues. Research from the University of Indonesia shows that downstream processing activities increase Regional Own-Source Revenue (PAD) and Revenue Sharing Funds (DBH) through motor vehicle taxes, vehicle title transfer fees, and street lighting taxes.
Minister of Investment/Head of BKPM Rosan Perkasa Roeslani added that downstream-based industries create quality formal employment and transform Indonesia's image into an added-value investment destination, rather than merely a raw commodity exporting nation.
A concrete example of downstream processing success can be seen in the Morowali industrial zone in Central Sulawesi, which has become the world's largest nickel processing centre. Total investment in the Indonesia Morowali Industrial Park (IMIP) reached US$34.3 billion by the end of 2024, with more than 11 smelters actively operating in 2025. The zone has become the backbone of electric vehicle battery and stainless steel production, whilst simultaneously driving regional economic growth in Sulawesi.
Nevertheless, social and environmental challenges have also emerged, including pollution, high demand for basic infrastructure, and environmental pressures that remain outstanding issues. To address these, the government has emphasised the importance of inclusive and sustainable industrial transformation.
Minister of Industry Agus Gumiwang Kartasasmita stressed that policies on Increasing the Use of Domestic Products (P3DN) and Local Content Requirements (TKDN), strengthened since early 2025, form the primary foundation for long-term downstream processing. The government is also promoting the integration of research and innovation between universities, research institutions, and industry to create downstream products capable of competing in international markets.
Although downstream processing achievements have been highly significant, some quarters consider further strengthening necessary, particularly regarding end products and industrial human resource development. The quality of human resources in the industrial sector remains insufficient to support accelerated industrialisation. Vocational education and technical training development must be strengthened to align with industrial needs.
Another challenge is the infrastructure development disparity outside Java, which hampers the optimisation of new industrial zones. The government continues to accelerate infrastructure development outside Java to drive the optimisation of new industrial zones. Equally important, the integration of fiscal policy, investment incentives, environmental sustainability, and social oversight must also be strengthened so that downstream processing delivers not only economic but also social and ecological impacts.
Looking ahead, downstream processing is expected to become the primary foundation for realising the Golden Indonesia 2045 vision. In the National Long-Term Development Plan (RPJPN) 2025–2045, downstream processing is one of the strategic priorities for elevating Indonesia to developed nation status based on a green economy and high technology. The government is targeting growth in mineral and energy downstream processing investment to reach Rp2,100 trillion by 2045, along with the development of downstream products based on research and digitalisation.
With increasingly mature policy direction, downstream processing is not merely political rhetoric but a concrete strategy driving industrial self-sufficiency, opening millions of jobs, strengthening Indonesia's position in the global value chain, and creating a more resilient economy in the face of global volatility. The success of this programme will be largely determined by the ability of the government and business community to maintain continuity, efficiency, and sustainability at every stage of national industrial development.