Making the low-carbon transition an engine of industrialisation
The strategic value of the low-carbon transition for Indonesia depends heavily on its ability to convert global technological change into domestic production capacity, knowledge and competitiveness.
Jakarta (ANTARA) — The low-carbon economic transition places Indonesia at a strategic industrial crossroads. The influx of clean investment and technology has the potential to strengthen national production capacity, but at the same time risks increasing dependence on overseas supply chains.
This situation is becoming ever more crucial amid the global energy and transport shift, which is opening new markets for electric vehicles, renewable energy, energy storage systems and efficiency technologies.
Indonesia itself possesses strong fundamentals in the form of a vast domestic market and a solid manufacturing base. In the second quarter of 2026, the non-oil and gas processing industry grew 5.32 per cent year-on-year, contributed 16.83 per cent to Gross Domestic Product (GDP) and absorbed 19.99 million workers. Meanwhile, Indonesia’s manufacturing value added reached US$275.61 billion in 2025, making it the largest in Southeast Asia and ranking 12th globally.
Minister of National Development Planning and Head of Bappenas, Rachmat Pambudy, estimates that the green economy could create around 1.2 million jobs per year and drive average GDP growth of 6–7 per cent annually.
However, the scale of this potential will not automatically translate into a stronger national industry. The benefits depend heavily on Indonesia’s ability to turn demand for low-carbon technology into production, skills and value added that grow at home.
Electric vehicles are the most concrete example. Deputy Chair of the House of Representatives’ Commission VII, Evita Nursanty, said the electric vehicle population has now reached around 541,000 units, with total investment in the assembly industry approaching Rp30 trillion.
According to her, this rapid growth must be directed towards strengthening the component industry and mastering technology, not merely expanding the market.
The government is encouraging this strengthening through the Local Content Level (TKDN) scheme.
Minister of Industry Agus Gumiwang Kartasasmita said the EV industry roadmap has set minimum TKDN thresholds of 40 per cent in 2026, 60 per cent in 2027–2029 and 80 per cent from 2030 onwards.
Currently, 14 companies have invested in the four-wheeled electric vehicle sector, with a value of Rp24.13 trillion and a production capacity of 409,860 units per year. The TKDN policy is designed so that these substantial investments increasingly involve the domestic component industry and supply chains.
However, local content only truly has value if it develops into real production capability. Local suppliers must be given room to improve quality, solve technical problems and meet ever-evolving global standards. It is from here that the relationship between investment and industrial deepening begins to take shape.
This capability also has the potential to spread to other low-carbon sectors. Experience in producing EV components and resolving technical obstacles can become the foundation for developing battery energy storage devices, industrial efficiency technologies and various supporting equipment.
For this reason, the direction of investment is just as important as its nominal value. Agus added that the government is beginning to study TKDN-based incentives to encourage the uptake of local components while ensuring investment does not stop at the assembly stage.
The next challenge lies in domestic gaps in knowledge and expertise. Chairman of the AMAN youth community, James Karnadi, stressed that Indonesia must play an active role in the production, innovation and creation of value added in low-carbon technology.
He emphasised the crucial importance of knowledge transfer, human resource capacity building and strengthening the local industrial ecosystem.
Investment should therefore ideally give rise to continuous learning. Capabilities built during the production process will become the main capital for domestic companies to increase capacity and transform from mere technology users into developers of solutions.