Farmers harvest chili at a farm in Palu, Central Sulawesi, Indonesia, Aug 10, 2022. (PHOTO / XINHUA)

Indonesia’s existing commodity downstreaming policy, which is one of the state leader’s flagship development strategies, should be maintained by any would-be successor of President Joko Widodo, according to a recent seminar.

“Don’t ever hope that we will succeed to make development leaps if what we produce will still be raw materials only,” Agustinus Prasetyantoko said in a seminar on 2024 state budget at the Ministry of Finance last Wednesday.

Attended by hundreds of finance ministry officials and outsiders including those participating online, the forum on Aug 30 aimed to provide the public with a clearer picture on the 2024 state budget draft submitted for deliberation at the House of Representatives on August 16 and pulicized for public discourses.  

Minister of Finance Sri Mulyani Indrawati said that public participation is meaningful to the parliamentary deliberation for the 2024 budget draft as it will be formalized into a law. Her speech was read out by finance ministry secretary general Heru Pambudi. 

The minister also said state budget designing is not merely about economic figures but also takes into account political considerations. 

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Rofyanto Kurniawan, finance ministry head of state revenue policy center and director of state budget designing, explained about the preparations of the 2024 state budget draft. 

Saying that Indonesia’s economy and state budget still largely relies on exports of natural resources products, Kurniawan warned about  the risk of rising oil prices on the world market.  Once an oil exporter and a member of Oil Producing and Exporting Countries (OPEC), Indonesia has now become a net importer of oil. 

Indonesia may see price increases of its natural resouces products, but surging global oil prices put strains on the state budget due to rising oil subsidy spending, Kurniawan said.  

Economist Sawidji Widoatmodjo agrees with Prasetyantoko on the government’s policy of gaining better earnings by increasing the value of minerals before exporting them.  

Prasetyantoko told the forum that the mineral downstreaming strategy introduced by the current government would significantly help halt the country’s deindustrialization that had become visible since two decades ago. 

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“If we want to boost the per capita income of all of our population, sectors that absorb massive numbers of workers must be developed and be made to stand out. Manufacturing industry is the key,” said Prasetyantoko, who is rector of Atmajaya Catholic University in Jakarta and a prominent columnist. 

The economist pointed to the president’s State of the Nation Address before the People’s Consultative Assembly, the House of Representatives and the Regional Representatives Council, which stressed the country’s success in gaining much larger state earnings from processed mineral exports rather than shipping raw materials to the world market.  

The president said “commodity downstreaming” adds value to the country’s minerals and this is key to Indonesia’s ambitions to become one of the world’s biggest economies by 2045. 

Chinese investors have a strong presence, as an example of projects that not only help increase state revenues but also help improve the welfare of Indonesians. Area nickel projects help support the growth of large numbers of area middle and small-scale businesses which supply them with items needed for their workers

Ending his second consecutive five-year term as president in October next year, Widodo had launched dowstreaming as his flagship policy to optimize the value of the country’s abundant minerals notably nickel, bauxite, copper and tin. His other flagship policies include infrastructure and transportation development and the relocation of state capital to East Kalimantan.  

Widodo’s mineral commodity strategy has incited complaints notably from the European Union and the International Monetary Fund.  

In 2020 the European Union filed a suit against Indonesia to the World Trade Organization after the country fully banned nickel ore exports so as to fully support its mineral downstreaming efforts. 

This year, the International Monetary Fund called on Indonesia to gradually remove its ban on the exports of nickel ore. However, early this month IMF managing Director Kristalina Georgivea expressed her apology for having protested against Indonesia’s nickel policy.  

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Meanwhile, some people including politicians claim that those export ban and downstream policies mainly benefit foreign investors, calling on the upcoming new government to review them. 

Prasetyantoko stressed that the mineral downstreaming strategy helped the country.

He mentioned nickel mining and nickel smelting in Sulawesi, where Chinese investors have a strong presence, as an example of projects that not only help increase state revenues but also help improve the welfare of Indonesians.  Area nickel projects help support the growth of large numbers of area middle and small-scale businesses which supply them with items needed for their workers. 

Last year’s media reports said at least 80,000 workers were employed in nickel mining and nickel smelting projects in Morowali in Central   Sulawesi alone. Nickel projects are also found in Southeast Sulawesi, South Sulawesi, North Maluku and on Gag Island, off West Papua Province, which are parts of Indonesia’s backward eastern region. 

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Widoatmodjo, who is dean of the economic school at Tarumanagara University in Jakarta, said in an   interview on Sept 1 that he can understand that foreign investors gain more than what is received by Indonesia. He referred to what had happened from long in the past with all mining projects in Indonesia, including Freeport-owned giant copper and gold mining in Papua and foreign-owned oil mining and coal operations in the natural resources-rich country.    

It is fair that foreign investors holding larger shares of input get more from added value products, he said. "So if Indonesia wants to get more from value added enterprises, it has to own them in the sense that it owns capital and the technologies required,” the writer of best seller books said.  

The writer is a freelance journalist for China Daily.