Indonesia’s controversial downstreaming policy comes in for criticism at election debate

[JAKARTA] The Indonesian government’s downstreaming policy – the flagship industrial policy of outgoing President Joko Widodo – was thrust under the spotlight at a debate involving the three men vying to become the country’s next vice-president at next month’s election.

Widodo’s eldest child, 36-year-old Gibran Rakabuming Raka, pledged to continue his father’s policy to accelerate the downstreaming process in the mineral industry if he was elected.

He also pledged his full support for downstreaming expansion on the mining, farming and maritime sectors.

Gibran is the running mate of presidential candidate Prabowo Subianto, with the pair enjoying a healthy lead in recent opinion polls, as the race to become the leader of South-east Asia’s largest economy continues. More than 204 million voters will go to the polls on Feb 14.

During the televised two-hour debate in Jakarta, Gibran said that the exports of raw materials should be stopped as he called for Indonesia – a country rich in nickel – to process its resources domestically.

“Indonesia is a large country. We should be grateful that we are blessed with abundant natural resources. We own the world’s largest nickel reserves and the second-largest tin reserves in the world,” he said. “That is why we need to continue and further expand our downstream industry development.”

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Back in 2020, Widodo’s government banned the exports of raw nickel ore, which led to billions of dollars worth of investments flowing in to Indonesia – with a large chunk coming from China – to build plants to process the material into more valuable products.

The policy of only allowing foreign companies to invest in nickel processing was criticised by Muhaimin Iskandar, the National Awakening Party’s chairman and running mate of presidential candidate Anies Baswedan.

Muhaimin asserted that the downstreaming policy had caused significant damage to the environment and provided little benefits to the people. While many investments have resulted in creating jobs in areas such as Sulawesi, foreigners have largely occupied these positions, he said.

“We saw in our mining business that downstreaming is being done recklessly,” he said. “Downstreaming development is not significantly affecting people’s welfare.”

The third vice-presidential candidate, Mahfud MD, pointed to the slow pace at which regulators have cracked down on illegal mining.

Mahfud, the current coordinating minister for political, legal, and security affairs, is paired with presidential hopeful Ganjar Pranowo.

Gibran also chimed in as he called for tougher legal action to clamp down on illegal mining activities and the environmental damage they cause. “We should revoke their mining permits,” he said.

This was the fourth of five planned debates involving the vice-presidential candidates. Among the other issues discussed on Sunday (Jan 21) were energy, natural resources, food, carbon tax and agriculture.

All three candidates were united in one issue – the need for Indonesia to expedite the implementation of the carbon tax, given that the current government has delayed it until 2025.

“If we talk about carbon issues, of course, we have to talk about carbon taxes, carbon storage and carbon capture. We must no longer be dependent on fossil energy,” said Gibran.

On Indonesia’s food policy, Mahfud pledged to reduce the country’s dependency on food imports if he and Ganjar were elected. He noted that a main challenge of food production in Indonesia is that many people do not want to be farmers as subsidised fertiliser is hard to come by.

His solution was to focus on greater enforcement in the distribution of subsidised fertiliser, where the supply is often manipulated by middlemen.