The global energy transition from fossil fuels to renewable energy is reshaping critical mineral supply chains, with demand expected to surge due to clean energy adoption. Key minerals such as lithium, nickel, cobalt, graphite, and rare earth elements saw demand growth of 8% to 30% in 2023. By 2030, this demand is projected to more than double, reaching 35 million tonnes annually by 2040. These resources are essential not only for traditional industries but also for emerging technologies such as electric vehicle (EV) batteries and renewable energy systems.
Head image source: https://voi.id/en/economy/249888
Indonesia holds significant potential in critical mineral due to its huge amount of resources, including nickel, bauxite, tin, and copper. As of recent estimates, the country possesses approximately 1.5 billion tons of nickel, 927 million tons of bauxite, 1.2 billion tons of tin, and 640 million tons of copper.
Figure 1 Map of Critical & Strategic Minerals Exploration Plan 2025 – 2029
Source: Pusat Sumberdaya Mineral Batubara dan Panas Bumi, 2024
The Indonesian government has implemented several policies to promote mineral downstreaming, exporting bans on raw materials have been enforced to encourage domestic processing. For instance, in 2014, Indonesia banned the export of raw nickel ores and bauxite ores to compel mining industry to build smelters domestically, thereby increasing the country’s share of the value added to its mineral resources.
Figure 2 The industrial area of PT Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi.
Source : CNBC Indonesia, 2021
But senior economist at the Institute for Development of Economics and Finance (INDEF), Faisal Basri, has strongly criticized the downstream processing (hilirisasi) policy
“The results of this (downstreaming) policy have benefited other countries more than Indonesia’s domestic industry”.
Later, He explained that this happens because most nickel downstreaming companies in Indonesia are owned by Chinese Companies, causing the revenue from these exports are not fully retained in Indonesia. At best, the money stays in Indonesia for just one day before being taken back to China. That is their right and it is legal. The Vice Chairman of the Indonesian Society of Mining Experts (PERHAPI), Resvani, also stated that there is no developed country in this world that skipped the process of industrialization.
Industrialization has a broader meaning; it is not just about processing natural resources; industrialization aims to strengthen the industrial structure to make it more resilient and sustainable. Meanwhile, downstreaming only focuses on adding value to raw materials.
Transforming from mere mineral processing to comprehensive industrialization is crucial for Indonesia’s economic advancement. This shift involves not only processing raw materials but also developing manufacturing industries that utilize these processed minerals. For example, establishing domestic production of electric vehicle batteries leverages Indonesia’s nickel resources, moving up the value chain from raw material supplier to high-tech manufacturer.
For this reason, government should prioritize industrialization, which would enhance Indonesia’s competitiveness and foster an industrial culture, rather than just building factories. Industrialization can also increase the proportion of formal workers, build a strong middle class, accelerate economic transformation, and reduce various forms of inequality.
China’s rapid industrialization serves as a clear example; by focusing on domestic processing and manufacturing, China transformed into a global industrial leader, significantly boosting its economy and technological capabilities.
Figure 3 BYD’s EV Factory in China
Source : electrek.co, 2024
However, achieving industrialization is not an easy task. As a developing country, Indonesia faces complex challenges that must be addressed to realize its industrialization ambitions. Some of the main challenges are:
- Workforce Readiness and Technological Capabilities:The lack of skilled and expert workforce in mineral processing, coupled with the shortage of domestic technology, makes industrialization in Indonesia even more difficult to achieve.
- Significant Investments:Establishing industrial facilities requires a huge amount of capital. Attracting both domestic and foreign investors is crucial, necessitating a stable and attractive investment climate.
- Regulatory Support:The ever-changing regulations, along with the current policies that still focus on raw material extraction and downstream processing, have resulted in the absence of a legal framework that can serve as a catalyst for industrialization growth in Indonesia.
Therefore, at least three recommendation frameworks can be considered to address these challenges in achieving sustainable industrialization in Indonesia. Among them are:
- Strengthening Research and Development in Mineral-Based Industries:Enhancing the role of universities in research and development of processing technologies, product development, and sustainable practices to improve competitiveness. This will foster a sustainable innovation ecosystem while also producing experts in mineral processing who are ready to enter the industry
- Investment Strategy:Developing targeted strategies to attract investments, such as public-private partnerships, R&D on mineral processing, and infrastructure development, can facilitate industrial growth.
- Establishing a Solid Regulatory Framework:Establishing regulations that serve as a catalyst for the development of mining industrialization, such as tax incentives for industries committed to building an integrated supply chain from upstream to end products, prioritizing budget allocations for mineral processing research, and providing clear legal frameworks for industry players.
With Indonesia’s massive critical mineral resources, the transformation from mineral downstreaming to full-scale industrialization could drive higher economic growth. With effective industrialization, the contribution of critical minerals is expected to continue growing, significantly boosting Indonesia’s economic expansion. The Coordinating Minister for Economic Affairs has set a target of 8% economic growth by 2028-2029, with industrialization as a key driver to achieve this goal.
As a trusted mining consultancy, Tura Consulting Indonesia is dedicated to advancing Indonesia’s economic resilience and self-sufficiency by providing research-based insights and scientific expertise to shape sustainable policies for critical mineral utilization. This commitment is reflected in our specialized Energy & Mining Policy advisory services, which align with national efforts to strengthen downstreaming and industrialization. Our strategic management team further enhances this vision by providing expert guidance in risk mitigation, strategic planning, and implementation frameworks—critical tools to navigate the complexities of industrial growth and policy execution.
To accelerate Indonesia’s journey toward a robust, value-added mineral economy, we invite industry stakeholders and policymakers to collaborate with Tura Consulting. Leverage our expertise to design actionable strategies, mitigate risks, and transform policy goals into measurable outcomes. Partner with us to unlock sustainable growth and ensure your initiatives align with Indonesia’s strategic industrial ambitions. Contact Tura Consulting today to discover how our tailored solutions can drive your success in this transformative era.
References
[i] Criekemans, D. (2021). “Chapter 2 ‘Geotechnical Ensembles’: How New Technologies Change Geopolitical Factors and Contexts in Economy, Energy and Security”. In Geopolitics and International Relations (pp. 20-35). Leiden, The Netherlands: Brill | Nijhoff. https://doi.org/10.1163/9789004432086_004
[ii] U.S. Geological Survey. (2022, December 16). U.S. Geological Survey releases 2022 list of critical minerals. U.S. Geological Survey. https://www.usgs.gov/news/national-news-release/us-geological-survey-releases-2022-list-critical-minerals
[iii] International Energy Agency. (n.d.). Critical minerals. IEA. Retrieved February 17, 2025, from https://www.iea.org/topics/critical-minerals
[iv] International Trade Administration. (2023, September 27). Indonesia Critical Minerals. Indonesia Critical Minerals
[v] UNCTAD. (2017). Using Trade Policy to Drive Value Addition: Lessons from Inonesia’s Ban on Nickel Exports.
[vi] CNBC Indonesia. (2023). Faisal Basri Buka-bukaan Lagi Soal Hilirisasi: Bikin Rugi!. https://www.cnbcindonesia.com/news/20230815122607-4-463081/faisal-basri-buka-bukaan-lagi-soal-hilirisasi-bikin-rugi
[vii] RiskAdvisory. (2024). Indonesia’s critical minerals push. Indonesia’s critical minerals push | Risk Advisory
[viii] Kementerian Sekretariat Negara Republik Indonesia. (2025). Pemerintah Targetkan Rp13.032 Triliun Investasi Untuk Dorong Pertumbuhan Ekonomi 8 Persen. https://www.setneg.go.id/baca/index/pemerintah_targetkan_rp13032_triliun_investasi_untuk_dorong_pertumbuhan_ekonomi_8_persen
Criekemans, D. (2021). “Chapter 2 ‘Geotechnical Ensembles’: How New Technologies Change Geopolitical Factors and Contexts in Economy, Energy and Security”. In Geopolitics and International Relations (pp. 20-35). Leiden, The Netherlands: Brill | Nijhoff. https://doi.org/10.1163/9789004432086_004
U.S. Geological Survey. (2022, December 16). U.S. Geological Survey releases 2022 list of critical minerals. U.S. Geological Survey. https://www.usgs.gov/news/national-news-release/us-geological-survey-releases-2022-list-critical-minerals
International Energy Agency. (n.d.). Critical minerals. IEA. Retrieved February 17, 2025, from https://www.iea.org/topics/critical-minerals
International Trade Administration. (2023, September 27). Indonesia Critical Minerals. Indonesia Critical Minerals
UNCTAD. (2017). Using Trade Policy to Drive Value Addition: Lessons from Inonesia’s Ban on Nickel Exports.
CNBC Indonesia. (2023). Faisal Basri Buka-bukaan Lagi Soal Hilirisasi: Bikin Rugi!. https://www.cnbcindonesia.com/news/20230815122607-4-463081/faisal-basri-buka-bukaan-lagi-soal-hilirisasi-bikin-rugi
RiskAdvisory. (2024). Indonesia’s critical minerals push. Indonesia’s critical minerals push | Risk Advisory
Kementerian Sekretariat Negara Republik Indonesia. (2025). Pemerintah Targetkan Rp13.032 Triliun Investasi Untuk Dorong Pertumbuhan Ekonomi 8 Persen. https://www.setneg.go.id/baca/index/pemerintah_targetkan_rp13032_triliun_investasi_untuk_dorong_pertumbuhan_ekonomi_8_persen
