Oil, gas, and minerals are expected to provide 91.7% of the $618 billion in downstream investment that Indonesia would require by 2040 to fulfill its aspirations for industrial transformation. The ambitious plan faces immediate challenges, such as 5% unemployment and skills gaps among 70% of the current workforce, despite its promise of 3 million new jobs. This crucial economic shift has the potential to either strengthen Indonesia’s standing as a major industrial powerhouse in the world or reveal its over dependence on exports of raw materials.
Key Facts & Background
Investment Blueprint
- Total Requirement: $618B (Rp10,084T) by 2040
- Sector Breakdown:
- Oil/Gas & Minerals: 91.7% share
- Renewable/Other: 8.3%
- Near-Term Projects: 18 feasibility-ready ventures worth Rp618.3T
Employment Projections
- Job Creation: 3 million positions (274,000 from initial 18 projects)
- Workforce Challenges:
- 70% labor force participation (BPS 2024)
- 5% unemployment rate persists
Strategic Framework
- Golden Indonesia 2045 Vision: Value-added industrialization
- Task Force Role: Hilirisasi & National Energy Resilience Team
Strategic Implications
Indonesia’s ambitious downstreaming plans pose an existential peril as well as an extraordinary opportunity. Through 2040, $38.6 billion in yearly investments are required to meet the $618 billion target, which is equal to 50% of Indonesia’s current GDP. Initial ventures will be driven by minerals (particularly nickel and bauxite) and oil and gas, but success depends on avoiding three pitfalls:
- Commodity Price Volatility: Current nickel oversupply shows how boom cycles can bust
- Technology Lock-in: Will smelters become obsolete before 2040?
- Labor Readiness: 5% unemployment masks severe skills mismatches
The 18 “shovel-ready” projects (Rp618.3T) offer a critical test case. These must demonstrate:
- Bankable ROI to attract private capital beyond state-owned enterprises
- Technology Transfer from foreign partners (especially EV battery makers)
- Cluster Development that spawns ancillary industries
Alternative manufacturing bases are provided by Thailand’s Eastern Economic Corridor and Vietnam’s explosive rise in foreign direct investment. Access to raw materials, Indonesia’s differentiator, is only significant when combined with:
- Streamlined permitting (cutting current 3-year project timelines)
- Stable regulatory regimes (avoiding sudden export ban shifts)
- Infrastructure parity (reliable power/transport at industrial sites)
Whether this goal materializes or becomes one of Indonesia’s unmet industrial promises will be decided over the next three to five years. Early warning signs to keep an eye on include:
- 2026-2027 investment flow rates
- First-generation smelter profitability
- Vocational school enrollment surges
If successful, Indonesia might become the global center of green industry. If it fails, it could be caught between unfinished industrial power and commodity exporters.