Smelter Development in President Jokowi’s Era Strengthens Indonesia’s Economic Foundation
By Agnia Sari Datu )*
The development of smelters in Indonesia is one of the strategic steps taken by the government under the leadership of President Joko Widodo. President Jokowi emphasized that the downstream industry will be the driving force of Indonesia’s economic growth in the future. The statement was made during the inauguration of the PT Freeport Indonesia (PTFI) processing and refining facility (smelter) in Gresik, East Java. The development of this smelter is part of the government’s efforts to make Indonesia an advanced industrial country that is able to process its own natural resources, without having to export them in the form of raw materials.
With the spirit of downstreaming, President Jokowi hopes that more smelters will be built throughout Indonesia. This is expected to shift the contribution of economic growth from domestic consumption to the productivity of the downstream industry based on natural resources. On that occasion, President Jokowi explained that Indonesia’s economic growth (GDP) has so far been heavily dependent on domestic consumption. However, with downstreaming, the government wants this shift to be towards productivity, both from state-owned and private companies.
In the development of PT Freeport Indonesia’s smelter, an investment of IDR 56 trillion was allocated to process 1.7 million tons of copper concentrate brought from Papua to Gresik. From this process, 900,000 tons of copper cathode, around 50 tons of gold, and 210 tons of silver were produced. These figures show the great potential of the downstream sector to make a significant contribution to the national economy. President Jokowi believes that the multiplier effect of this project will be very large, because it will involve many micro, small, and medium enterprises (MSMEs), as well as various other business sectors related to the smelter in Gresik.
Furthermore, President Jokowi said that the production of this smelter will give birth to derivative industrial companies that utilize copper products, such as copper foil and cable factories. This is in line with the hope of creating a stronger industrial ecosystem in Indonesia. With the existence of derivative industries, it is hoped that various new jobs will emerge that can reduce unemployment and improve people’s welfare.
Minister of State-Owned Enterprises (BUMN), Erick Thohir, also emphasized that the inauguration of the PT Freeport Indonesia smelter in Gresik is proof of President Jokowi’s commitment to downstreaming in Indonesia. With President Jokowi directly supervising the progress of the smelter construction up to three times before the inauguration, this shows the government’s responsibility and attention to this project. Erick added that national economic growth is expected to increase along with the operation of this smelter in the future.
The Indonesian government, through the Ministry of BUMN, is committed to supporting the downstreaming program. After the success of nickel downstreaming which managed to generate revenues of up to US$40 billion for the country, Erick believes that downstreaming for other commodities, such as gold and copper, will also reap similar success.
The Indonesian Mining Industry Holding (MIND ID) is committed to carrying out the downstreaming mandate to support the strengthening of the industrial ecosystem and increase the added value of Indonesian minerals. The construction of the PT Freeport Indonesia smelter in the JIIPE Special Economic Zone, Gresik, is one concrete manifestation of this commitment. During the visit, President Jokowi was accompanied by a number of state officials, including Minister of State-Owned Enterprises Erick Thohir, Minister of Energy and Mineral Resources Bahlil Lahadalia, and Minister of Investment Rosan Roeslani. They all witnessed firsthand how important this smelter is for increasing the added value of raw materials, which in turn will have a positive impact on state revenues.
President Jokowi emphasized that downstreaming is not just a program, but is the foundation of Indonesia’s new economy. Thus, Indonesia will no longer depend on domestic consumption, but instead shift to the productivity of companies, both state-owned and private.
President Jokowi hopes that the momentum of this smelter construction can immediately give birth to derivative industrial companies around the smelter location that are capable of producing various copper-based products. This will not only increase national productivity, but also encourage regional economic growth, which in turn can improve the welfare of local communities.
Minister of State-Owned Enterprises Erick Thohir also said that the completion of this smelter construction project is a strong step forward from the government in supporting the downstreaming program in the mining sector.
