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Indonesia’s mining downstreaming can nurture inclusive economy: FEB UI research

Creative Desk (The Jakarta Post)
Jakarta
Mon, February 3, 2025

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Indonesia’s mining downstreaming can nurture inclusive economy: FEB UI research

I

ndonesia’s focus on mineral commodities such as copper, bauxite and silica sand in its mining downstreaming policy has the potential to create a strong foundation for inclusive economic development, new findings by the Faculty of Economics and Business, University of Indonesia (FEB UI) have shown.

Titled "Study of the Impact of Mining Industry Downstreaming on the Economy, Social, and Environment: Copper, Bauxite, and Silica Sand", the research noted that the construction of smelters across the archipelago has shown real results. Along with processing raw materials into value-added products such as copper cathodes and alumina, the smelters create new economic opportunities for surrounding communities.

“Downstreaming is not just an economic transformation. It is an effort to build a more independent society, improve welfare and pave the way for social development," said Nur Kholis, deputy head of the Center for Sharia Economics and Business, Faculty of Economics and Business, University of Indonesia (PEBS FEB UI) in a statement.

Nur Kholis, who also served as head of the Research Implementation Team, said the downstreaming policy had a significant social impact though there is still room for further development.

In downstream areas such as Gresik, East Java; West Sumbawa, West Nusa Tenggara; Mempawah, West Kalimantan; and Batang, Central Java, a number of social indicators show improvement.

Expected years of schooling (HLS) and average length of schooling (RLS) have increased along with the development of educational infrastructure, supported by regional income from revenue sharing funds (DBH) and regional taxes (PAD). Meanwhile, indicators in the health sector showcase encouraging progress, such as rising life expectancy (UHH) and a decrease in stunting rates.

"With downstreaming, we see an increase in the quality of life of local communities. The regional income generated is used for the development of health facilities such as hospitals and clinics, which are very beneficial for the community," he explained.

In addition, mining downstreaming also provides opportunities for micro, small and medium enterprises (MSMEs). MSMEs in Gresik, West Sumbawa, Mempawah and Batang benefit from training and mentoring programs initiated by mining industry downstream companies through corporate social responsibility (CSR) programs.

"With the ban on raw mineral exports and the development of downstream industries, MSMEs have the opportunity to partner with smelter companies. This is expected to encourage the growth of MSMEs and increase the competitiveness of domestic products, while strengthening the local economy in various downstream locations," he concluded.

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