JAKARTA (The Jakarta Post/Asia News Network): President Joko 'Jokowi' Widodo announced on Thursday (Aug 26) a three-pronged strategy to boost Indonesia's economic growth, providing insight into the direction of government policy over the remainder of his term in office.
The three key aspects are the green economy, the digitalisation of micro, small and medium enterprises (MSMEs) and as well as the development of downstream industries.
With regard to the first of those three, Jokowi said the government was planning to build a “green industrial park” by October 2021 to produce “green products” using only renewable energy.
As for the second key aspect, the government wants all 60 million MSMEs to be able to sell their goods and services on e-commerce and other digital platforms.
Today, only a fifth of them tick that box.
Elaborating on the third key aspect, the President noted that the government had begun downstream industrial development in early 2020 with a ban on nickel ore exports and said this had lifted steel exports to US$10.5 billion.
The scheme would be expanded to other commodities, namely bauxite, gold, copper and palm oil.
“We know that the future of green products looks promising, and we have a great opportunity in this,” Jokowi said in his opening remarks at the 100 Economists event.
The President's speech signals the next step in a long-term shift in economic policymaking for a government that in the past had seemed focused on quick gains from extractive industries with little concern for ecological repercussions.
According to the Finance Ministry, coal, crude palm oil (CPO) and raw mineral exports are the main sources of revenue from export levies and non-tax income.
Meanwhile, in 2020, renewable sources accounted for 11.2 per cent of the national energy mix, while the rest came from fossil fuels, according to the Energy and Mineral Resources Ministry. Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa said the concept of green economics should be accompanied by commitments to reduce emissions, waste and the extraction of natural resources.
It also demanded fair treatment of local communities so that they also benefited from the development.
“The term ‘green’ must not just be a slogan; there is a lot to do to [justify] such a claim,” Fabby told The Jakarta Post on Thursday.
The concept, he said, should be incorporated in a clear transition for all industries across Indonesia and reduce reliance on natural resources and extractive industry exports.
“One industrial park is not enough to [proclaim] a green economy. The whole industry must move in the same direction,” Fabby said.
Center of Reform on Economics (CORE) executive director Mohammad Faisal said the government, so far, had not been consistent about downstream development, which he said would require a much firmer policy.
He cited as an example the nickel ore industry, where most companies only refined the raw material one or two steps up from the ore stage, such as into ferronickel or stainless steel, rather than into finished products like batteries.
“We have to push added value to a higher level. If not, ‘downstream’ will be a mere label, without real value,” Faisal told the Post on Thursday.
Meanwhile, Faisal said the drive for digitalisation of MSMEs faced several obstacles, as the government had not provided sufficient digital infrastructure, especially with regard to internet access.
He added that digitalisation should be followed by a long-term plan to empower and develop MSMEs, especially to ensure the competitiveness of their products in the market.
“Digitalisation should not stop at putting MSMEs on [online] platforms. We need to ensure that their products can compete with others, especially foreign ones,” Faisal said.
Earlier, industry leaders signalled that the country was more than capable to drive growth from industrial clusters, even in remote areas, as technology has enabled digital infrastructure to bridge the gap that physical infrastructure has lacked for decades.
Schneider Electric’s Indonesia and Timor-Leste cluster president Roberto Rossi suggested it would become increasingly easy for companies to switch to green energy as the supporting technology became cheaper.
“Today, global investors and big players are looking for sustainable companies. The money is shifting from the old way of fossil fuels to green energy,” he said during a webinar held by the Post on Tuesday.
Rossi went on to say that the world was entering the “Electricity 4.0” era backed by green energy and digital infrastructure as the operational backbone. Electric energy would be two to five times more efficient than other forms of energy, he said.
Indosat Ooredoo’s chief strategy and innovation officer, Arif Musta’in, said the company planned to build more than 7,100 4G sites by the end of the year.
The telco launched its commercial 5G network in June. Indosat plans to continue rolling out 4G and 5G networks to more areas while phasing out 2G and 3G. Arif went on to say that Indosat had so far deployed 164 base transceiver stations (BTS) under the universal service obligation (USO) programme, most in outermost and isolated areas.
“This shows that it is possible to reach out to broader regions that may [have very poor] connectivity. The pandemic is not keeping us from delivering connectivity,” he said.