Defining Precisely What is 'Downstream' Activity for Indonesia?

As for palm oil, a special mention should be made that Indonesia seems perpetually stuck in the midstream, not downstream of its production. Indonesia produces 58% of the world’s palm oil or CPO. This is more than double that of Malaysia and Thailand combined. However, palm oil in itself is not ultimately the finished product, but rather still a substrate, that can be broken down into many more specific oils beyond cooking oil, such as stearins, oleins, and ethers. These are used for specialty foods, detergents, and cosmetics. Gaining the know-how to make those types of products would be the formula for any successful down-streaming. 

We have not even mentioned other downstream processing efforts in Indonesia mining, such as bauxite to produce aluminum used in aircraft, iron ore to produce specialized steel tools, or gold resources to produce jewelry and industrial products, such as the plating on semi-conductors used in smartphones and computers. Yes, far-fetched it seems, but that would be the goal in a vertically inlined downstream process, namely, from refinement to finished products.

Of course, again all of this downstream from cracking oil, to plated nickel, to plastic PVC beads, to specialized oleins, requires a large input component of electricity. In Indonesia, it is obviously going to be produced by burning more coal, and thus more environmental problems.

A broader definition of ‘downstream activity’ should include a matrix of objectives, in order to really make down-streaming ‘more profitable  (or palatable?) to the people’. This matrix would include the following, beyond just measuring profits and increased taxation, (historically, money alone in Indonesia tends to be siphoned off by inside actors, misappropriated, misspent, or simply disappearing, meaning the downstream never really reaches the people the slogans intend it to reach anyway) such as: 

Knowledge Transfer: Mentoring, educational, shared learning, and vocational programs that create sustainable know-how for downstreaming. Is the knowledge of downstream creating new opportunities for many or just the well-connected with specialized knowledge? The knowledge transfer must be open learning, so all can engage and participate. These are the German, U.K., and Swiss models of industrial knowledge transfer, and a good template to follow. 

DMO (Domestic Market Obligations) and local content initiatives: Requiring a specific amount of not only physical content but also knowledge content should be included in all exports. This can lead to bigger opportunities for small businesses in products and services. These opportunities should also include recycling, repairing, and refurbishing, which creates a plethora of secondary jobs. 

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