In recent years, the term “downstreaming” (hilirisasi) has emerged as a central theme in Indonesia’s strategic discourse on economic policy. The concept refers to the process of increasing the added value of a commodity or sector by processing it domestically before it is exported or utilized, with the goal of generating greater economic benefits for the country.

Initially, downstreaming was primarily associated with natural resource sectors such as nickel, coal, and palm oil, where the government sought to curtail the export of raw materials and promote the development of domestic processing and manufacturing industries. The main objectives were to strengthen the national industrial structure, generate employment opportunities, and increase state revenues through the export of high-value products.

However, as time progresses and the need for a technology-driven economic transformation intensifies, the concept of downstreaming has expanded into more abstract but equally strategic areas—particularly the digital sector. This evolution has led to the emergence of a new term: digital downstreaming.

In this context, digital downstreaming goes beyond merely applying digital technology to support traditional sectors. It represents a comprehensive and deliberate effort to build a competitive and self-reliant national digital ecosystem. This includes the development of digital infrastructure, the establishment of robust data governance and regulatory frameworks, the creation of local software solutions, and the empowerment of domestic digital talent.

Rhenald Kasali (2023) describes digital downstreaming as the creation of value within the country, not merely the consumption of foreign technology. It entails building homegrown applications, domestic data centers, and algorithmic logic tailored to Indonesia’s culture and interests. Through this framework, Indonesia aims to move beyond being a consumer of foreign digital products and services and become a producer of digital value, capable of fostering its own innovations, transforming data into strategic assets, and developing technologies aligned with local needs. This involves encouraging tech startups, enhancing research and development in digital sectors, and fostering collaboration among government, industry, and academia to establish a strong, inclusive, and sustainable digital ecosystem. These efforts are crucial in light of the rapid pace of global digital disruption, which presents both significant opportunities and complex challenges for the national economy.

During the vice-presidential debate in December 2023, Gibran Rakabuming Raka explicitly highlighted digital downstreaming as one of the key national development priorities, alongside green energy downstreaming and the creative economy. His statement underscored the significance of digital transformation as a core pillar of national development, reflecting the increasing reliance on digital technology across various sectors such as the economy, education, healthcare, and public administration.

Nevertheless, the relevance of digital downstreaming in Indonesia is not without its structural challenges. On one hand, the country possesses tremendous potential: a large and youthful population, rapidly growing internet penetration, and a vibrant tech startup scene. On the other hand, Indonesia faces persistent digital inequality, the dominance of foreign platforms in the digital economy, underdeveloped infrastructure in remote areas, and weak data sovereignty and privacy protections.

Moreover, the global geopolitical dynamics surrounding technology have added pressure on Indonesia to strengthen its digital sovereignty. Dependence on foreign technologies—from hardware to cloud services and artificial intelligence—poses strategic vulnerabilities. Thus, digital downstreaming must also encompass the development of national data regulations, a domestic semiconductor industry, technological research, and the cultivation of competitive digital human resources.

Gibran’s prior remarks emphasized that digital downstreaming should not remain a mere political slogan. Instead, it must be recognized as a strategic necessity for achieving digital independence and sovereignty. The challenge lies in transforming this narrative into concrete, inclusive, and forward-looking policies that genuinely serve the national interest in an increasingly competitive digital economy.

Challenges

Despite rapid internet penetration, digital access remains highly unequal between urban and rural regions. Many areas in Eastern Indonesia, the interior of Kalimantan, and Papua still struggle with slow, expensive, or nonexistent internet connectivity. This digital divide hinders the participation of these regions in the digital economy and exacerbates development disparities.

Meanwhile, core technologies such as cloud computing, big data analytics, AI, and popular software applications are still heavily dominated by global companies like Google, Microsoft, Meta, and Amazon. Indonesia has yet to establish strong local digital platforms or independent, large-scale computing infrastructure.

Another major hurdle is the lack of skilled digital human resources in areas such as data science, AI, cybersecurity, and software development. Many ICT graduates are not industry-ready or are absorbed by opportunities abroad. At the same time, higher education institutions have not sufficiently adapted to the latest technological demands. Weak regulations concerning personal data protection, data sovereignty, and cybersecurity further expose Indonesia to the risk of foreign data exploitation. Many digital players still store their data abroad, and data breaches involving public or private information often occur without clear accountability.

Although the discourse around digital downstreaming has been echoed in national forums, public speeches, and medium-term development plans, its implementation on the ground remains hampered by serious obstacles—particularly in the realm of concrete strategic planning. To date, there is no integrated and measurable national roadmap for digital downstreaming. Critical components such as sector prioritization, implementation phases, success indicators, and resource allocation remain undefined.

As a result, coordination among government agencies remains fragmented and siloed. Many programs operate in isolation, overlap, or even conflict with each other. For instance, policies related to data governance, digital innovation centers, and digital talent training often lack alignment in terms of standards, goals, and funding. Industry players—from startups and digital MSMEs to major corporations—often struggle to navigate inconsistent, constantly shifting regulations, which breeds legal uncertainty and discourages private sector participation in digital downstreaming efforts.

Without a clear roadmap and strong institutional coordination, the risk of policy inconsistency and lack of momentum will persist, making it difficult for digital downstreaming to evolve into a truly impactful and sustainable national strategy.

Solutions

First, the government must formulate a national digital downstreaming blueprint that outlines short-, medium-, and long-term timelines, priority sectors (such as health, agriculture, education, and manufacturing), targeted outputs (such as the number of startups, local digital products, and data centers), key performance indicators, and measurable impacts. This roadmap should be developed collaboratively across ministries (e.g., Kominfo, Bappenas, Ministry of Industry, Ministry of Education) with input from the private sector and academic institutions.

Second, a Digital Indonesia Task Force should be established under the Coordinating Ministry for Economic Affairs or directly under the President. This task force would be responsible for coordinating inter-ministerial efforts, monitoring roadmap implementation, and ensuring regulatory consistency.

Third, the expansion of high-speed internet access to rural and 3T regions (underdeveloped, frontier, and outermost areas), the development of national and regional green energy-based data centers, and the provision of incentives for SOEs and private companies to invest in digital infrastructure such as edge computing, satellite systems, and fiber optic networks are all essential.

Fourth, there must be a revamp of vocational and higher education curricula to align with the needs of the digital industry (e.g., AI, cloud computing, cybersecurity, data engineering). National-scale scholarship and training programs—such as Kominfo’s Digital Talent Scholarship—should be expanded and tied directly to downstreaming targets. Industry-academia collaboration should be promoted through innovation hubs, tech parks, and certified internship programs.

Fifth, strategic state investments (sovereign funds) should be directed toward the semiconductor industry, domestic AI development, and other key technologies. Data must be designated as a national strategic asset, with regulations mandating that sensitive data be stored and processed within the country. In addition, Indonesia should pursue strategic technology partnerships with allied nations to enable technology transfer and foster open tech collaboration.