Indonesia’s agriculture sector, especially plantations like palm oil and rubber, plays a crucial role in the national economy and rural employment. Despite contributing significantly to GDP and exports, most commodities are still exported as raw materials, resulting in low added value for local farmers. This reliance on raw exports exposes Indonesia to global price fluctuations and reduces domestic economic resilience. The government sees downstreaming (hilirisasi)—the processing of raw commodities into value-added products—as a strategic solution. With vast potential in palm oil, coconut, and spices, downstreaming not only increases farmers’ income but also strengthens local industries and economic stability.

Downstreaming promotes inclusive growth by creating jobs in rural areas and reducing regional inequality. Farmers gain more income by joining processing activities, while domestic industries benefit from higher export value and reduced import dependency. The Indonesian government has made downstreaming a national priority, offering regulatory reforms, fiscal incentives, and support for agro-processing SMEs. Despite challenges like limited infrastructure and funding access, especially for smallholders and cooperatives, consistent policy implementation and inclusive partnerships can turn downstreaming into a transformative force for fair, sustainable economic growth.

Source:
https://ditjenbun.pertanian.go.id/dari-ladang-ke-pasar-hilirisasi-demi-kesejahteraan-petani/