“I’ve been unemployed for three years and applied to more than 5,000 companies.”

This recently viral social media post captured the quiet frustration simmering across Indonesia.

Among the country’s many challenges, few are more pressing than the shortage of good jobs. At the heart of this problem lies Indonesia’s premature deindustrialization: manufacturing’s share of the economy has declined before the country has become wealthy.

As documented in a 2021 World Bank report, manufacturing has long been a cornerstone of Indonesia’s economic development, accounting for more than a quarter of the expansion in middle-class jobs. Yet as industrial growth has lost momentum, so too has the creation of quality employment.

Caught between the relentless march of automation and China's dominance of global manufacturing supply chains, reviving Indonesia's industrial sector may seem like a lost cause. Yet a new opportunity is emerging.

Harvard economist Dani Rodrik has argued that the climate transition offers developing countries opportunities for green industrialization, particularly those endowed with critical resources. He has pointed to Indonesia as an example, citing billions of dollars in Chinese investment aimed at supplying the rapidly expanding electric vehicle (EV) and battery industries.

China itself offers perhaps the most compelling illustration of green growth's economic potential. Solar power, EVs and other clean-energy technologies accounted for more than a third of China's economic growth in 2025 and more than 90% of the net increase in investment, according to an analysis by the Centre for Research on Energy and Clean Air.

Yet beneath the excitement surrounding China's success and Indonesia's early achievements lies an uncomfortable truth: Indonesia's green industrial transformation has yet to live up to its promise.

Jakarta's flagship nickel downstream industrialization policy has attracted billions of dollars in investment, but the development of a comprehensive domestic EV battery ecosystem remains incomplete. Much of Indonesia's processed nickel continues to be exported in intermediate forms, including ferronickel, rather than being transformed into higher-value finished products.

The energy transition presents a similar picture. Despite considerable solar potential, Indonesia's installed solar capacity remains modest compared with that of several regional peers. The gap between the country's green growth ambitions and its achievements remains substantial.

After years of uneven progress, however, Indonesia may finally be approaching a turning point.

The first encouraging development is a clearer strategic direction. President Prabowo Subianto has set an ambitious target of deploying up to 100 gigawatt-peak (GWp) of solar power capacity.

Critics may question whether such an ambitious goal is achievable. Yet setting a bold target is preferable to proceeding without a clear sense of direction—provided that ambition is matched by credible implementation.

The second development is institutional.

For years, Indonesia's energy transition and critical-mineral industrialization have suffered from bureaucratic fragmentation, with responsibilities dispersed across ministries pursuing competing priorities and lacking a unified approach to energy, trade and industrial policy.

The recent Cabinet reshuffle offers an opportunity to address this problem through the establishment of the Coordinating Ministry for Downstream Industrialization and Energy Transition, tasked with strengthening coordination between these two strategic agendas.

The new arrangement recognizes a fundamental reality: downstream industrialization and the energy transition are mutually reinforcing. Industrial development needs reliable, increasingly clean and competitive electricity, while the transition to renewable energy will generate far greater economic benefits if Indonesia develops the domestic supply chains and manufacturing capabilities needed to support it.

East Asia's economic history offers ample evidence that structural transformation requires sustained coordination among government institutions and the private sector.

In postwar Japan, the influential Ministry of International Trade and Industry (MITI) helped coordinate industrial policy, financing and technological development to support the country's rapid industrialization.

One notable example was Japan's government-backed semiconductor research initiative in the 1970s, which brought major companies together to develop advanced technologies. Such initiatives contributed to Japan's emergence as a global semiconductor powerhouse, with Japanese manufacturers eventually capturing more than half the world market at their peak.

China offers another example. Its National Development and Reform Commission (NDRC) has played a central role in economic planning, including the preparation and implementation of national five-year plans that help guide industrial priorities and investment.

China's rise as an EV manufacturing powerhouse was supported by sustained industrial policies, technological investment, infrastructure development and consumer incentives. An estimate by the Center for Strategic and International Studies puts cumulative Chinese government support for the EV sector at approximately $231 billion between 2009 and 2023.

The lesson for Indonesia is clear: ambitious targets and Cabinet reshuffles may create the conditions for green industrial transformation, but they cannot deliver it on their own.

If the new coordinating ministry is to fulfill its promise, it must pursue three imperatives.

First, establish clear priorities.

It is better to achieve three strategic objectives than to pursue 300 and accomplish none.

The coordinating ministry must ensure that government agencies, financial institutions and industry stakeholders concentrate their resources on a limited number of high-impact goals rather than spreading their efforts too thinly.

Given Indonesia's vast nickel reserves and ambitious solar deployment targets, developing a competitive EV battery ecosystem and domestic solar photovoltaic manufacturing capabilities would be logical priorities.

Second, secure genuine institutional alignment.

The ministry must function as an effective conductor, ensuring that different institutions work toward the same objectives.

This means coordinating the energy and industry ministries to develop local-content regulations that encourage domestic manufacturing without unnecessarily raising costs or discouraging investment.

It also means mobilizing financing institutions, including Danantara Indonesia and state-owned banks, to support commercially viable investments in priority green industries.

Equally important is encouraging domestic companies to enter emerging green sectors, including through partnerships with international technology leaders that facilitate technology transfer, skills development and the acquisition of manufacturing expertise.

Such coordination should extend beyond investment announcements. It must translate into clear responsibilities, measurable outcomes and accountability for implementation.

Third, embrace disciplined experimentation and adaptation.

Industrial policy cannot be treated as a fixed blueprint. It must evolve in response to evidence about what works and what does not.

If years of restricting nickel ore exports result primarily in increased exports of ferronickel rather than the development of a comprehensive domestic battery industry, policymakers must be prepared to reassess their approach.

One option worth examining is a carefully designed export levy on lower-value nickel products to encourage further domestic processing. However, any such measure would need to account for market conditions, competitiveness, investment incentives and the risk of unintended consequences.

The broader principle is more important than any single policy instrument: Indonesia must be willing to adjust its industrial strategy when outcomes fall short of expectations.

China, Japan and other successful industrial economies did not achieve their transformations through rigid adherence to policies that failed. Their progress depended, in part, on institutions capable of learning, adapting and coordinating action over time.

Indonesia's ambitious clean-energy targets and newly established coordinating ministry offer a welcome opportunity to revive the country's green industrial ambitions.

But a new institutional structure is only the beginning. Its success will ultimately be measured not by the number of meetings held, targets announced or investments pledged, but by factories built, technologies mastered, supply chains developed and quality jobs created.

Indonesia cannot afford to let this opportunity slip away.

For millions of Indonesians searching for decent work and a better future, the stakes could hardly be higher.

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Dimas Muhamad is a PhD student in Development Studies at the University of Cambridge; Kafi Prasetya is the Director of Programs and Development at the Industrial Policy Lab. The views expressed in this article are solely those of the authors.
 

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