JAKARTA (REUTERS) - Indonesia started construction on Tuesday (Dec 21) of a new industrial estate on Borneo island, which officials said aims to use hydropower for plants producing items including semiconductors, lithium ion batteries, solar panels and aluminium products.

Located in North Kalimantan province on Borneo, the estate will span 30,000ha and include investment from China and the United Arab Emirates, Indonesian President Joko Widodo said during a ground-breaking ceremony.

"Indonesia's economic transformation starts here where we will manage our natural resources from the upstream to downstream to create massive job availability," Mr Widodo said in a broadcast event.

He is keen to establish manufacturing industries to take advantage of Indonesia's rich natural resources, such as nickel, bauxite and copper, so that the country can move up the value chain and not just export raw materials.

The government says the estate will be "green" as it will use energy from a planned hydropower project.

Up to US$12 billion (S$16 billion) of investment will be needed for the hydropower project alone and nearly US$1 billion for a port, senior minister Luhut Pandjaitan said at the same event.

Mr Luhut said Indonesia also planned for an electric vehicle battery plant to be built at the North Kalimantan project.

The project is being led by Kalimantan Industrial Park Indonesia (Kipi), which controls the land to be used for the estate, Mr Luhut said.

Kipi is led by coal tycoon Garibaldi Thohir.

Earlier this year, Mr Luhut said Australia's Fortescue Metals Group and China's Tsingshan Holding Group could invest billions of dollars at the industrial park.