Indonesia’s Success Story in Profiting from its Critical Minerals
Indonesia is the 4th most populated country in the world with a population of more than 280 million people. Over recent years, it has experienced sustained economic growth, thanks in part to a judicious management of its #CriticalMinerals.
According to geological survey reports, Indonesia has significant deposits of the following: 1.5 billion tonnes of Nickel, 1.2 billion tonnes of Tin, 927 million tonnes of Bauxite, and 640 million tonnes of Copper. As a major economy in Asia and even the world, Indonesia is also a important member of ASEAN, BRICS, IORA as well as having joined the #BRI and #IPEF.
In a nutshell, the mineral boom started when Indonesia banned the export of raw nickel ore and encouraged domestic processing instead. The policy directed foreign direct investment (FDI) into the Local Value Addition (#LVA) of minerals, which in turn created jobs and spurred economic growth. To justify its policy, Indonesian President Prabowo Subianto declared: “We’re not protectionist; what we’re doing is very logical.”
Eventually, Indonesia developed into the world’s top #nickel supplier. Indonesia views its critical minerals as a key resource which will propel the country into the elite league of the Top 5 economies globally by 2045.
It was under former President Joko Widodo that Indonesia adopted the policy commonly referred to as ‘ #downstreaming ‘. This policy decision allowed Indonesia to gain greater benefits from its resources, as opposed to purely ‘extractive arrangements’ earlier.
Downstreaming motivated investors to expand their business model beyond the extraction and export of raw minerals. By investing in processing plants which can add more value locally, Indonesia could thus retain higher economic benefits associated with its natural resources.
It is worth noting that the Indonesia has been able to catch the high-speed train destined for #NetZero, that necessitates substantial amounts of #CriticalMinerals such as Nickel. Indeed, Indonesia now accounts for more than half of the global nickel production.
According to government figures, the value-add of nickel production has increased from USD 1.4 billion in 2020 to USD 34.8 billion in 2023, thanks to the downstreaming drive. The downstream mining sector has now attracted over a quarter of all #FDI into Indonesia.
The upgrade of the mining sector in Indonesia has been largely made possible by investments from China. In fact, the Indonesia Morowali Industrial Park (IMIP) on the eastern coast of Central Sulawesi is a flagship project under the Belt and Road Initiative (#BRI).
President Subianto is confident that the mining sector will contribute to boost economic growth from 5% up to 8% annually. In the first phase, downstreaming led to the construction of smelters locally. Eventually, Indonesia wishes to move further up the value chain by manufacturing higher value-added goods.