Alvin Camba in Phenomenal World:
A pillar of Indonesia’s unprecedented economic growth over the last decade has been its ban on the export of raw nickel ore. This national experiment in downstream industrial policy began with the 2009 Mining Law signed by former president Susilo Bambang Yudhoyono, which mandated the domestic processing of all commodities mined in the country. The export ban on nickel was only partially implemented in 2014 amid widespread opposition from the mining sector, and it came into full effect in 2020.
Before the ban, Indonesia predominantly exported raw nickel ore, which is minimally processed into nickel matte. The country’s nickel-related exports were a modest US$6 billion in 2013. By 2022, this figure had risen to nearly US$30 billion, propelled by the exports of higher value-added products such as stainless steel and battery materials.
Chinese firms that were large players in the downstream nickel-based production had no choice but to expand their operations within Indonesia to secure access to its abundant nickel resources. The rapid growth of the nickel sector was facilitated by direct investments under the Belt and Road Initiative. Chinese state-owned banks financed the construction of coal power plants and basic infrastructure, integral components of the industrial areas that fostered economies of scale and agglomeration.
The outcomes of these policies have been mixed.
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