Stainless success, battery lag: Evaluation of Indonesia's resource nationalism in nickel

This study examines Indonesia's resource nationalism policy in the nickel industry between 2008 and 2023. The analysis focuses on potential consequences of the 2009 Mining Law’s mineral export ban, implemented in January 2014. Utilizing data on value-added distribution, export volumes, and capital inflows, the research reveals diverging paths for the stainless steel and EV battery sectors. The stainless steel industry experienced significant export growth reaching $11.9 billion in 2022 and increased domestic value-added production and financing. In contrast, the EV battery sector’s exports declined by almost a third from 2014 to 2022. The EV battery industry only became a national priority in 2019, providing insufficient time to develop a comprehensive manufacturing ecosystem. Moreover, the midstream processing capacity crucial for batteries was initially lacking. Product space theory explains the challenges: battery manufacturing requires more advanced production capabilities than Indonesia's existing industries. Recent political support and announced foreign investments indicate progress in the EV sector, but concerns persist over captive coal plants reliance. The study concludes with Indonesia’s shifts beyond strict resource nationalism, namely building partnerships with automotive and battery manufacturers while opening trade. It also highlights risks of aggressive resource nationalism policies, including market distortions, trade disputes, and socio-environmental concerns.