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Resource Nationalism is a political doctrine concerning a country’s management and distribution of profits derived from natural resources. Indonesia is very rich in coal, palm oil, nickel, and tin, and plays a critical role in global commodity markets. During the commodity boom from 2000 to 2014, Indonesia became a country known for resource nationalism as it introduced a wide array of policies ranging from disinvestment of foreign companies, higher taxations and restrictions on unprocessed raw material. Indonesia has continued to implement a policy whereby natural resources are retained within the country. In 2022, Indonesia, the largest producer of palm oil, introduced a temporary ban to stabilize domestic prices. In 2025, Indonesian President Prabowo Subianto signed a new regulation requiring exporters of resources, other than oil and gas, to hold all proceeds for a year, arguing that Indonesia’s resources should benefit Indonesians.
Post Colonial Indonesia: Inclination towards Resource Nationalism
Indonesia is a former Dutch colony, and its resources were heavily exploited. Colonial policies prioritized foreign profits and the local population was often subjected to human rights abuses, like extrajudicial executions and torture. After the attainment of independence in 1945, the new President, President Sukarno adopted economic nationalism, a path commonly followed by post-colonial states, and in the 1950s and 1960s, Indonesia followed that path. President Sukarno nationalised Dutch-owned companies, including oil and plantations, bringing them under state control. However, economic mismanagement and political instability led to the fall of Sukarno’s government to a military coup and his successor, Suharto adopted a more pragmatic approach by allowing foreign investment while maintaining significant state control over key resource sectors. Companies like Pertamina, the state-owned oil company, played a dominant role in managing natural resources, balancing economic nationalism with foreign investment.
1997 Financial Crisis: Reforms and Resource Nationalism
The Asian Financial Crisis of 1997-1998 deeply affected many countries in East and Southeast Asia. It began in Thailand which devalued the baht, after running out of foreign exchange reserves to defend it. This triggered a chain reaction, leading to financial collapse across the region, mass unemployment and currency devaluations. Indonesia was one of the worst hit and had to be bailed out by the International Monetary Fund (IMF). Due to IMF program, Indonesia had to undertake major economic reforms; however resource nationalism was still a prominent feature in the Indonesian polity. Despite economic reforms, Pertamina, the state-owned oil company, and other State Owned Enterprises (SOEs) retained control over key resources and industries. The government ensured that foreign investment was strictly regulated to prevent excessive foreign dominance.
A decade after the crisis, the Indonesian parliament passed a new Mining Law commonly referred to as Law. No 4 in 2009, prohibiting exports of unprocessed ores, implementing the obligation to process and refine ores in Indonesia, and requiring payment of higher export tariffs for specified period. Further, the foreign stakeholders in companies were told to divest up to 51% of shares to an Indonesian entity within ten years. This policy aimed to benefit local industries by creating jobs and enhancing the country’s smelting and refining capacity. By 2014, Indonesia had minimal refining capacity for key minerals such as nickel, bauxite, and copper. The government’s enforcement of the export ban in January 2014 surprised the mining industry, causing nickel and bauxite mining to nearly halt and considerably reducing exports in the first year. Despite initial economic setbacks, this policy eventually attracted substantial investment in the downstream sector, which led the Indonesian government to loosen some of the restrictions it had imposed on the export of raw resource materials . Indonesia also introduced bans on the export of nickel ore in 2014, 2020, and 2022. The ban has significantly advanced its economic and industrial objectives, particularly in developing downstream processing industries and enhancing its role in global supply chains while also creating jobs. Indonesia currently produces approximately 50% of the global raw nickel output from 28% in 2020 and according to the Global Critical Minerals Outlook published by the International Energy Agency (IEA), Indonesia along with China will account for 65% of refined nickel output globally. In June 2023, Indonesia had banned the exports of bauxite ore as well as bleached bauxite in order to increase domestic bauxite processing and refining capacity. This move was significant as Indonesia has 2.8 million tons of bauxite reserves and is currently the fourth largest producer of bauxites globally as per the US Geological Survey. In 2024, Indonesia which is also the second largest tin producer in the world, imposed tighter environmental regulation on tin along with export limits aimed at developing its downstream sector. However, in 2023-2024, Indonesia relaxed restrictions for some time on exports of copper, zinc, iron ore, lead, and anode mud to develop its smelting capacity and boost its domestic processing.
Conclusion
In an era of intensifying geopolitical competition, Indonesia’s natural resources are poised to play a pivotal role, particularly in the context of the US-China Trade War and the reciprocal tariffs imposed by the Trump administration in the United States on various countries. These disruptions, along with the global shock caused by the covid-19 pandemic have prompted multinationals to diversify their manufacturing base and reduce their overreliance on China. In this scenario, Indonesia has emerged as an alternative to China as it offers vast resources and industrial manufacturing capacity. Indonesia’s commitment to bolster its downstream processing capacities, particularly with regard to nickel and other critical minerals further strengthens its leverage in global trade. This strategy not only bolsters Indonesia’s domestic industry, it also enhances its position in the evolving global order. Furthermore, as the world transitions towards green energy, Indonesia’s vast reserves of strategic minerals, vital for batteries, electric vehicles, and renewable energy infrastructure, enhance its position as a key actor in the future ‘green’ economy.
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