Indonesia has transformed its nickel industry in recent years.\nRestrictions on nickel ore exports have prompted the construction of\ndomestic processing facilities, attracted large-scale investment and\nstrengthened the country\u2019s position in the global mineral supply\nchain.<\/p>\n
Processing industrial estates have expanded in several areas,\nparticularly in Sulawesi and North Maluku. Smelters turn nickel ore into\na range of products, from ferronickel and nickel pig iron (NPI) to\nintermediate materials for the battery industry.<\/p>\n
But behind this progress lies a more fundamental question: who\nactually controls Indonesia\u2019s downstream industries?<\/p>\n
Does Indonesia merely provide natural resources, land, labour and\nproduction facilities, while capital, technology and business decisions\nremain in the hands of foreign investors? Or can such investment help\nIndonesia build an increasingly self-reliant national industry?<\/p>\n
The question matters because the success of downstreaming is not\ndetermined only by the number of factories built or the value of\nexports. Company ownership, control of technology, the ability to shape\nproduction and Indonesia\u2019s position in the global supply chain must also\nbe considered.<\/p>\n
Foreign investors play a major role<\/p>\n
Developing mineral-processing industries requires substantial\ncapital, technology, infrastructure and access to international markets.\nDomestic companies cannot meet all these needs quickly.<\/p>\n
Foreign investment has therefore been a key driver of downstreaming\nin Indonesia, particularly in the nickel sector.<\/p>\n
Chinese companies are leading players in the development of nickel\nprocessing. They bring capital, processing technology, supplier networks\nand access to markets for metals and batteries.<\/p>\n
One major player is China\u2019s Tsingshan Holding Group, which is\ninvolved in developing Indonesia\u2019s nickel industry and processing\nindustrial estates.<\/p>\n
The presence of these investors has accelerated the construction of\nlarge-scale production facilities. Indonesia, which previously exported\nmuch of its nickel ore, now has far greater processing capacity and can\nsupply processed products to international markets.<\/p>\n
The impact is evident in trade figures. According to Reuters, the\nvalue of Indonesia\u2019s nickel-product exports rose from about US$3.3\nbillion in 2017 to more than US$33 billion in 2024, as domestic\nprocessing expanded. This figure reflects growth in exports of nickel\nproducts, not the net profits received by Indonesia.<\/p>\n
However, success in attracting foreign investment also carries\nconsequences. The greater the role of particular investors in a\nstrategic industry, the more important it is for the government to\nensure that national interests are protected.<\/p>\n
The issue is not simply whether investors are domestic or foreign.\nMore important are the ownership structure and business relationships,\nhow much value remains in Indonesia, and whether domestic companies have\nthe opportunity to grow.<\/p>\n
About 75% of nickel-refining capacity controlled by Chinese\ncompanies<\/p>\n
The scale of Chinese investors\u2019 role is illustrated in a report\npublished in February 2025 by C4ADS, a global security research\norganisation.<\/p>\n
Citing the report, Reuters said Chinese companies controlled about\n75% of Indonesia\u2019s nickel-refining capacity, based on a mapping of\ncompany ownership in 2023.<\/p>\n
The analysis covered about eight million tonnes of refining capacity\nacross 33 companies. Its examination of shareholder structures also\nfound ownership links between several companies.<\/p>\n
The figure should be interpreted in context. It describes the\nownership structure of capacity in 2023, not the share of the entire\nIndonesian downstream industry owned in 2026. Refining capacity is also\ndistinct from mine ownership, control of the entire production chain or\nthe profits earned by companies.<\/p>\n
Nevertheless, the findings show that Indonesia\u2019s nickel industry is\nsignificantly dependent on certain investor groups.<\/p>\n
This raises a strategic question: if most refining capacity depends\non companies whose capital and business networks are relatively\nconcentrated, how much room does Indonesia have to determine the\nindustry\u2019s direction?<\/p>\n
For instance, if global demand changes, nickel prices fall or parent\ncompanies alter their strategies, what would the impact be on\nproduction, employment and economic activity in Indonesia\u2019s industrial\nregions?<\/p>\n
Dependence on particular investor groups could also pose a challenge\nas Indonesia seeks to broaden its export markets or develop a more\ndiverse production chain.<\/p>\n
Strengthening national industry therefore requires more than\nattracting as much investment as possible. The government also needs to\ndiversify investors, reinforce domestic companies and build industrial\ncapabilities that can withstand changes in global markets.<\/p>\n
Foreign capital does not necessarily mean a loss<\/p>\n
Even so, foreign investors\u2019 dominance does not automatically mean\nthat downstreaming is detrimental to Indonesia.<\/p>\n
Foreign investment can accelerate the construction of production\nfacilities requiring substantial capital and technology. Without it,\ndeveloping processing industries could take longer and face financing\nand technical constraints.<\/p>\n
Investors can also create jobs, boost regional economic activity,\nincrease tax and non-tax state revenue (PNBP), and create opportunities\nfor local companies to become suppliers.<\/p>\n
These effects can provide a foundation for developing national\nindustry, particularly if investment leads to knowledge transfer,\nimproved workforce skills and the growth of domestic companies capable\nof supplying industrial needs.<\/p>\n
But these benefits do not arise automatically simply because a\nfactory is built in Indonesia.<\/p>\n
The scale of the benefits to the national economy depends on several\nfactors, including company ownership structures, the employment of local\nworkers, purchases of goods and services from domestic suppliers, fiscal\nobligations and the extent to which production is connected to national\nindustry.<\/p>\n
Companies operating in Indonesia can generate domestic value added,\nbut some profits may also accrue to shareholders according to their\nownership stakes and business agreements. Dividend payments to foreign\ninvestors, for example, are part of cross-border investment relations\nand should be distinguished from value added created domestically.<\/p>\n
Evaluations of downstreaming should therefore distinguish between\nbenefits received by Indonesia and income earned by companies\noverall.<\/p>\n
Success should be measured not by whether capital comes from home or\nabroad, but by whether investment strengthens Indonesia\u2019s economic\ncapabilities over the long term.<\/p>\n
Who controls the technology and markets?<\/p>\n
Share ownership is an important aspect of control over an industry.\nBut technology and market access are no less decisive.<\/p>\n
In modern mineral industries, companies that control processing\ntechnology, production standards, supplier networks and access to buyers\ncan have significant bargaining power.<\/p>\n
A country may own mines and processing facilities without controlling\nall the technology used to produce higher-value products.<\/p>\n
The same applies to the electric-vehicle battery industry. Processing\nnickel into intermediate materials is an important step, but it is not\nthe same as controlling the entire battery-making process.<\/p>\n
The production chain can involve raw-material processing, precursor\nproduction, cathode-material manufacturing, battery-cell production and\nbattery-pack assembly. Each stage requires different technology,\ncapital, quality standards and marketing capabilities.<\/p>\n
If Indonesia controls only some stages, there remains an opportunity\nto capture more value further along the chain.<\/p>\n
The government must therefore ensure that investment produces not\nonly facilities but also opportunities to improve national technological\ncapabilities.<\/p>\n
Universities, research institutions, domestic companies and\ntechnology-development centres need to be connected to industrial\nactivity. Developing skilled specialists must also be part of the\nlong-term strategy.<\/p>\n
In this way, Indonesia can move beyond being a production location\nand gradually improve its ability to design, develop and operate\nindustrial technology.<\/p>\n
Control of technology is also important in strengthening Indonesia\u2019s\nbargaining position when global demand shifts or competition between\nindustry players intensifies.<\/p>\n
Government begins to promote deeper downstream processing<\/p>\n
The government\u2019s policy direction indicates that downstream\ndevelopment should not stop at building smelters.<\/p>\n
In 2025, the government issued Government Regulation No.\u00a028\/2025 on\nthe implementation of risk-based business licensing. In practice, the\nregulation has also served as an instrument for directing the nickel\nindustry towards more advanced production stages.<\/p>\n
The Jakarta Post reported in November 2025 that the licensing rules\nrestricted the issuance of new permits for certain types of\nnickel-smelter projects producing only intermediate products, including\nferronickel, NPI, nickel matte and MHP. The policy aims to shift\nproduction from initial processing towards industries that produce\nhigher-value-added goods.<\/p>\n
The policy is consistent with the government\u2019s view that domestic\nprocessing industries need to be developed. Energy and Mineral Resources\nMinister Bahlil Lahadalia said: \u201cIndeed, we have no other choice; there\nmust be industry in the country.\u201d<\/p>\n
The policy highlights a new challenge. Having attracted investment\nand built refining capacity, Indonesia now needs to encourage industry\nto move further along the production chain.<\/p>\n
But this shift cannot be achieved through licensing restrictions\nalone. The government must also ensure that infrastructure, energy,\nhuman resources, technology and markets are available for the products\nbeing made.<\/p>\n
Legal certainty is crucial because industrial investment involves\nlarge amounts of capital and long timeframes. Policy changes need to be\naccompanied by clear rules, adequate transition periods and consistent\nimplementation to avoid creating uncertainty for businesses.<\/p>\n
At the same time, the government needs to strengthen domestic\ncompanies through partnerships, technology development, stronger local\nsuppliers and direct investment in downstream industries.<\/p>\n
The aim is not to shut the door on foreign capital, but to ensure\nthat foreign investment goes hand in hand with improved national\nindustrial capabilities.<\/p>\n
National companies need more room<\/p>\n
One challenge for downstreaming is ensuring that domestic companies\nare not merely supplementary players in the industrial ecosystem.<\/p>\n
National companies need opportunities to participate in every stage\nof production, from mineral processing and component manufacturing to\nequipment supply, engineering services and product distribution.<\/p>\n
Their involvement can be strengthened through partnerships that\nenable local companies to improve their technical capabilities and meet\nindustry standards.<\/p>\n
The government can also encourage collaboration between large\ncompanies, state-owned enterprises (SOEs), national private businesses\nand research institutions to develop products with clear market\nprospects.<\/p>\n
An important example is the role of state-owned mining company PT\nAneka Tambang Tbk (Antam) in developing the nickel and battery\necosystem. National companies\u2019 participation in industrial partnerships\ncan create opportunities for Indonesia to strengthen its position in the\nsupply chain, although the scale of the benefits will depend on\nownership structures, the division of responsibilities and the\ntechnological capabilities acquired.<\/p>\n
The government should also ensure that business opportunities are not\nconcentrated solely among large companies. Local suppliers and micro,\nsmall and medium-sized enterprises (MSMEs) can be involved in supplying\ngoods and supporting services, provided they meet requirements for\nquality, safety and efficiency.<\/p>\n
Strengthening national companies does not mean producing everything\ndomestically or restricting all foreign investors. What is needed is a\nstrategy to ensure that foreign investment helps build domestic\ncapabilities rather than creating permanent dependence.<\/p>\n
From production location to industry player<\/p>\n
Indonesia has the advantages of abundant natural resources and a\npotentially large domestic market. These can provide a basis for\nbuilding value-added industries.<\/p>\n
But natural resources alone cannot guarantee control of an industry.\nA country also needs technology, a skilled workforce, competitive\ncompanies, adequate infrastructure and consistent policies.<\/p>\n
Downstreaming strategy must therefore advance in several directions\nat once.<\/p>\n
First, strengthen existing processing industries so that they can\noperate efficiently and meet international standards.<\/p>\n
Second, extend the production chain towards higher-value products\nwhere market prospects and sound economic calculations support it.<\/p>\n
Third, build the capacity of national companies so that they can act\nas producers, suppliers, technology partners and owners within the\nindustrial ecosystem.<\/p>\n
Fourth, strengthen research and development so that Indonesia does\nnot remain dependent on technology developed overseas.<\/p>\n
Fifth, ensure that the economic benefits of investment are felt\nthrough quality job creation, workforce development, fiscal\ncontributions and the growth of local businesses.<\/p>\n
These steps will take time. Technological mastery and the creation of\ncompetitive companies cannot be achieved simply by building production\nfacilities over a few years.<\/p>\n
Without a clear direction, however, Indonesia risks remaining a\nlocation for processing raw materials while some strategic capabilities\nand business decisions continue to be made abroad.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/testing-downstreaming-3-who-controls-indonesias-downstream-industries-1792018288", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }