The Political Economy of Indonesia’s Mining Downstreaming Policy: An Adam Smithian Analysis of the Joko Widodo Administration

Bagaskoro Nur Abu Yogar, Rijal Ramdani, Kevin Arya Pranaja, Destita Mutiara, Muhammad Rifandi

Abstract


Indonesia’s downstream mining policy under President Joko Widodo has emerged as a pivotal strategy to transform the national economy from resource extraction to industrial value creation. This study examines the policy’s effectiveness and socio-economic implications of the downstream mining policy using a qualitative descriptive approach supported by document analysis and secondary data from government reports, academic studies, and industrial statistics. The analysis is framed through Adam Smith’s classical economic theory, focusing on the principles of limited government intervention, division of labour, and public welfare. The findings reveal that the down streaming policy has successfully increased the export value of processed minerals, attracted investment in smelting industries, and generated employment opportunities. However, the benefits remain uneven due to regulatory inconsistency, rent-seeking practices, and environmental degradation in mining regions. From a theoretical standpoint, Indonesia’s case reflects both adherence to and divergence from Smithian ideals—combining state-led industrialization with market-driven efficiency. The study concludes that to ensure sustainable downstream development, Indonesia must reinforce institutional integrity, regulatory transparency, and environmental responsibility. The Indonesian experience thus offers valuable lessons for other resource-dependent nations pursuing structural economic transformation.

Keywords


Political Economy, Coal-nickel, Downstream mining Policy, Joko Widodo, Indonesia

Full Text:

PDF

References


Adi, A. (2023). Ini Negara Penghasil Batu Bara Terbesar 2023. Databooks.Com. https://databoks.katadata.co.id/index.php/pertambangan/statistik/0d86bfed00dfaea/ini-negara-penghasil-batu-bara-terbesar-2023

Alfredo Rynaldi, Efrata Hamonangan Sinaga, & Jhonathan Roganda Sitorus. (2024). Kajian Kriminologi Hijau Terhadap Studi Kasus Hilirisasi Tambang Nikel. Jurnal Lingkungan Kebumian Indonesia, 1(3 SE-Articles). https://doi.org/10.47134/kebumian.v1i3.2572

Annur, C. M. (2024). 9 Negara Penghasil Nikel Terbesar di Dunia (2023). Databooks.Com. https://databoks.katadata.co.id/pertambangan/statistik/78c11619e2e0aa2/indonesia-negara-penghasil-nikel-terbesar-di-dunia-pada-2023

Arif Deddy, M., Adriyanto, A., Djoko Andreas, R. N., Ekonomi Pertahanan, P., & Manajemen Pertahanan, F. (2023). Strategi Hilirisasi Di Indonesia Dalam Menghadapi Kebijakan Larangan Ekspor Bijih Nikel Terhadap Tingkat Pengangguran Dan Cadangan Devisa Negara. Jurnal Ilmu Sosial Dan Pendidikan (JISIP), 7(3), 2026–2032. https://doi.org/10.58258/jisip.v7i1.5137/http

Ashar, B., Pratama, H. S., Hidayat, R. N., & Nurcahya, W. F. (2024). Dampak Kebijakan Hilirisasi Nikel Terhadap Peningkatan Pendapatan Negara Bukan Pajak (Minerba). Journal of Law, Administration, and Social Science. https://api.semanticscholar.org/CorpusID:270545413

Coyle, D. (2023). ECONOMIC PROGRESS AND ADAM SMITH’S DILEMMA. National Institute Economic Review, 265, 5–11. https://doi.org/DOI: 10.1017/nie.2023.21

ESDM. (2023). Handbook of energy & economic statistics of indonesia 2023.

Evensky, J. M. (2011). Adam Smith ’ s Essentials : On Trust , Faith , and Free Markets ADAM SMITH ’ S ESSENTIALS : ON TRUST ,. SSRN Library. https://doi.org/10.1017/S1053837211000034

Fritsch, S. (2025). Classical Political Economy and the Power of Technology: Adam Smith and Thorstein Veblen on Technological Ambivalence. Philosophy & Technology, 38(4), 135. https://doi.org/10.1007/s13347-025-00957-7

Graafland, J., & Wells, T. R. (2021). In Adam Smith ’ s Own Words : The Role of Virtues in the Relationship Between Free Market Economies and Societal Flourishing , A Semantic Network Data ‑ Mining Approach. Journal of Business Ethics, 172(1), 31–42. https://doi.org/10.1007/s10551-020-04521-5

IEA. (2024). Global coal production in 2023 grew close to 9 Bt. International Energy Agency.

Jaffe, K. (2014). The Wealth of Nations: Complexity Science for an Interdisciplinary Approach in Economics. Cornell University.

Jasinski Stephen M. (2022). Mineral Commodity Summaries 2022 - Phosphate. https://www.usgs.gov/

John, H. (2023). Activists slam coal pollution from Indonesia’s production of ‘clean’ batteries. Mongabay. https://news.mongabay.com/2023/08/activists-slam-coal-pollution-from-indonesias-production-of-clean-batteries/

Khairurrizqo, & Millata, I. (2025). Analysis of Technological State Implementation: Case Study of President Jokowi’s Nickel Downstream Policy. JIM: Jurnal Ilmiah Mahasiswa Pendidikan Sejarah, 104–113.

Khelalfa, H. (2023). Building a Holistic Approach: Uniting Marxist and Smithian Economics for a More Resilient Economic Theory. Trends Journal of Sciences Research, 1, 7–10. https://doi.org/10.31586/jsmhes.2023.616

Lahadalia, B., Wijaya, C., Dartanto, T., & Subroto, A. (2024). Into Sustainable and Equitable Nickel Downstreaming in Indonesia : What Policy Reforms are Needed ? Migration Letters, 8984, 620–631.

Lazuardi, S., Hadi, F., Devintasari, D., Wuryaningrum, P., Riduwan, M., Noarista, O., & Alifia, S. (2024). The impact on downstream policy implementation for mineral export products in Indonesia: marine transportation point of view. IOP Conference Series: Earth and Environmental Science, 1298, 12018. https://doi.org/10.1088/1755-1315/1298/1/012018

MacDonald, R. (2023). ADAM SMITH AND THE NEO-LIBERAL PARADIGM: ON THE ESSENTIAL NATURE OF TRUST, AND REBALANCING CAPITAL. National Institute Economic Review, 265, 105–143. https://doi.org/DOI: 10.1017/nie.2023.25

Medina, A. (2024). Regulatory Shifts in Indonesia’s Mining Sector: Empowering Local Stakeholders. ASEAN Briefing. https://www.aseanbriefing.com/news/exploring-indonesias-new-mining-regulations/

Mohr, K., Vasudha, V., Wallenta, A., Wehnert, T., & Yetano, M. (2025). Status Report of the Coal Sector in Indonesia. February.

Pabbu, A., Novianti, A. N., Mundzir, A. S., & Timur, U. I. (2024). HILIRISASI NIKEL DAN TANTANGAN PERLINDUNGAN HAK LINGKUNGAN DI INDONESIA : STUDI KASUS KAWASAN INDUSTRI BANTAENG. 8(11), 323–328.

Peh, G. (2024). Indonesia’s coal companies: ome diversity, others expand capacity. In Institute for Energy Economics and Financial Analysis.

Prasetyo, T. A., Syah, N. F. M., Ghofari, A., Aidah, N., Faruq, U., Mirzak, M., & Khatimah, D. (2024). Pengaruh Perang Rusia-Ukraina Terhadap Ekonomi International. At-Tawazun, Jurnal Ekonomi Syariah, 12(01), 23–31. https://doi.org/10.55799/tawazun.v12i01.491

Putra, A., & Samputra, P. (2023). Analysis of nickel export restriction and downstream policy in Indonesia. Indonesian Journal of Multidisciplinary Science, 3, 180–187. https://doi.org/10.55324/ijoms.v3i3.749

Rahmawati, N. D., & Swara, E. (2025). Indonesia ’ s Nickel Export Ban : Between Industrial Downstreaming and International Trade Disputes ore . This policy was initially introduced in 2009 with the enactment of the ore must be processed domestically prior to export . 3 This requirement was. Fortiori Law Journal.

Rathbone, M. (2023). Moral theory , agrarianism and sustainable free market economics in the work of Adam Smith. The Journal FCR, 1–11.

Siahaan, M. (2025). Domestic market obligation (DMO) on coal in Indonesia from 2018 to 2023. Statista. https://www.statista.com/statistics/1091603/indonesia-coal-domestic-market-obligation/

Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. McMaster University Archive for the History of Economic Thought. https://econpapers.repec.org/RePEc:hay:hetboo:smith1776

Sofwan, E., & Putri, D. H. (2025). Tantangan dan peluang hilirisasi pertambangan komoditas mineral batubara menuju indonesia emas 2045 : evaluasi penegakan hukum dan penataan administrasi perizinan tambang. 14(April), 107–123.

Tahir, E. (2025). Indonesia’s Nickel Gamble: Growth, ESG Risks & WTO Clash. Global Is Asia. https://lkyspp.nus.edu.sg/gia/article/the-nickel-gamble--indonesia-s-quest-for-rapid-industrial-development

Trisnawati, M. (2025). Indonesia Will Have 55 Nickel Smelters. Indonesia Miner. https://indonesiaminer.com/news/detail/2025-01-08143427-indonesia-will-have-55-nickel-smelters

Tunnicliffe, A. (2024). Indonesia’s nickel market stranglehold tightens, again. Mine. https://mine.nridigital.com/mine_apr25/indonesia-nickel-market-2025

Yanto, A., Salbilla, F., Sitakar, R. C., Hukum, F., Belitung, U. B., Daerah, O., Daerah, P. A., & Timah, P. (2023). Implikasi Resentralisasi Kewenangan Pertambangan Timah Terhadap Potensi Pendapatan Daerah Di Bangka Belitung. Jurnal Interpretasi Hukum, 4(2), 344–357. https://www.ejournal.warmadewa.ac.id/index.php/juinhum/article/view/7756%0Ahttps://www.ejournal.warmadewa.ac.id/index.php/juinhum/article/download/7756/4847

Zadeh, J. (2025). Indonesia’s Nickel Industry: Powering Global Supply Chains. Discover Alert. https://discoveryalert.com.au/indonesian-nickel-industry-growth-challenges-2025/

Zalvino, M. A. (2021). Prediksi dan Arah Kebijakan Mengenai Bijih Nikel di Indonesia dalam Menghadapi Peningkatan Permintaan Baterai Mobil Listrik. https://api.semanticscholar.org/CorpusID:240531704




DOI: https://doi.org/10.33373/jtp.v10i1.8830

Refbacks

  • There are currently no refbacks.


EDITORIAL OFFICE:

Department of Government Science, Faculty of Social and Political Sciences - Universitas Riau Kepulauan - Indonesia

Telp: (0778) 39275 | Email: jurnaltriaspolitika2017@gmail.com

Jurnal Trias Politika (JTP) is licensed under a Creative Commons Attribution 4.0 International License. © 2017-2025 Authors