EXECUTIVE SUMMARY
Economic Aspect
Current Nickel Downstream Offers Limited National Economic contribution: Indonesia has implemented two significant nickel ore export bans. Despite the substantial growth in nickel-related industries following the second ban, our preliminary analysis suggests that the current nickel downstream activities have not generated sufficient value-added to meet Indonesia’s need for higher growth needs. Relying solely on nickel downstream will not be enough to ensure sustainable growth for Indonesia’s economic
transition.
Current Suboptimal Gains from Nickel Downstream: Indonesia’s downstream activities are still primarily focused on lower value-added process, such as steel-making manufacturing, rather than higher value-added process like electric vehicle (EV) manufacturing. In 2023 Indonesia’s ferronickel exports (steel-making process) were approximately three times the combined exports of nickel mattes and nickel sulfate (EV-making process). In addition, since many nickel mining and industrial firms are notdomestically owned, it is estimated that around 90% of the value-added creation of nickel is not distributed to the people of Indonesia.
Nickel Downstream Has Larger Local Economic Impact: Nickel mining and industry activities have significantly boosted the local economy. Between 2021-2023, several nickel-producing provinces, such as North Maluku and Central Sulawesi, experienced high economic growth compared to the period from 2014 to 2019. North Maluku’s growth increased from 6.73% (2014-2019) to 20.07% (2021-2024), while Central Sulawesi’s growth rose from 11.17% (2014-2019) to 12.94% (2021-2024). The high growth of metal ore mining and metal industry, especially in North Maluku, supported the overall economic growth.
Nickel Downstream Does Not Guarantee Local Structural Transformation: Central Sulawesi and North Maluku have seen a significant increase in their share of metal ore mining and basic metal manufacturing, which now account for approximately 40% of their total GDRP. However, the agriculture sector in these nickel-rich provinces continues to grow, albeit at a declining rate since 2021, particularly in Southeast Sulawesi and North Maluku. Nickel Downstream Improves Local Fiscal Revenue: PAD revenue has more than tripled from 2011 to 2023 in the nickel-rich provinces of Central Sulawesi, Southeast Sulawesi, and North Maluku. Additionally, DBH revenue in these nickel-rich provinces has increased significantly, rising 6-8 times from 2019 to 2023, largely due to mineral and coal DBH.
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