Indonesia’s Industrial Policy at a Crossroads: Growth, Sustainability, and Global Impact

The United Nations Economist Network (UNEN) has released a Policy Brief on Industrial Policy for Sustainable Development, outlining how countries worldwide are reshaping their economic strategies to align with evolving technological, environmental, and geopolitical realities. As industrial policies gain renewed attention, developing nations seek ways to balance economic growth with sustainability, social inclusion, and resilience.

Indonesia is highlighted in the report as a resource-based industrial policy model, particularly in its nickel sector, which plays a crucial role in stainless steel production and electric vehicle (EV) batteries. Holding 22% of the world’s nickel reserves and contributing 37% of global production, Indonesia has implemented export bans since 2014 and enforced it since 2022 to drive investment in domestic processing, attracting significant Chinese FDI in downstream industries. These policies have helped Indonesia become the leading producer of refined nickel, an input to produce steel and EV batteries, demonstrating a successful industrial strategy so far.

According to Marco Kamiya, UNIDO Representative for Indonesia, Timor-Leste, and the Philippines, who also co-authored this report, Indonesia’s industrial policies serve as a critical case study in resource-driven economic transformation:

"Indonesia's approach to industrialization, leveraging its rich nickel reserves, has accelerated economic growth while creating opportunities for higher-value industries. However, sustaining this momentum requires a long-term vision that integrates innovation, sustainable practices, and global partnerships."

Kamiya emphasizes that while Indonesia has made significant progress, technological barriers in EV battery production and evolving global market dynamics pose new challenges:

"Indonesia's next step is to enhance its processing capabilities to produce high-value EV battery components integrating technology transfer with local expertise to maintain its competitive edge in the global clean energy transition."

The UNEN Policy Brief emphasizes that modern industrial policies should promote sustainability and innovation as well as driving growth. With Sustainable Development Goal 9 (Industry, Innovation, and Infrastructure) at its core, Indonesia’s efforts in nickel industrialization highlight both opportunities and challenges in leveraging natural resources for long-term development. The brief underscores the importance of policy coherence, international collaboration, and equitable financing to ensure that countries like Indonesia are not left behind in the race toward a sustainable global economy.

Read the full UNEN Policy Brief here