Report

Resource nationalism in post-boom Indonesia: the new normal?

27 Apr 2017
Description

Executive summary

During the global commodity boom, Indonesia emerged as an exemplar of resource nationalism. The government introduced a range of nationalist policies in the mining sector, ranging from export bans to forced foreign divestment. Once commodity booms end, however, analysts generally predict that resource-rich states such as Indonesia will abandon the nationalist position with a view to attracting foreign investment. Indeed, historically, economic nationalism in Indonesia has peaked during the good times of a resources boom, and faded during an economic downturn. But the situation in Indonesia today seems to challenge these market-cycle theories.

This Analysis examines the durability of contemporary resource nationalism in Indonesia. It argues that structural features of the post-Suharto political economy have sustained the nationalist policy trajectory that emerged during the boom. First, Indonesia’s business class is more liquid and more engaged in the resource industries than at any previous time in Indonesia’s history. The notion that Indonesians should both own and run their own extractive sector is, therefore, no longer merely aspirational. The mood of contemporary Indonesian politics has also boosted resource nationalism’s appeal. This points to a second factor sustaining resource nationalism: popular mobilisation and electoral politics in post-authoritarian Indonesia.

Key findings:

  • Market cycle theories argue that resource-rich countries will roll back nationalist interventions when commodity prices fall, but this has not been the case in Indonesia.
  • An expanding domestic capitalist class and the imperatives of popular politics have given rise to a particularly durable brand of resource nationalism which has become a permanent feature of Indonesia’s political economy.
  • Yet Indonesia’s policy regime is not radically nationalist. Regulatory and institutional ambiguity, rather than nationalism, is a more pressing challenge for investors and policymakers alike.
Publication Details
License Type: 
All Rights Reserved
Published year only: 
2017
25
Share
Share
Subject Areas
Geographic Coverage
Advertisement