From Resource Abundance to Industrial Constraint: Managing Upgrading and Structural Dependencies in Indonesia’s Nickel Value Chain

Abstract

Indonesia’s nickel sector has undergone a rapid structural transformation following the implementation of downstream industrial policies, shifting from a primary exporter of raw materials to a major global hub for nickel processing. While this transition has significantly expanded domestic value addition and strengthened Indonesia’s position in global supply chains, its long-term developmental implications remain contested. This paper examines Indonesia’s position within the global nickel value chain through the lens of industrial upgrading and structural dependency. Drawing on the global value chain framework, the study argues that Indonesia’s upgrading trajectory remains incomplete and uneven, characterized by concentration in upstream and midstream activities, continued reliance on foreign technology, and vulnerability to critical input dependencies. The findings suggest that rather than following a linear progression toward higher-value activities, resource-based industrialization may become locked in an intermediate stage of “midstream entrapment,” in which industrial expansion does not translate into technological autonomy or innovation capacity. The paper contributes to the literature by refining the concept of industrial upgrading in resource-rich economies and highlighting the structural constraints that shape their development pathways. Policy implications emphasize the need for deliberate capability-building strategies, including technological learning, domestic innovation, and stronger industrial linkages, to enable a transition from resource-driven growth toward sustainable, innovation-led development.