Downstreaming: Banning Raw Exports

How Indonesia banned exports of raw nickel ore to force processing at home, how it attracted Chinese smelters, and the debate over this industrial policy.

Indonesia pursues hilirisasi (“downstreaming”): processing raw materials at home.

Nickel ore ban

Indonesia banned raw nickel ore exports in 2014, relaxed it, then reimposed it in 2020.
Companies had to build smelters in Indonesia to access ore.

Results

Chinese firms built huge smelting parks like Morowali in Sulawesi.
Nickel product exports rose dramatically, and Indonesia became the dominant nickel producer.

Criticisms

The EU challenged the ban at the WTO, which ruled against Indonesia in 2022; Indonesia appealed.
Environmental damage and coal-powered smelters.
Worker safety: fatal accidents at smelters.
Much value captured by Chinese firms.

Expansion

Indonesia extended bans to bauxite and plans more.

Lesson

Export bans can force investment, but benefits depend on who owns plants and environmental standards.

The smelter park

Where a village once shipped raw ore, a smelter park now employs thousands, turning ore into nickel products for batteries.

Thinking export bans automatically make countries rich

Benefits depend on ownership, labour and environment.

Key takeaways

Indonesia bans raw nickel ore exports to force local processing.
Chinese smelters built parks like Morowali.
The WTO ruled against the ban in 2022.
Environmental and safety concerns persist.