President Joko "Jokowi" Widodo has taken further steps this year to restrict exports of sought-after commodities in an effort to promote resource nationalism in favour of value-added downstream industries, but has caused friction over free trade.
At an investment forum in early February, Widodo hinted at a ban on exports of tin, gold and other metals. At a January meeting of his ruling Democratic Party of Struggle, he said Indonesia would ban copper exports "probably by the middle of the year."
All this comes after Widodo announced in December that the government would ban bauxite exports from June.
With countries around the world setting targets to reduce greenhouse gas emissions in an effort to combat climate change, there will be growing demand for every commodity Mr Widodo targets. Widodo himself has pledged to achieve net zero emissions by 2060.
Bauxite is used to make aluminum, a lightweight material that is easy to recycle and is gaining attention as an energy-saving material. Indonesia is the world's sixth-largest producer of bauxite, according to the U.S. Geological Survey.
Mr Widodo predicted that the bauxite ban would nearly triple the value of exports to 62 trillion rupiah ($4 billion).
The president laid out a grand strategy to tighten exports of raw materials and "develop downstream industries related to these commodities." Copper, for example, is a key resource for making electric cars and solar power equipment.
The ban on bauxite and copper followed Indonesia's ban on nickel ore exports in January 2020. Widodo has said the value of exports of nickel-processed products, mostly made up of nickel ore, will jump to 468 trillion rupiah in 2022, more than 27 times the 2014 figure.
The price of three-month nickel futures contracts on the London Metal Exchange, the international benchmark, is now almost double its level at the start of 2020.
Nickel is crucial to making batteries for electric cars, and Indonesia is the world's largest producer by volume. By banning exports of nickel ore, Mr Widodo hopes to attract investment into Indonesia's processing industry, rather than just exporting raw materials.
Well-known battery makers such as South Korea's LG Energy Solutions and China's CATL have decided to set up new factories in Indonesia. Last year, Hyundai Motor and SAIC-GM-Wuling Automobile both started production in China.
Now, Widodo is lobbying Tesla and automakers from Japan and Europe to start land-based electric vehicle manufacturing in Indonesia, with the aim of attracting investment to turn his country into a Southeast Asian manufacturing hub.
However, the trajectory has raised diplomatic tensions. In 2019, the European Union formally asked the World Trade Organization to set up a dispute settlement panel on Indonesia's restrictions on nickel ore exports.
In November, the WTO panel ruled in favour of the EU and issued a report outlining how Indonesia's export restrictions were inconsistent with WTO rules prohibiting member countries from setting quantitative limits on imports and exports to other signatories.
Indonesia immediately appealed, citing differences with the WTO ruling. Widodo further defended his economic policy decisions in a speech late last year at a summit of the European Union and the Association of Southeast Asian Nations.
"Indonesia wishes to emphasize that inclusive and value-added development will support the sustainability of the global economy in a just manner," Widodo said. In connection with this, Indonesia will continue to build downstream industries."
China is one of the biggest consumers of Indonesian bauxite. With domestic economic growth slowing, Beijing is likely to frown on the export ban. Widodo said in late February that he was not sure how China would respond.
Indonesia's business community is concerned that the country does not have the capacity to process all the surplus raw materials and that the export ban will cause companies to halt production.
"The government may allow some bauxite exports under certain conditions in response to insufficient domestic processing capacity and industry resistance, however, the government is positioning the export ban as a success and the trend of resource protectionism will continue," Tomohiro Shiratori, deputy director of the Japan Organization for Metals and Energy Security.
