[Press Release] Promoting the economic optimization of critical minerals in Indonesia: national workshop on sustainable benefit sharing models for resource-rich regions

Jakarta, 9 Desember 2025 – A national workshop entitled “Optimizing Economic Benefits from Critical Mineral Management in Indonesia and Developing Benefit Sharing Models at the Sub-National Level” was successfully held on December 8-9, 2025, at Artotel Gelora Senayan, Jakarta. The event, attended by more than 60 participants from 31 institutions, discussed the significant disparities in the distribution of benefits from the nickel industry in Indonesia.

One of the main highlights of the forum was the unfair distribution of fiscal, social, and environmental benefits for nickel-producing regions. Dimas Muhammad from the Task Force for the Acceleration of Nickel Industry Downstreaming at the Indonesian Ministry of Energy and Mineral Resources (KemenESDM) said:

“The distribution of downstream revenues is unfair to the regions, as they only receive one-sixth of the state's downstream revenues.”

Indonesia's Strategic Context in the Global Nickel Industry

Indonesia has a unique strategic position in the global nickel industry supply chain, as noted by Thibault Michel in an Ifri study on the prospects for an Indonesian nickel boom (Michel, 2024), in which Indonesia controls around 42 percent of the world's nickel reserves and has accounted for around half of global nickel mining production in recent years. The economic potential of nickel has driven the rapid expansion of the processing and refining industry, including the construction of dozens of new smelters and integrated industrial parks such as Morowali and Weda Bay, which have attracted tens of billions of US dollars in investment (ASEAN Briefing, 2025). These capital flows are dominated by foreign investment—particularly from Chinese companies and consortia—which now control more than three-quarters of Indonesia's nickel refining capacity, making the country one of the most important nodes in the global nickel supply chain for stainless steel and electric vehicle batteries (ASEAN Briefing, 2025).

Although the downstreaming strategy has had a tangible positive economic impact, particularly in critical mineral-producing regions such as Morowali, North Morowali, North Konawe, and Central Halmahera, where local labor wages exceed the national average, inequality in profit sharing remains a fundamental challenge that must be addressed.

Sovereign Wealth Fund of Sovereign Wealth Fund (SWF) instruments as one solution

As one of the efforts to reduce this disparity, the national forum proposed strengthening of Sovereign Wealth Fund (SWF) mechanism as a strategic instrument for sustainable and equitable redistribution of benefits at the regional level. This can be done by establishing a subnational Natural Resource Fund, or a Dana Abadi SDA Daerah.

Dewa Putu Ekayana, Senior Policy Analyst at the Directorate General of Financial Sector Stability and Development, Ministry of Finance, emphasized the importance of strong and transparent institutions in establishing an SWF.

“Institutionalization is important, even though most of the funds will come from allocations or portions of natural resource revenue sharing funds from local governments. The SWF must be viewed as an investment instrument generates income and profits. Otherwise, the SWF that will be established will not be sustainable." said Dewa. 

The SWF principles agreed upon in the forum include

1. Transparent and Accountable Institutions – Professional governance with international governance
2. Financial Independence – SWFs are managed separately from the state budget/regional budget cycle to avoid the use of funds for short-term political purposes
3. Profit-Generating Mechanism – Professional management capable of generating income and profits to ensure long-term sustainability
4. Economic Diversification – Investments from SWFs must support the economic diversification of producing regions, not merely consumption or temporary infrastructure

Learning from Regional and Practitioner Experiences

The national workshop forum involved active participation from various stakeholders:

• Central Government: Task Force for the Acceleration of Nickel Industry Downstreaming, Ministry of Energy and Mineral Resources; Directorate General of Financial Sector Stability and Development, Ministry of Finance; and Ministry of Home Affairs.
• Research Institutions and Think Tanks: INDEF, PolGov UGM, A33 Indonesia, CORE Indonesia, Dala Institute, Migunani, LPEM UI. 
• Local/regional CSOs: Representatives from nickel-producing regions (Central Sulawesi, Southeast Sulawesi, North Maluku).
• Industry Practitioners and Academics: Mining experts, economists, academics, universities, and researchers from various leading institutions.

Academics and practitioners have raised important concerns about the complexity of implementation. Academics from Khairun University (Southeast Sulawesi) and Halu Oleo University (North Maluku) emphasized the need for transparency in nickel production and reserve data to plan benefit sharing based on reliable data. Meanwhile, industry practitioners remind us that the downstreaming process is highly complex and requires multi-sector coordination—it cannot stand alone without involving local communities as labor and suppliers.

Challenges That Still Need to Be Addressed

Although positive momentum has been generated in this forum, several substantial challenges remain to be resolved:

1. Limited Regional Authority – Most of the authority to manage the nickel industry remains centralized at the central government level, limiting regions' ability to optimize local benefits.
2. Reclamation and Environmental Mitigation – Mining companies have not yet fully complied with their post-mining reclamation obligations.
3. Production Data Transparency – Nickel production data from various sources remains inconsistent, making it difficult to develop data-driven policy planning.
4. Redistributive Justice – benefit sharing remain difficult for local communities to access; many programs exist only on paper or are referred to as “empty promises.”

Concrete Steps and Implementation Timeline

Workshop participants formulated a series of concrete steps , with a clear timeline:

A. Development of Benefit Sharing Models in 4 Pilot Areas

The forum focused on designing benefit sharing in four pilot areas:

• Morowali, Central Sulawesi
• Morowali Utara, Central Sulawesi Tengah
• Konawe Utara, Southeast Sulawesi
• Central Halmahera, North Maluku

Each model integrates three main streams of benefit sharing:

1. Fiscal Discretion and Direct Finance
   • Optimization of Revenue Sharing Funds (DBH)
   • Earmarking for corporate and entity taxes
   • Establishment of Sovereign Wealth Fund (SWF) at the regional level
   • Timeline: Quick wins can be identified within the next 6-12 months
2. Local Content and Supply Chain
   • Strategy for placing local workers with a clear within a clear timeline
   • Optimization supply of local goods and services supply
   • Improvement of supporting infrastructure
   • Innovation in production processes (e.g., biomass to replace coal)
   • Target: Identify quick wins within 12 months
3. Company-to-Community Direct Finance
   • Optimization of CSR/PPM (Community Empowerment Program) mechanisms
   • Synchronization with RPJMD and RKPDES
   • Credible and transparent governance to prevent “empty promises.”
   • Target: Improvement of program quality in the current year

B. National Policy Advocacy

1. Increased DBH for Downstream Regions – Proposal to give regions a fairer share of nickel revenues, especially regions that suffer the greatest environmental externalities.
2. Tax Transparency and Earmarking – Implementation of an earmarking mechanism for PBB (Land and Building Tax) agencies so that regions receive a larger share based on the location of the taxpayer.
3. Export Duty on Semi-Finished Products – A fiscal mechanism to encourage nickel products to move further downstream, not just low-value-added ferronickel.
4. Partnership Scheme Levy – Formalization of partnerships between companies and local communities as an instrument of direct benefit sharing .

C. Collaboration and Shared Learning Platform

The forum also agreed to establish a mechanism to aggregate knowledge and share best practice sharing across institutions to strengthen policy advocacy and collective learning.

Key Messages from Forum Leaders

Alexander Irwan from the Ford Foundation, which has supported the benefit sharing mechanism or model initiative for 15 years, emphasized:

“We must have champions champions and good relationships with local and national governments in supporting benefit sharing initiatives in the nickel extractive industry. We certainly do not want a repeat of the Sumatra disaster.”

This message reminds us of the importance of each party committing to sustainable development and not repeating the mistakes of the past.

Imaduddin Abdullah from INDEF, who discussed the dynamics of global nickel value chains reminded us of the importance of economic diversification:

"The further downstream, the lower the volatility and the more stable the fiscal revenue that can be used. When a country is further downstream and no longer dependent on commodities, it should be able to provide relatively stronger fiscal policy planning than when it is dependent on natural resources.”

Joint Commitment

All forum participants are committed to:

1. Realizing a fair benefit-sharing model in the nickel sector based on the principles of transparency and accountability
2. Narrowing the economic gap between producing regions and national growth centers
3. Ensuring equitable and sustainable development, taking into account environmental and social impacts
4. Accelerating the implementation of the benefit sharing in 4 pilot regions , within a clear timeline
5. Building a supporting ecosystem that includes appropriate regulations, political willfrom leaders, and adequate technical capacity

Future Outlook

This workshop marks an important milestone for collaborative efforts to realize nickel downstreaming that is not only economically beneficial but also fair, sustainable, and empowering for local communities. By involving all stakeholder—from central and regional governments, industry, academia, to civil society—it is hoped that a realistic, contextual, and credible benefit sharing model can be realized at the subnational level in the near future.

As stated in the closing remarks of the forum: “We share the same enthusiasm, and there are many opportunities that we can optimize, both from the central and regional governments.” This momentum must be maintained and followed up with concrete actions so that benefit sharing does not remain a slogan, but becomes a reality felt by the nickel-producing communities.

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