Reordering the extractive political settlement: Resource nationalism, domestic ownership and transnational bargains in Indonesia

- 1 November 2020

Trade topics: Indonesia, Resource Nationalism, Mining Policies, Natural Resource Governance, Political Bargain Model, Extractive Political Settlements

Since the early 1990s, heavy state intervention in the extractives sector—or resource nationalism—has become more common in resource-rich lower income countries. This article considers what domestic and global conditions in the political economy of extractives account for the resurgence of resource nationalism in Indonesia despite the risks to foreign investment, including who benefits and how. We examine Indonesia's regulatory reforms and analyse the intersections between global and domestic dynamics that have resulted in Indonesia taking a majority ownership share of Freeport Indonesia. We contend that within long-durée Cycles of Resource Nationalism, the geospatial concentration of minerals in maturing industries has given more bargaining power to Indonesia vis-à-vis foreign investors. However, we argue the specific timing and scope of resource nationalism in Indonesia has been contingent on the conditions in particular sectors of the domestic political economy and the ways that foreign investors and the domestic elites have reconfigured their goals to be mutually compatible. In democratising contexts, resource nationalism provides a discursive rubric by which elites can garner support and legitimacy to reorganise the underlying ‘extractive’ political settlement, within which foreign investors can influence elite incentives but less so the deeper configuration of power relations.

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