Analysis of the Impact of Mineral and Coal Downstreaming Policy on Global and National Economies: A GTAP Approach
Abstract
Indonesia's mineral and coal downstreaming policy, which imposes export bans and restrictions on raw minerals such as nickel, bauxite, copper, and coal, represents one of the most ambitious resource industrialization strategies globally. This study aims to analyze the potential and impact of the mineral and coal downstreaming policy on Indonesia's macroeconomic and sectoral economic indicators as well as its implications for global trading partners. The analysis method employs the GTAP (Global Trade Analysis Project) version 10 database model with two cooperation scenario approaches: a 50% reduction in raw mineral exports (Simulation 1) and a 95% reduction in raw mineral exports (Simulation 2). The macroeconomic indicators analyzed include welfare (equivalent variation), real Gross Domestic Product (GDP), household consumption, government expenditure, investment, exports, imports, and trade balance. The sectoral indicators include output changes and employment opportunities. The results show that Indonesia's downstreaming policy promotes an increase in real GDP, household welfare, domestic consumption, and investment, with the highest gains occurring in the nickel processing, ferronickel, and manufactured metals sectors. However, the policy creates a temporary trade balance deterioration due to increased capital goods imports for smelting infrastructure. From the sectoral perspective, downstream mineral industries particularly ferronickel, chemical fertilizers derived from coal gasification, and mineral-based manufactured goods record the highest output and employment increases. These findings underscore the strategic importance of accelerating hilirisasi policies while mitigating trade risks through market diversification.
References
APBI-ICMA. (2025). Challenges sustainability coal and the economy post-mining. Accessed from https://apbi-icma.org
Aragie, E. A., Balié, J., Magrini, E., & Morales, C. (2016). Can a cereal export ban affect a net food-importing economy? The case of Ethiopia. Paper presented at 19th Annual Conference on Global Economic Analysis.
CSIS. (2025). Indonesian industrialization: Downstreaming up the value chain. Charting Geoeconomics. Accessed from https://www.csis.org
Dewani, S. S., Susanto, S. K. M., Muzhaffar, M., & Wulandari, W. (2026). Legal Implications of the Application of the Principle of Due Diligence on the Extension of the Work Contract of PT Freeport Indonesia. Devotion: Journal of Research and Community Service, 7(1), 110-122.
East Asia Forum. (2023). Assessing nickel downstreaming in Indonesia. Retrieved from https://eastasiaforum.org
Ember Energy. (2025). From captive coal to green nickel: Securing Indonesia's future competitiveness. Diakses dari https://ember-energy.org
Gastanaga, V. M., Nugent, J. B., & Pashamova, B. (1998). Host country reforms and FDI inflows: How much difference do they make? World Development, 26(7), 1299–1314. https://doi.org/10.1016/S0305-750X(98)00049-7
Hadiyanto, Y. R. (2015). The effect of export diversification on the value added growth per labor of agro and non-agro based manufacturing sector. Buletin Ilmiah Litbang Perdagangan, 9(2), 179–200.
Hertel, T. W., & Tsigas, M. E. (1997). Structure of GTAP. In TW Hertel (Ed.), Global Trade Analysis: Modeling and Applications (pp. 13–73). Cambridge University Press.
IISD. (2025). Critical minerals and energy transition in Indonesia. International Institute for Sustainable Development. Diakses dari https://www.iisd.org
Indonesia.go.id. (2024). Downstreaming mine: Transformation Indonesian economy from material raw to product worth add. Accessed from https://indonesia.go.id
Jurnal Ekonomi Pembangunan UMS. (2024). What are the economic impacts of Indonesia's export ban? Jurnal Ekonomi Pembangunan: Kajian Masalah Ekonomi dan Pembangunan, 25(1), 126–134. https://doi.org/10.23917/jep.v25i1.23626
Kutlina-Dimitrova, Z. (2017). The economic impact of the Russian import ban: A CGE analysis. International Economics and Economic Policy, 14(4), 513–531.
Lahadalia, B., Wijaya, C., Dartanto, T., & Subroto, A. (2024). Nickel downstreaming in indonesia: reinventing sustainable industrial policy and developmental state in building the EV Industry in ASEAN. Journal of ASEAN Studies, 12(1), 79-106.
Lowy Institute. (2025). The future of Indonesia's green industrial policy. Accessed from https://www.lowyinstitute.org
Lu, C., Zhang, X., & He, J. (2010). A CGE analysis to study the impacts of energy investment on economic growth and carbon dioxide emission: A case of Shaanxi Province in western China. Energy, 35(11), 4319–4327. https://doi.org/10.1016/j.energy.2009.04.007
Mineral and Coal Energy and Mineral Resources. (2024). Downstreaming as step beginning Indonesia's change from a developing country become an industrial country forward. Accessed from https://www.minerba.esdm.go.id
Ministry of Energy and Mineral Resources of the Republic of Indonesia. (2024). Downstream development: Government strategy work on mark plus mining. Accessed from https://www.esdm.go.id
Musafa, A. Q. A., & Muhtada, D. (2026). Indonesia–China Economic Diplomacy in Nickel Downstreaming Policy: The Perspective of the Rule of Law and Sustainable Development. Al-Amwal: Journal of Islamic Economic Law, 11(1), 35-49. https://doi.org/10.24256/alw.v11i1.9526
Naryono, E. (2023). Evaluation policy Downstreaming of Indonesian Minerals: Perspectives chain global values. Journal Mineral Resources, 5(2), 88–104.
Nyberg, D., Wright, C., Bowden, V., & Fleming, P. (2026). Carbon Populism and Representative Politics: On Why Fossil Fuel Firms Speaking for ‘The People’Is a Bad Idea. Journal of Management Studies. https://doi.org/10.1111/joms.70096
Oktaviani, R., & Amaliah, S. (2010). The impact of Free Trade Agreement (FTA) on Indonesian macro economic, sectoral, and income distribution. Jurnal Ilmu Pertanian Indonesia, 15(3), 192–204.
Oktaviani, R., & Novianti, T. (2014). International Trade Theory and Its Application in Indonesia. IPB Press.
Oktaviani, R., & Puspitawati, E. (2008). Impacts of ASEAN agricultural trade liberalization on ASEAN-6 economies and income distribution in Indonesia. Asia-Pacific Research and Training Network on Trade Working Paper Series.
Philippa, D., & Gali, J. (2003). The trade and investment effects of preferential trading arrangements. Staff Working Papers. Australian Productivity Commission.
Puspitawati, E., & Oktaviani, R. (2017). Teori, Model dan Aplikasi GTAP (Global Trade Analysis Project). IPB Press.
Rahman, D., & Raphael, F. (2025). Optimizing the utilization of coal in Indonesia through downstreaming: Economic benefits, challenges and solutions. Economic Military and Geographically Business Review, 2(2), 107-123. https://doi.org/10.61511/emagrap.v2i2.2025.1472
Ridwansyah, M., & Abidin, Z. (2026). Disharmony in Mineral and Coal Mining Regulation in Aceh: A Critical Review of the Basic UUPA, UU Minerba and MoU Helsinki. Dusturiyah: Jurnal Hukum Islam, Perundang-undangan dan Pranata Sosial, 16(1), 100-118. https://doi.org/10.22373/pzetqv38
Stephan, Y., & Ademayowa, A. (2015). Impact of unemployment on national output in Nigeria, 1980–2011. Historical Research Letter, 1(25), 18–24.
Umar, U., Sari, E., & Umar, F. (2025). The Paradox of Economic Development: Environmental Sustainability and Economic Growth of the Mining Industry in Indonesia. Journal of Economics and Business (JECOMBI), 6(02), 93-103.
Wau, FT, et al. (2024). Analysis strategic policy mineral downstreaming: Economic implications and impacts to economy. Journal Publicuho, 7(3), 1215–1224. https://doi.org/10.35817/publicuho.v7i3.481
Widyastutik, W., Amaliah, S., Hotsawadi, H., & Firdaus, M. (2023). The impact of One Belt One Road and Indonesia-Pakistan palm oil trade liberalization. Journal Management and Agribusiness, 20(3), 466–476. https://doi.org/10.17358/jma.20.3.466
Yogar, B. N. A., Ramdani, R., Pranaja, K. A., Mutiara, D., & Rifandi, M. (2026). JURNAL TRIAS POLITIKA. Jurnal Trias Politika, 10(1), 107-124.
Zhang, Y., & Diao, X. (2020). The changing role of agriculture with economic structural change: The case of China. China Economic Review, 62, 1–21.
Zheng, X., Lu, Y., Ma, C., Yuan, J., Stenseth, N. C., Hessen, D. O., ... & Zhang, S. (2023). Greenhouse gas emissions from extractive industries in a globalized era. Journal of Environmental Management, 343, 118172. https://doi.org/10.1016/j.resourpol.2024.105290
Copyright (c) 2026 Journal La Sociale
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
