Indonesia’s establishment of its Mineral Industry Agency is critical in realising its vision of resource nationalism, independence in military production, and strategic autonomy. By establishing a national critical minerals supply chain, Indonesia can enhance its bargaining power as a global critical minerals powerhouse and reduce its dependency on imported weapons technologies and related parts.
Indonesia’s Ministry of Energy and Mineral Resources designated 47 types of critical minerals in 2023. It defined them as those that were essential for the national economy and national defence and security, were exposed to supply disruptions and had no suitable substitutes. Among them were aluminium, copper, molybdenum, nickel, lithium and rare earth elements.
When President Prabowo Subianto established the Mineral Industry Agency in August, he stressed that Indonesia needed to be able to use and preserve its critical mineral resources and that they would have a significant impact on the nation’s future, notably in the defence sector. Not long after, the ministry prohibited the export of rare earths.
Prabowo’s rationale for enacting two resource nationalism initiatives during his administration resembles that of his predecessors. President Joko Widodo implemented a mineral downstreaming program to boost Indonesia’s economic benefits from the mineral industry and strengthen its bargaining power in diplomacy. This has risen in importance as critical minerals have featured in a trade war between the United States and China.
These policies also support Indonesia’s longstanding vision for self-reliance in defence production. The Ministry of Defence increasingly sees the control of critical minerals as the initial step in this. The explicitly stated primary goal of the Mineral Industry Agency is to manage strategic mineral industries for the benefit of the defence industry. The minister of defence was even appointed by the president to be the chair of the MIA Advisory Board.
Indonesia has 10 national defence industry priority programs covering radar, military satellites, fighter jets, underwater sensing systems, submarines, unmanned combat aerial vehicles, medium tanks, rockets, missiles and propellants. Although the need for critical minerals, including rare earths, will vary, these programs cannot run without them.
Europe’s weapons technology sector demonstrates the crucial importance of self-sufficiency in owning and processing critical minerals. Making battle tanks requires neodymium and yttrium. Aluminium, lithium, nickel and copper are used in warships. Nickel, yttrium, aluminium and molybdenum are needed in precision-guided munitions, radar and sonar. Titanium is a key material in fighters and missiles.
Indonesia has significant potential in the critical minerals that are needed for developing advanced weapons technology. It is the world’s largest nickel-producing nation and has the seventh-largest copper reserve. Indonesia also has great potential for aluminium production, since its bauxite reserve is the fifth largest in the world. It could produce titanium from its large ilmenite reserves. Yttrium, a rare earth, can also be sourced in Indonesia.
Nonetheless, Indonesia’s defence industry remains dependent on imported raw materials. PT Pindad, maker of the Anoa armoured personnel carrier, continues to import aluminium alloy sheets. PT Dirgantara Indonesia still relies on imported aluminium alloy to make the CN-235-200 transport aircraft.
As defined by Defence Industry Law, the Indonesian defence industry ecosystem comprises four tiers: the raw material industry (fourth tier), the component industry (third tier), the main component industry (second tier) and the main equipment industry (first tier). Independence in making military equipment cannot be achieved by solely relying on the first tier. Yet research shows that the value of inter-tier transactions is only 9 percent of the value of all the defence industry’s transactions.
Without making and supplying its own raw resources, Indonesia will continue to rely on imports and remain vulnerable to pressure and influence from other countries. This needs to change, given the technological decoupling within the defence sector as well as the US–China trade war.
Even though the pursuit of self-reliance is extremely difficult for Indonesia, the new agency and the rare-earths export ban are more than just examples of the global resurgence in resource nationalism. Securing domestic access to critical minerals and consolidating their management will help Indonesia improve its defence industry capacity, bargaining power and strategic leverage in international diplomacy.