Indonesia is rapidly emerging as a pivotal player in the global race for critical minerals, resources essential for clean energy technologies, advanced manufacturing, and national defense. With vast reserves of nickel, tin, copper, and rare earth elements (REEs), the country is positioning itself at the center of supply chains that power electric vehicles, renewable energy, and high-tech industries.

President Prabowo Subianto’s administration has made resource sovereignty a strategic priority. In August 2025, he inaugurated the Mineral Industry Agency (MIA) under Presidential Decree No. 77P/2025, appointing Higher Education Minister Brian Yuliarto as its head. The new body is tasked with managing minerals vital to the defense and green-energy sectors, including rare earths, radioactive materials, and other critical resources, under three key mandates: securing and optimizing extraction, protecting them as national assets, and accelerating downstream industrialization to produce high-value products like permanent magnets and advanced batteries.

Energy Minister Bahlil Lahadalia emphasized that the government will exert full control over rare earth management, noting that upstream activities will remain under state supervision due to their strategic importance and high value. The policy reflects a continuation of Indonesia’s broader downstreaming strategy, which began under former President Joko Widodo. Since banning raw nickel ore exports in 2020, Indonesia has become the world’s largest refined-nickel producer and attracted tens of billions of dollars in foreign investment for domestic processing facilities. By 2040, Jakarta aims to extend this policy to 20 commodities, targeting US $545 billion in cumulative investment.

However, Indonesia’s rare earth ambition faces significant hurdles. According to Agus Puji Prasetyono of the National Energy Council, the country’s research and development spending remains below 1 percent of the state budget, far behind regional peers such as China, Singapore, and Malaysia. This underinvestment limits Indonesia’s ability to conduct comprehensive geological mapping of its REE reserves, a crucial step for building a coherent development roadmap. The lack of detailed reserve data, combined with the high technological complexity and cost of REE processing, continues to slow progress.

Despite these challenges, Indonesia’s rare earth prospects remain promising. Studies have shown that REE-bearing minerals such as monazite and xenotime occur as by-products of tin and zircon mining, particularly in Bangka-Belitung and Kalimantan. Leveraging these secondary sources could enable Indonesia to develop a domestic REE value chain without opening large new mines.

International partnerships are another key avenue. In 2025, Indonesia deepened cooperation with the United States through a tariff-reduction agreement and ongoing talks between Danantara Indonesia and the U.S. International Development Finance Corporation (IDFC) to fund critical-mineral projects. Similar initiatives are under discussion with Australia, focusing on joint research and downstream processing for nickel and lithium supply chains.

Ultimately, Indonesia’s success will depend on closing the research funding gap, strengthening institutional capacity, and ensuring environmental safeguards. The establishment of the Mineral Industry Agency marks an important institutional step, but achieving full value-chain integration, from exploration to high-tech manufacturing, will require sustained investment, transparent governance, and strategic global partnerships. If managed well, Indonesia’s critical minerals and rare earth resources could transform the nation from a raw-material exporter into a cornerstone of the global green-technology economy.

          

Sources:

• AInvest. “Why Indonesia’s Critical Minerals Are the New Safe Haven for Global Investors Amid US Tariff Chaos.” Jun 30, 2025. https://www.ainvest.com/news/indonesia-critical-minerals-safe-haven-global-investors-tariff-chaos-2506/
• Indonesia Business Post. “Indonesia Invites U.S. Investment in Critical Minerals for Battery Ecosystem Collaboration.” Aug 6, 2025. https://indonesiabusinesspost.com/4928/energy-and-resources/indonesia-invites-u-s-investment-in-critical-minerals-for-battery-ecosystem-collaboration
• Jakarta Globe. “Gov’t to Entirely Control Indonesia’s Rare Earths.” Aug 25, 2025. https://jakartaglobe.id/news/govt-to-entirely-control-indonesias-rare-earths
• Lowy Institute. “A Critical Mineral Match for Australia and Indonesia.” May 14, 2025. https://www.lowyinstitute.org/the-interpreter/critical-mineral-match-australia-indonesia
• The Jakarta Post. “New agency to assert state control over minerals vital for defense.” Aug 25, 2025. https://www.thejakartapost.com/business/2025/08/25/new-agency-to-assert-state-control-over-minerals-vital-for-defense.html
• The Jakarta Post. “Research Funding Gap Hampers Indonesia’s Rare Earth Ambition.” Aug 27, 2025. https://www.thejakartapost.com/business/2025/08/27/research-funding-gap-hampers-indonesias-rare-earth-ambition.html