Indonesia’s investment authority recently informed Parliament that PT Indonesia Tsingshan Stainless Steel, a Chinese major nickel smelter in Central Sulawesi, has never submitted its mandatory Investment Activity Report.
The disclosure emerged during a 2025 review of smelter supervision. As a result, the government has no official record of the project’s realized investment.
This is not a minor administrative lapse. Lax reporting by a major smelter threatens Indonesia’s ability to oversee its nickel industry—a vital sector driving both economic growth and industrial policy.
Without accurate Investment Activity Reports, authorities cannot track capital, assess production or enforce regulations, leaving policy decisions adrift. The case matters because it sits at the heart of China-Indonesia economic cooperation.
Over the past decade, Indonesia has become the world’s largest processor of nickel, driven in large part by Chinese investment. Industrial estates expanded rapidly in Sulawesi and eastern Indonesia, driving an export boom. Indonesia moved closer to its goal of capturing more value from its mineral resources rather than exporting raw ore.
This outcome followed deliberate policy choices. Jakarta banned the export of unprocessed nickel, expedited permit approvals and promoted downstream processing as a national priority. Chinese firms responded with capital, engineering capacity and speed. The arrangement aligned mutual interests and reshaped global nickel supply.
This scale of investment now underscores the urgent need for robust governance to protect national interests.
Failure to enforce a core reporting obligation for years reveals a critical regulatory gap. If rules are not followed, institutional oversight breaks down and Indonesia’s authority over its strategic nickel sector is weakened.
The environmental implications are immediate. Nickel processing is energy-intensive and often relies on coal. Industrial expansion can increase deforestation, water stress, and flood risk if controls weaken. Central Sulawesi has already experienced environmental pressure around industrial zones. Effective monitoring depends on accurate, routine reporting.
Fiscal risks are just as serious. Nickel has become one of Indonesia’s most valuable resources as demand for electric vehicle batteries accelerates. Investment reports help reconcile production volumes with revenue declarations and tax payments. Missing data increases the risk of leakage and weakens public finances over time.
There is also a strategic cost. Indonesia has positioned itself as a reliable supplier of critical minerals with clear rules and long-term policy direction. Oversight gaps undermine that credibility and raise doubts about whether institutions can keep pace with industrial growth.
None of this diminishes the importance of China-Indonesia cooperation. The partnership remains economically rational and deeply embedded. Capital flows are driven by strong fundamentals. What is needed now is regulatory capacity that matches the scale of investment.
A comprehensive audit should follow. Authorities need to review investment realization, tax compliance, environmental permits, and energy sourcing. The findings should be made public to reinforce accountability and restore confidence.
Beyond one case, supervision must become systematic rather than incidental. Reporting systems should be integrated across investment, customs, and tax agencies to surface inconsistencies early. Sanctions for noncompliance must be predictable and enforced without delay.
Indonesia’s advantage lies not only in its nickel reserves but in its ability to govern them. Natural resources create opportunity; institutions determine outcomes.
The next phase of China-Indonesia economic cooperation will test that capacity. Industrial ambition has delivered rapid gains for Indonesia. Sustaining them will depend on disciplined enforcement, clear data and consistent oversight.
Bhima Yudhistira Adhinegara is executive director of the Jakarta-based Center of Economic and Law Studies (CELIOS) independent research institute. Muhammad Zulfikar Rakhmat is director of the institute’s China-Indonesia Desk.
