Can Indonesia free itself from neo-colonial patterns, and does the country have the political will to challenge the powerful forces, both foreign and domestic, that benefit from the status quo?
From “Cultuurstelsel” to the Brief Economic Nationalism Dream
The Dutch East Indies colonial enterprise was one of the most profitable in world history. The 19th century’s infamous cultivation system (cultuurstelsel) forced Indonesian farmers to dedicate portions of their farmlands to grow specific crops for “export” purposes, such as sugar, indigo, and coffee.
This extractive caricatural model, which was a heavy consumer of raw materials at the lowest cost, while creating no local value, is not a thing of the colonial past; it has actually created a pattern that still persists today. As local infrastructure, industry, and education dwindled under neglect, the wealth continued to flow outward, or should we say “Westward”.
Following independence, Sukarno pursued an assertive economic nationalism. In 1955, Indonesia hosted the Bandung Conference, where 29 countries from Asia and Africa assembled to say an in-unison NO to colonialism and neo-colonialism, creating what some called the world’s third largest international bloc through the Non-Aligned Movement, which included 121 countries.
Sukarno’s government, with its assertive economic nationalistic stance, tried to gradually nationalize Dutch, American, and British interests, starting in 1957, and culminating with the total prohibition of foreign investments in 1965.
Challenges quickly ensued with the failure of the Soviet and Chinese modelled 5-year plan of delivering prosperity, with soaring inflation, political upheavals, and economic mismanagement leading to the horrific mass killings of 1965-1966. This anti-communist purge and violent abortion of the 30 September Movement’s coup d’état by the Indonesian army eventually resulted in the replacement of Sukarno with General Suharto in 1967.
Geneva 1967: Carving Up a Nation
While Suharto was taking a grip on Indonesia, an exceptional forum gathered in November 1967. The Indonesian Investment Conference, assembled the world’s largest corporations, institutions, and giants of capitalism, like Chase Manhattan (David Rockefeller), Swiss Bank Corp. (Samuel Schewizer), American Express (Howard L. Clark Sr.), Goodyear (Russell deYoung), Heinz (Jack Heinz), Lehman Brothers Inc. (George W. Ball), Fiat (Gianni Agnelli), Bank of America (Rudolph A. Peterson), IBRD (World Bank Group), among many others.
They would sit around the meeting tables with Suharto’s personnel, whom Rockefeller called “Indonesia’s top economic team,” some of whom were economists who graduated from the University of California. These Indonesian “Golden Bears” would sit with large smiles on their faces, marketing their country’s potential, touting selling points like “abundance of cheap labour” and “a treasure house of resources.”
According to Professor Jeffrey Winters of Northwestern University, who studied the conference proceedings, executives from these corporations “divided up into five different sections: mining in one room, services in another, light industry in another, and banking and finance in another.”
What emerged was nothing short of remarkable: “They basically designed the legal infrastructure for investment in Indonesia.” Corporate representatives sat with Indonesian officials and, as Winters put it, “hammered out the conditions of their own entry into that country.”
The result was Indonesia’s 1967 Foreign Investment Law, which reversed Sukarno’s nationalist policies and opened the floodgates to foreign capital. Tax incentives were generous, land lease terms extended to 70 years (later 95 years), and restrictions were minimal. The law effectively granted foreign corporations’ extraordinary access to Indonesia’s natural resources, copper in Papua, nickel in Sulawesi, timber across the archipelago, oil and gas everywhere.
The Purest Form of Neo-colonialism
Indonesia was indeed carved up, sector by sector, at the conference. In one room, forests, in another, minerals. The Freeport Company got a mountain of copper in West Papua (which had Henry Kissinger on its board). A US/European consortium got West Papua’s nickel. The giant Alcoa company got the biggest slice of Indonesia’s bauxite. A group of US, Japanese, and French people got the tropical forests of Sumatra, West Papua, and Kalimantan.
A Foreign Investment Law, hurried on to the statutes by Suharto, made this plunder tax-free for at least five years. Real and secret control of the Indonesian economy passed to the IMF and the World Bank through the Inter-Governmental Group on Indonesia (IGGI), whose principal members were the US, Canada, Europe, and Australia.
Under Sukarno, Indonesia had few debts. Now the really big loans rolled in, often straight into pockets, as the treasure house of resources rolled out. Shortly before the Asian financial crash in 1997, the IGGI godfathers congratulated their favourite mass murderer for having “created a miracle economy.
This was neocolonialism in its purest form: not direct political control, but economic domination structured through legal frameworks written by the beneficiaries themselves. Indonesia’s sovereignty was formal, but its economic policy was substantially determined by external actors prioritizing capital accumulation over domestic development.
The Nickel Paradox: An “Unreliable” Success
Today’s Indonesia is trying to break this pattern, and nowhere is this more evident than in its nickel industry.
Indonesia holds roughly 40% of the world’s nickel reserves, and since 2014, the “Equatorial Emerald” has been pursuing a “downstreaming” policy, with former President Joko Widodo, decision to ban exports of raw nickel ore, as part of a strategy deigned to force companies to process the ore domestically, aiming to increase value-added production, expecially for the global EV battery supply chain.
Nickel exports grew from $800 million in 2020 to nearly $8 billion by 2024, with processed products reaching $38-40 billion overall. The number of smelters exploded from two in 2014 to over 60 by 2025. Indonesia now supplies approximately 60% of global mined nickel and processes 45% of primary nickel—a commanding market position.
Still, what’s called “domestic processing”, needed some external help. Chinese companies control roughly 65% of Indonesia’s nickel refining capacity, with Indonesian firms owning merely 10%. The massive Indonesia Morowali Industrial Park (IMIP), the country’s largest facility, is a joint venture with China’s Tsingshan Holding Group.
While Indonesia has moved up the value chain from ore to processed nickel, the benefits are not entirely “indigenous.”
Furthermore, the Indonesian nickel industry faces environmental challenges, with fisheries that sustain local communities being damaged by nickel processing pollution. Aside from the widespread reliance of the processing plants on coal for power, which amounts to 12% of Indonesia’s coal capacity.
Not to forget that battery technology is shifting to Lithium iron phosphate batteries (LFP), and these batteries are nickel-free, rendering the long-term bet on nickel-based EV batteries unreliable.
Current Economic Realities
One begins to have doubts about President Prabowo Subianto’s ambitious objective of reaching an 8% GDP growth by 2029, when you learn that that rate currently stands at 4.9%, 4 points behind the government target of 5.2%.
The middle-class headcount fell from 60 million Indonesians in 2019 to around 48 million in 2024 due to stagnant wages, inflation, and rising living costs. Investment efficiency is problematic in Indonesia, which requires almost sevenfold more capital investment than neighboring countries to achieve 1% growth. While Income inequality remains high, the combined wealth of Indonesia’s four richest people equals that of a thousand average citizens.
The Indonesian Rupiah was hit by a 4% depreciation against the dollar in the 1st quarter of 2025, which caused a rise in import costs, price volatility, and high inflation rates, with an additional layer of uncertainty due to dependence on mining exports.
Some challenges emanate from the geopolitical theatre as well, as trade tensions, especially between China and the United States, escalate, threatening Indonesia’s China-aided industrial successes and exports.
ASEAN and BRICS: A Junction?
January 2025 marked the joining of the first Southeast Asian country to the BRICS. With the group offering Indonesia access to infrastructure financing through the New Development Bank, reduction of dollar dependency through local currencies trading, and a platform pushing for global governance reform.
Indonesia’s BRICS membership requires the country to balance its new opportunities and commitments with its ASEAN partnerships, as it is already facing critics trying to discourage the new course by claiming it marks an abandonment of Indonesia’s non-alignment and its “free and active” foreign policy.
While others see it as a new collaboration and intersected integration opportunity, with an association that groups nations of a combined 685 million people and a total GDP of more than $3.5 trillion, they see ASEAN as a substantial market and a counterweight to larger powers, with its members located in an important junction, between the South China Sea and the Indian Ocean, and an agent for building regional supply chain resilience.
Real Economic Sovereignty
Gaining political independence is one thing, but building real economic sovereignty in such a complex geopolitical theatre that Indonesia exists within is a whole other story. Seventy-five years after Sukarno and Hatta’s declaration, Indonesia remains substantially integrated into global value chains on terms largely set by external actors and new forms of neo-colonial resource extraction.
The question isn’t whether Indonesia can break free from neo-colonial patterns; it’s whether the country has the political will to challenge powerful interests, both foreign and domestic, that benefit from the status quo.
Tamer Mansour, Egyptian Independent Writer & Researcher
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