Designing nickel smelter industry investment competitiveness policy in Indonesia through system dynamics model

Abstract

Purpose

This research is intended to assess the nickel smelter industry’s investment competitiveness in Indonesia and identify ways to improve its competitive advantage for the nation.

Design/methodology/approach

This research uses a sequential mixed-methods approach, expanding on a first qualitative phase with a second quantitative phase. Interviews are used in the qualitative phase to identify the underlying causes of issues and potential solutions to increase the competitiveness of the nickel smelter industry, while a system dynamics (SD) model is used to conduct the quantitative phase. This study uses the idea of a country’s competitive advantage from Porter’s diamond model (PDM). The model was tested and validated using SD simulation resulting in a new policy scenario, which was evaluated in metallurgy expert conferences and high policymaker discussion forums.

Findings

The results reveal the complexity of the nickel smelter industry in Indonesia and conclude that the integrated export duty beneficence policy is the most effective way to boost competitiveness. This policy gives a significant improvement both in the number of smelters and state revenue compared to the current policy. The industry’s investment competitiveness is enhanced by the six factors of the diamond model, with the first three factors being integrated strategy, limited export of excess production and export duty beneficence, while the remaining factors are metal price fluctuation, domestic demand and mineral supply which are related to mining conditions uncertainty.

Research limitations/implications

The research creates a SD model to support Indonesia’s competitive advantage in the smelter industry. Despite limitations like interpretations and distorted semantic analysis, it provides a useful framework for exploring complex industry themes, excluding social factors due to limited data and knowledge requirements.

Practical implications

The findings of this research offer a framework for policymaking by the government to enhance the competitiveness of investments in Indonesia’s nickel smelter industry.

Originality/value

This study delves into Indonesia’s nickel industry competitiveness using PDM. Using a more detailed SD model with quantitative analysis, it goes beyond strategy development to provide a comprehensive approach to the nickel smelter industry.

Citation

Hanafi, M. (2024), "Designing nickel smelter industry investment competitiveness policy in Indonesia through system dynamics model", Journal of Science and Technology Policy Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JSTPM-01-2024-0016