Indonesia

Physical risk, resource concentration and policy continuity intelligence for Indonesia-origin supply chains.

Geopolitical conflict

Natuna Islands EEZ overlaps with China's nine-dash line — periodic Chinese fishing vessel and coast guard incursions. Non-aligned 'bebas-aktif' foreign policy reduces bilateral geopolitical exposure. Internal security issue in Papua has no impact on main export zones.

Supplier concentration

World's largest palm oil producer (~55% of global supply). Largest nickel producer — critical for EV battery supply chains. Indonesia and Malaysia together control ~85% of global palm oil. Concentration risk is high for buyers of these specific commodities.

Climate & physical risk

127 active volcanoes — highest of any country. Major earthquake exposure on the Pacific Ring of Fire. Annual Jakarta flooding so severe the capital is being relocated to Nusantara (Borneo). El Niño-driven forest fires in Sumatra and Kalimantan cause regional haze disruptions to logistics and aviation.

Sanctions exposure

Not subject to US, EU, or UN sanctions. One of the lowest sanctions exposure scores on this index.

Policy continuity & property rights

Broad market capitalism maintained. Resource nationalism is the key policy risk — nickel ore export ban (2020) and copper/bauxite ban (2023) demonstrate willingness to restrict commodity exports to force downstream processing. This risk is concentrated in extractive industries, not export manufacturing.

Geopolitical Exposure

Natuna Islands: Indonesia's exclusive economic zone around the Natuna Islands overlaps with China's nine-dash line claim. China does not claim Indonesian land territory but asserts historical fishing rights in the Natuna EEZ. Indonesia has deployed naval vessels and coast guard assets in response to periodic Chinese fishing vessel incursions.
Non-aligned foreign policy: Indonesia's 'bebas-aktif' (free and active) foreign policy doctrine means Indonesia does not formally align with either the US or China. This positioning reduces the risk that Indonesia becomes a frontline state in US-China competition — a meaningful advantage for foreign buyers seeking to avoid geopolitically exposed sourcing origins.
Internal security: Papua province has a long-running low-level independence movement (OPM — Free Papua Movement). This has no operational impact on Indonesia's main manufacturing and export zones in Java, Sumatra, or Kalimantan.
ASEAN role: Indonesia chaired ASEAN in 2023 and plays a stabilising regional role. Its diplomatic weight — as the world's fourth-most-populous country and largest Muslim-majority nation — gives it influence over regional conflict dynamics disproportionate to its military capacity.

ACLED data →

Supply Chain Concentration

Palm oil dominance: Indonesia produces approximately 55% of global palm oil supply. Indonesia and Malaysia together account for approximately 85% of global production. For buyers of palm oil, palm kernel oil, oleochemicals, and palm-derived food ingredients, Indonesia is not one option among many — it is the market.
Nickel and EV supply chains: Indonesia holds the world's largest nickel reserves and is the largest producer. Nickel is a critical input for EV battery cathodes (NMC and NCA chemistries). Indonesia's dominance in nickel creates acute concentration risk for buyers building EV and energy storage supply chains.
Export ban precedent: Indonesia imposed a nickel ore export ban in January 2020 to force domestic processing — a policy that triggered a WTO dispute with the EU. In May 2023 Indonesia applied similar bans to copper concentrate and bauxite. Buyers of Indonesian mineral commodities must price in the risk of further export restrictions.
Manufacturing base: Beyond commodities, Indonesia has a growing textile and garment manufacturing sector and an emerging consumer electronics assembly industry. These categories have a different risk profile from commodities — concentration is lower and resource nationalism risk is minimal.

Climate & Physical Risk

Volcanic activity: Indonesia has 127 active volcanoes — the highest count of any country. Major eruptions (Merapi 2010, Sinabung 2014–2018, Semeru 2021) cause ash disruption to aviation and agriculture. The 2022 Hunga Tonga eruption generated a pressure wave detectable in Indonesia and caused a minor tsunami on the coast.
Earthquake and tsunami: Indonesia sits on the Pacific Ring of Fire. The 2004 Indian Ocean earthquake and tsunami originated off Sumatra's coast. The 2018 Lombok earthquakes (August), the 2018 Palu earthquake and tsunami (September — 4,000+ deaths), and the 2022 Cianjur earthquake all caused significant infrastructure and economic damage.
Flooding and capital relocation: Annual flooding in Jakarta and Java is a significant logistics disruption. Jakarta's flooding risk is so severe that Indonesia is relocating its capital to Nusantara (East Kalimantan) — a multi-decade infrastructure project reflecting the structural unsustainability of the current capital's physical situation.
El Niño and forest fires: El Niño events trigger severe drought in Sumatra and Kalimantan, causing forest and peatland fires. The resulting haze disrupts regional aviation, logistics, and outdoor working conditions across Indonesia, Malaysia, and Singapore. The 2019 fire season was among the most damaging in decades.

Germanwatch CRI →INFORM Risk Index →

Sanctions & Policy Continuity

Sanctions status: Indonesia is not subject to US, EU, or UN sanctions. Indonesia's non-aligned foreign policy and lack of involvement in sanctioned activities gives it one of the lowest sanctions exposure scores on this index. This is a structural advantage for buyers seeking geopolitically safe sourcing origins.
Market capitalism: Indonesia has maintained a broad market-capitalist economic framework since the post-Suharto Reformasi era (1998). The Prabowo administration (elected October 2024) has signalled continuity with Jokowi's economic development priorities. No nationalisation of foreign-owned manufacturing assets is expected.
Resource nationalism: The key policy continuity risk is resource nationalism in extractive industries. The nickel ore export ban (2020), copper and bauxite export ban (2023), and downstream processing requirements demonstrate a consistent pattern of using commodity export restrictions as industrial policy. Buyers of Indonesian mineral commodities should treat this as a structural feature of the sourcing environment, not an isolated event.
Manufacturing vs. commodities: The policy continuity risk profile differs significantly by sector. Foreign-owned textile, garment, and electronics manufacturing operations have operated without policy disruption. The resource nationalism risk applies specifically to raw material export categories — palm oil, nickel, copper, bauxite, and potentially others. Buyers should assess their specific exposure by commodity category.

OFAC SDN List →Fraser Institute EFW →

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