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Leading sector and dual economy: how Indonesia and Malaysia mobilised Chinese capital in mineral processing

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  • Alvin Camba
  • Guanie Lim
  • Kevin Gallagher

Abstract

How do states pursue industrial policies in the context of China’s rise? Examining Indonesia and Malaysia’s mineral processing sectors, we argue that these countries illustrate two different pathways that states take to bolster their industrial policies. Indonesia has followed the leading sector strategy to increase domestic nickel processing capacity and decrease reliance on resource exports. Chinese firms and the Indonesian government built the Indonesia Morowali Industrial Park to house nickel smelters, fostering a new leading sector. Chinese capital in smelting follows what Albert Hirschman has called ‘intermediate investments’, maximising forward and backward linkages across the Indonesian economy. In contrast, Malaysia has followed the dual economy strategy, where semi-finished goods are imported and assembled into finished ones to be exported abroad. Chinese firms and the Malaysian government established the Malaysia–China Kuantan Industrial Park to import, process and export steel products. However, due to the dual economy strategy, the industrial park impairs the activities of domestic steelmaking companies and inhibits the potential build-up of smelting capacity. In sum, through an examination of an industrial park in each country, our paper connects the literatures on industrial policy and Chinese capital.

Suggested Citation

  • Alvin Camba & Guanie Lim & Kevin Gallagher, 2022. "Leading sector and dual economy: how Indonesia and Malaysia mobilised Chinese capital in mineral processing," Third World Quarterly, Taylor & Francis Journals, vol. 43(10), pages 2375-2395, October.
  • Handle: RePEc:taf:ctwqxx:v:43:y:2022:i:10:p:2375-2395
    DOI: 10.1080/01436597.2022.2093180
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    Cited by:

    1. Nicholas Jepson & Oyuna Baldakova, 2024. "Chinese State Capital as a Partner for Resource-Based Structural Transformation? The Belt and Road Initiative and Downstream Linkages in Bolivia and Kazakhstan [¿El capital estatal chino como socio," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(3), pages 718-745, June.
    2. Wei, Feiqiong & Han, Jiatong & Xu, Wei, 2024. "Exploring the nexus between structural capital, carbon neutrality and sustainable competitiveness: Evidence from natural resource exploitation in the post-COVID-19 era," Resources Policy, Elsevier, vol. 88(C).
    3. Tritto, Angela & Camba, A., 2022. "State-facilitated Industrial Parks in the Belt and Road Initiative: Towards a framework for understanding the localization of the Chinese development model," World Development Perspectives, Elsevier, vol. 28(C).

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