Natural resource governance and strategic economic resources: The perspective of Indonesia Raya Incorporated

Indonesia, a populous archipelagic nation rich in natural resources, faces persistent challenges of poverty and inequality despite its resource wealth and rising GNI per capita. The country’s 1945 Constitution (Article 33) mandates that natural resources and strategic branches of production be controlled by the state for the people’s prosperity, with a principle of kinship guiding economic efforts. However, many resource-rich areas remain poor, and liberalization trends have favored private and foreign corporations. Indonesia Raya Incorporated (IRI) proposes integrating State-Owned Enterprises (SOEs) and Regional-Owned Enterprises (ROEs) to prioritize state stewardship of natural resources for public welfare, aligned with the economic constitution. While there are early examples (e.g., restructured ownership in PT Freeport Indonesia), broader adoption is limited and recent policy (e.g., Job Creation Law) may enable further liberalization. This study addresses the research question: How does IRI conceive economic development in the natural resource and strategic economic sectors for the people’s welfare? The aim is to identify and describe an economic development theory from IRI’s perspective, engage with Murakabi economic system ideas, and contribute conceptual and practical guidance for governance of natural and strategic economic resources in Indonesia and beyond.

Prior IRI work identifies four core, interrelated themes: (1) natural resources and strategic economic sectors, (2) government policy, (3) state companies (SOEs/ROEs), and (4) economic strata of the people. Literature on natural resources emphasizes the shift toward sustainability and green economy (e.g., renewable energy such as green fuel and biomass), the role of state ownership in profitability and national growth, and the need for effective governance to balance individual and community interests. IRI thinking encourages integration of business ownership in resource sectors among SOEs, ROEs, and potentially Village-Owned Enterprises (VOEs), within a framework of good governance and political stability. Government policy is central: while constitutional mandates call for state control over natural resources and strategic sectors (Article 33), interpretation and implementation are influenced by political economy dynamics, often leading to private/foreign dominance and regional-center gaps. For SOEs/ROEs, Indonesia’s SOEs Law (2003) frames governance but has been criticized for limited inclusion of ROEs and for fostering individualistic/capitalistic tendencies. IRI’s initial conception suggests share-ownership structures to integrate central and regional entities (and eventually VOEs and public participation), aiming for equitable development and national integrity. Literature on economic strata underlines that resource wealth has not consistently translated to broad welfare improvements; Murakabi economics proposes a cooperative-like corporate structure with multistakeholder share ownership (employees, communities, governments, customers, suppliers, cooperatives, and private firms), aligning with constitutional goals and enabling incorporation with national/multinational firms depending on share allocation.

The study employs a qualitative grounded theory strategy combined with constructivist and critical interpretive approaches. Grounded theory is used to build new theory around IRI thinking, guided by memoing to identify focal themes linking natural and strategic resources, government and SOEs/ROEs roles, and population welfare. Constructivism supports building holistic constructs from diverse meanings in the data, while critical theory frames critiques of political-economic policies, domination, and governance issues. Data collection was conducted via two Focus Group Discussions (FGDs) on IRI: Solo/Surakarta (December 2016; n=18) and Batam (January 2017; n=20). Participants primarily included economists (Professors and PhDs) as key informants, with practitioners and government officials as supporting informants; researchers served as neutral moderators. Additional field observations in 2018 examined SOEs in water storage/supply (West Java) and cement (West Sumatra), with discussions with directors/managers to connect theoretical interpretations to practice. Data were analyzed using componential analysis with axial coding to identify themes, code sources (A for Solo, B for Batam; KI for key informant; SI for supporting informant; CN for conclusion notes), and construct textual and structural descriptions culminating in premises and propositions. Validation involved public media coverage of IRI, seminars (2018), an international conference presentation and abstract (2020), and a 2023 forum on green economy implementation; these activities served as confirmability and socialization of findings.

• The study identifies four main variables in IRI’s economic development perspective: (1) natural resource and strategic economic potential, (2) roles and functions of government, (3) roles and functions of state enterprises (SOEs and ROEs), and (4) the population’s economic strata (welfare). - Propositions (P1–P7) articulate relationships among these variables: P1: Management of natural resource and strategic economic potential indirectly shapes regional and national population welfare strata. P2: Pursuit of people’s welfare via natural and strategic resource management necessitates and stimulates the government’s role and function. P3: Such management also necessitates and stimulates the roles and functions of SOEs and ROEs. P4–P5: Government and state enterprise roles are mutually determining in managing resource potential for welfare, requiring constitutionalized policies and robust governance. P6–P7: Together, government and state enterprise roles determine the population’s economic strata in resource and strategic sector management. - Evidence from FGDs indicates that current private/foreign dominance in resource sectors and central–regional gaps hinder equitable welfare, particularly in resource-rich regions. - IRI emphasizes incorporation/synergy between SOEs and ROEs (and potentially VOEs and public shareholding), improved good corporate governance (GCG), and alignment with the economic constitution (Article 33) to prioritize public welfare. - The framework suggests state-led but inclusive governance (with potential private and multinational participation via joint ventures) to improve equitable outcomes and support national integrity.

The findings address the research question by offering a structured IRI framework showing how constitutionalized, state-led stewardship of natural and strategic resources—operationalized through mutually reinforcing roles of government and SOEs/ROEs—can better translate resource wealth into broad-based welfare gains. The study critiques the prevailing liberalized model that prioritizes private/foreign control, noting its limited welfare impact in resource-rich regions. It argues for policy reforms to harmonize development via incorporation between SOEs and ROEs, improved GCG, and inclusion of communities (VOEs, cooperatives) within Murakabi corporate formats. Practical illustrations include the restructured ownership of PT Freeport Indonesia as a partial IRI implementation and a green economy initiative in Wonosari, indicating pathways for integrating alternative energy, sustainability, and multilevel stakeholder participation. The significance lies in aligning economic development with Article 33, strengthening state enterprises as development agents, enhancing regional equity through ROEs’ participation, and positioning state corporations to become competitive regionally and globally while fostering sustainable, people-centered outcomes.

The study concludes that managing natural and strategic economic resources is an indirect yet critical driver of population welfare. Achieving constitutional mandates for prosperity requires robust roles and functions of government and state enterprises (SOEs/ROEs), with policies that prioritize state stewardship and incorporation mechanisms aligning central and regional interests. The IRI framework advances prior IRI and Murakabi conceptions, implying practical strategies for resource governance, corporate strategy within SOEs/ROEs, and selective integration with private/multinational firms. It underscores transitioning toward sustainable, alternative energy and green economy pathways (aligned with the NZE 2060 target) while maintaining careful oversight of continued mining activities. Recommendations center on central and regional governments initiating dialogue with legislative and policy elites to adopt IRI and Murakabi approaches, harmonizing liberalization with constitutional priorities, and using joint ventures to integrate private actors. The conceptual framework invites future quantitative research to operationalize and test deductive variables and broader studies on corporate governance and operations of SOEs/ROEs within the Murakabi system.