Statism and state activism in response to China’s belt and Road Initiative: Indonesia and Malaysia’s approaches to developing the EV sector

Abstract

How have the Belt and Road Initiative (BRI)’s host countries employed state capitalism to pursue global value chain (GVC) integration? This article answers this question by analyzing cases of electric vehicle GVCs in Indonesia and Malaysia. Employing qualitative and quantitative data, the discussion unpacks how the BRI generates opportunities for activist states to channel new capital and technologies toward national strategic economic outcomes. In Indonesia, President Widodo’s state capitalism efforts employed Chinese investments to bring new smelting and refining technologies to restructure and industrialize the country’s mineral sector. As a result, Indonesia has become a leading nickel-processing destination for stainless steel production and, more recently, for electric vehicle batteries. Meanwhile, the Malaysian government has directed investments toward green energy and smart manufacturing, which resulted in the brokerage of a pivotal car manufacturing joint venture. Both countries employed a mix of statism and state activism to partake in the emerging GVCs connected to the electric vehicle sector, with Indonesia preferring the former by primarily employing industrial policy interventions to prioritize private sector investments, while Malaysia predilected hybrid forms of state and private sector coordination. Overall, the results show that industrial policies and Chinese investments have brought opportunities but also unintended development outcomes.