GOVERNING NICKEL-LED DEVELOPMENT: POLICY EFFECTIVENESS, SOCIO-ECONOMIC TRANSFORMATION AND POVERTY ALLEVIATION

Abstract

Nickel-led development has accelerated investment and regional economic activity in Indonesia, yet many mining-affected communities continue to experience livelihood insecurity and unequal access to development benefits. This study examined whether innovation-based economic empowerment and policy effectiveness improved poverty alleviation outcomes through socio-economic transformation and whether participatory policy making operated as a direct governance mechanism and a moderator. A quantitative explanatory design was applied to survey data from 185 residents of nickel mining-affected communities in Southeast Sulawesi, Indonesia. The relationships were estimated using partial least squares structural equation modelling. Innovation-based economic empowerment significantly promoted socio-economic transformation (beta = 0.197, p = 0.002) but had no significant direct effect on poverty alleviation. Policy effectiveness was the strongest predictor of socio-economic transformation (beta = 0.621, p < 0.001) and also directly improved poverty alleviation outcomes (beta = 0.241, p < 0.001). Socio-economic transformation improved poverty alleviation outcomes (beta = 0.363, p < 0.001) and mediated the effects of both empowerment and policy effectiveness. Participatory policy making directly contributed to poverty alleviation (beta = 0.247, p = 0.006), whereas its moderating effect was not significant. The findings support a policy-driven transformation perspective: innovation generates welfare gains when it produces changes in income stability, employment, skills, service access and household independence. Poverty reduction strategies in mining regions should therefore integrate capability-building programmes with coordinated policy implementation, local economic diversification and substantive community participation.