Constrained Paradiplomacy: The Limited Role of North Maluku’s Provincial Government in Governing Foreign Nickel Investment

Abstract

North Maluku Province occupies a strategically significant position in the global nickel supply chain, recording annual
economic growth of 20.49 percent in 2023, 13.73 percent in 2024, and 34.17 percent in 2025 far above the national average of roughly 5 percent over the same period. Nevertheless, the provincial government’s capacity to act as an equal participant in negotiating, regulating, and overseeing foreign investment in the sector remains severely limited. By applying established paradiplomacy theory, fiscal federalism, and centre–periphery theory to the case of North Maluku, this article analyses a condition termed constrained paradiplomacy one in which subnational international engagement is blocked not by incapacity or unwillingness but by a legal and fiscal architecture designed by the central government. Using a qualitative case study approach with document analysis and updated secondary data (2023–2026), the study finds that the recentralization of licensing authority under Law No. 3 of 2020, the asymmetry of the revenue-sharing (DBH) formula, and the dominance of Chinese capital within the nickel industrial ecosystem jointly eliminate any substantive space for provincial participation. These findings extend the application of paradiplomacy theory to unitary-state contexts in the Global South and underscore the need for regulatory reform and subnational institutional capacity-building.